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What to Do If You Can’t Afford to Pay Your Life Insurance: Part 2

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Last week, we shared some options regarding what to do if you have found yourself in a difficult financial situation and are unable to pay your upcoming life insurance premium. Today, we wanted to offer a few more alternatives, as well as review some commonly asked questions.

Before making your final decision, take a moment to speak with your insurance agent. Each insurer has their own set of rules and guidelines – some of our suggested options might not apply to you and, you never know, your agent may have some more tricks up their sleeve that aren’t covered here.

Apply for Consideration of a Change in Health Classification

Remember when you applied for your life insurance policy, you took a medical exam and answered a series of questions? There are a number of conditions that could have impacted your rate classification and, in turn, your annual premium.

Were you a smoker at the time? Did you have cancer, that is now in remission? Depending upon the pre-existing condition, you may be eligible for a change in rate class. If your application is approved, you could receive a more affordable rate on your current policy.

Life Settlement

As defined by the Life Insurance Settlement Association, “A life settlement is the sale of a life insurance policy to a third party for a value in excess of the policy’s cash surrender value, but less than its face value, or death benefit.”

The third party agrees to pay all future policy premiums and receives any available death benefits when the insured passes away. Unfortunately, this option is typically only available to insureds over the age of 65 or for customers whose policy has accumulated enough cash value to sell their policy. Since each insurer (and policy) has their own set of rules, contact your agent to learn more about this option.

Frequently Asked Questions: How Can I Make My Life Insurance More Affordable?

Question: I really want to invest in a life insurance policy, but don’t think I can afford it. What should I do?

Answer: We have a few suggestions that might help make your policy more affordable:

  • Purchase a policy as soon as possible – The younger you are, the cheaper your life insurance policy will be. Plus, you never know what kind of health conditions could pop up unexpectedly. So, if you’re young and you do not currently have a life policy, start shopping now. Our website offers multiple options for figuring a rate quote or, if you prefer to speak with a person directly, an agent would be happy to discuss your options with you. Just give us a call at 1-866-450-2424.
  • Buy a term life insurance policy – Insurers understand that consumers need options to fit every budget. Term life insurance rates are the most affordable option, with term periods lasting anywhere from one to thirty years. Just keep in mind that, when the policy term expires, your rates will be significantly higher than your original investment.
  • Inquire about payment plans – As a rule, your insurance premium will be cheaper if you pay the full annual premium upfront. There are, however, options to pay semi-annually, quarterly, and monthly. These payment plans often have processing fees tacked on to the total, so make sure you have all the information before making your final decision.
  • If you are a smoker, quit ASAP – We aren’t here to judge you; everyone has a guilty pleasure (or two). As a smoker, however, your rates are guaranteed to be higher than as a non-smoker. When you are ready to quit, write your quit-date on a calendar you can refer back to. Depending upon the insurer and policy, you can reapply for a lower rate in one to three years.

Question: What are some of the situations that could cause my life insurance rates to be higher?

Answer: As previously mentioned, smokers automatically earn a lower table rating, which results in higher policy premiums. There are a number of other pre-existing conditions, however, that could affect your table rating. To learn more about what to expect during the paramedical exam and what they are testing for, visit our blog here. If you feel you will classify as a higher risk, discuss your health issues with an insurance professional. They can assist you in finding the best policy for the very best premium.

Question: I’m still not sure I can afford the premium. Is there anything else I can do?

Answer: A term life insurance policy is very affordable. Consider sitting down and evaluating your budgetary spending. According to the National Resource Defense Council, each household spends approximately $529/year on unwanted snacks. Is there anything you can eliminate or cut down on in your monthly spending? Our blog, 7 Everyday Things That Cost More than Term Life Insurance, should be a great place to start getting ideas.

Before making any permanent decisions, remind yourself why you purchased your life insurance policy in the first place. While you may feel lost and desperate right now, this situation is temporary. Work with your agent and/or insurer to identify all options available to you before making your final decision. Best of luck to you!

What to Do If You Can’t Afford to Pay Your Life Insurance: Part 1

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If you own a life insurance policy, you’ve already weighed every option and determined the value it stands to add to your portfolio. You’ve considered the financial strain an unexpected death could put on your family, and defined how much your dependents would need to survive, without your income. While we spend each day educating our clients on the importance of life insurance, we are still conscious of the fact that everyone falls on difficult times. And, when those days arrive, life insurance payments may become one of the first casualties.

Whether it’s the loss of a job or unexpected expenses, everyone falls on tough financial times at least once in their adult life. This is when we have to analyze the family budget and identify ways to cut back on spending. Since none of us have any plans to pass away anytime soon, life insurance is often the first part of the budget families consider slashing. After all, how can you worry about your family’s financial situation ten or twenty years from now, when you can’t even figure out how to get past today?

If you’re having trouble paying the premium and are considering canceling your life insurance policy, make sure you understand all the potential repercussions. Don’t make a hasty decision now that could significantly impact your family later, just to save a money in the short term.

Life After Death

When a family member dies, those left behind are often left with a great number of expenses. In addition to the mortgage and daily living expenses, there are funeral costs, credit card bills, and taxes. In fact, 62% of consumers polled indicated they would be financially strapped almost immediately, if the primary breadwinner passed away unexpectedly. While most companies are sensitive to a family’s loss, they would go out of business if they absolved the outstanding debts of everyone who suffered the loss of a loved one.

Far too many people allow their life insurance policy to lapse, without considering all their options. Most don’t even realize that they have any options at all. Let’s look at a few ways you can keep your current life policy in place, even when you can’t afford to pay your premiums.

Term Life Insurance

A term life policy covers you for a specified period of time. If you pass away during that period, your beneficiaries receive a death benefit. If you’re still here, once the policy period expires, no one receives anything. If you fail to pay the policy premium when it comes due, the policy will lapse and your beneficiaries will receive nothing.

If you own a term policy, there are a few options available to you:

  • Grace period: While you’ll need to check the specifics of your policy, most insurers offer a 30-day grace period. Just send in your payment within the grace period and the policy will continue on as usual.
  • Payment plans: Most insurance companies also offer the option to pay your premium in installments. If you currently receive a bill annually, or even semi-annually, call your insurer and ask what installment options are available to you.
  • Reinstatement of a lapsed policy: If you failed to make your premium payment within the grace period, the policy will lapse. Don’t get discouraged though, there’s still hope. Most companies will allow you to reinstate your policy after the lapse date. The rules very from insurer to insurer, so check with your agent or the company to find out their specific rules. Some allow for reinstatement up to five years, but do require the insured to undergo the underwriting process again.

Permanent Life Insurance

If you opted to invest in a permanent life insurance policy, you likely had a number of reasons for doing so. Unless your situation has changed drastically and it’s probably a good idea for you to keep the policy in place. Fortunately, there are a number of options for you to consider:

Use your cash value to pay premium: This option is best for insureds who have had a permanent policy in place for quite some time. In the initial years, the policy is slow to build up cash value. As time goes on, however, it does build enough cash value to make a significant impact on one’s financial situation. While we recommend holding off on cashing in until you’ve reach the goals you set when purchasing the policy, we also understand that unavoidable circumstances occur. And using the cash value to pay the premiums is certainly better than allowing the policy to lapse. Before selecting this option, be sure to discuss the long-term implications this could have on your policy. Using the cash value of your policy is considered a loan. If you don’t pay it back, the death benefit your beneficiary receives will be reduced and, in some cases, cause the policy to lapse.

Use your dividends to pay premium: If your permanent policy pays dividends on the policy’s investments, you may be able to use these to offset your premiums.

Reduce the death benefit: Many insurers allow customers to decrease the face value of the policy in exchange for a reduced premium. In some cases this diminishes the premium amount enough for the policy to be considered “paid in full.” In this instance, the policyholder is able to stop paying on the policy entirely.

Waiver of premium: Many policies include a waiver of premium rider, which allows the insured to stop paying on their policy if they meet the disability conditions set by the carrier.

Convert to a term life policy: While you would incur some cancellation feeds, converting to a term policy is another option for those carrying a permanent life policy. In this case, you would cancel the permanent policy, using the cash value to convert to term insurance. If you’re considering this option, just keep in mind that your new policy would only provide a death benefit should you pass away during the defined timeframe.

If you’ve found yourself in a financial predicament, remember – nothing in life is permanent. This too shall pass. Work with your insurance advisor and explore all your options before allowing your policy to lapse. Stay tuned for Part 2, where we explore a few more potential alternatives and answer some questions frequently asked by others in your same situation.

Life Insurance Paramedical Exam: What Are They Testing For?

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Last month, we shared with you the details of what to expect during the life insurance application and paramedical exam process. Some of you may be wondering “But what exactly will they be testing for?” So, to add that last piece to the puzzle, we thought we’d provide some specifics regarding what underwriting is looking for.

If you have any health issues that come up on this list, please do not let this intimidate you. Negative results do not guarantee you’ll be denied coverage. However, if you’re feeling uneasy, please take a moment to share your concerns with us. Our job is to arm you with all the information and assist you in finding the very best policy, at the best possible rate.

Heart Conditions

According to the American College of Cardiology, cardiovascular disease (CVD) is responsible for almost 800,000 deaths in the U.S. each year, with one person dying every 40 seconds. Your blood work will offer underwriting insight into the health of your heart and arteries, through the following tests:

Cholesterol

Cholesterol is fatty matter that your body needs to keep everything lubricated. Your blood holds “bad” and “good” cholesterol. If it’s storing too much of the bad, it can cause serious health complications. The specifics regarding how much is too much varies from insurer to insurer.

  • HDL– High-Density Lipoprotein is that “good” cholesterol we mentioned earlier. It wards off LDL build-up in your arteries.
  • LDL – Low-Density Lipoprotein is what’s labeled as “bad” cholesterol. Accumulation of LDL in your arteries typically leading to blockage and, potentially, heart attack or stroke.
  • LDL/HDL Ratio – This ratio is used to define your risk for heart disease. The lower number = lower the risk.
  • Cholesterol/HDL Ratio – This is also an indicator of your risk for heart disease. Ideally, this number should read 5 or lower.

Triglycerides

Triglycerides are fat lipids found in your blood. Higher levels indicate an increased risk for heart disease. Levels of 150 or lower are preferred.

Diuretic In Urine

Your urine sample will be used to test for diuretics, which is an indicator that you’re currently on blood pressure medication.

Beta Adrenergic Blockers

Some insurance companies will test for beta adrenergic blockers, which shows if you’re on any blood pressure medication or being treated for heart defects or arrhythmias.

Liver

The liver is one of the primary producers of protein and cholesterol in your body. In fact, contrary to popular belief, only 20% of the cholesterol in your blood stream comes from the foods you consume; the other 80% is produced by your liver. These tests offer the underwriter insight into your risk for liver or muscle disease.

Alkaline Phosphatase

Elevated levels of this enzyme could indicate liver or some types of bone disease. Target readings are 30 to 100.

Aspartate Aminotransferase

(AST) Increased levels of this enzyme in your blood signals the potential for heart, muscle, or liver disease. Target readings are below 40.

Alanine Aminotransferase

(ALT) You may be at risk for liver disease if elevated levels of this enzyme are present. Target readings are 45 or lower.

Gamma Glutamyl Transpeptidase

(GGT) Higher levels of this enzyme are often present with liver disease and excessive alcohol consumption. Target readings are below 65.

Bilirubin

Elevated levels of bilirubin are an indicator of liver or gallbladder disease. Target levels range from .3 to 1.8.

Protein

Another indicator of liver disease; target levels range from 6 to 8.

Albumin

Lower levels are an indicator of severe liver disease and could be a sign that additional disorders exist. Target levels are between 3.8 and 5.2.

Globulin

Readings lower than 2.1 or higher than 3.5 could indicate an issue. Increased levels could be a sign of infection or immune system problems.

Pancreas

The pancreas works to produce hormones and enzymes that are responsible for regulating blood sugar levels and food digestion.

Glucose in Urine

The presence of glucose is an indicator of diabetes.

Hemoglobin A1c

This test provides a measurement of blood glucose over the last 90 days. Target level is 5.7 or lower. If your reading is 5.7 – 6.4, you’ll be considered pre-diabetic by the life insurance underwriter. If your levels are 6.5 or above, underwriting will view you as diabetic.

Fructosamine

This provides a measurement of your blood sugar levels over the past 2-3 weeks. Target levels are between 1.5 and 2.5.

Kidney and Bladder

The kidney and bladder are responsible for removing waste from your urine.

Leukocyte Esterase

This enzyme’s presence enzyme could indicate an infection.

Blood urea nitrogen

(BUN) This reading is used to calculate your overall health. Target levels are 10-25.

Urine PH Screen

This tests for the acidity of your urine. Target levels are 4-8.

Hemoglobin Screen

The presence of hemoglobin could indicate kidney infection or a UTI.

Creatinine

Elevated levels signal the possibility of kidney disease. Target levels are 0.7 to 1.5.

Proteinuria, Urine Creatinine, and/or Microalbumin

Presence of these in your urine indicates you may be at risk for kidney disease. Normal levels of urine creatinine are 25-250. They’ll also test your ratio, which should be between 0.0-0.20. Levels of 0.30 or lower are considered normal for microalbumin.

Serum HIV

Your blood will be tested for HIV, which is the virus that causes

AIDS.

Cotinine

Cotinine is the primary byproduct of nicotine. Presence signals possible tobacco use, ranging anywhere from 2 days to 3 months.

The paramedical exam is the underwriter’s tool for getting a picture of your overall health. This, combined with your application, helps the insurer identify you as a risk and set your premium. Regardless of what you fear these tests could uncover, don’t let this keep you from exploring your life insurance options. Discuss your choices with a licensed life insurance agent; we’re here to help you find the very best solution to fit your family’s needs.

Busted: Top 10 Life Insurance Myths

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For many, the subject of life insurance is uncomfortable. Let’s face it, no one really enjoys facing the idea that they could leave their family before they’re ready. Believe me, I understand. I’d be willing to bet, however, that you’d do just about anything to protect your loved ones.

When it comes to ensuring your family’s financial future, it’s vital that you take the time to separate fact from myth. To help you on your quest for the truth, we’re here to debunk the 10 most common myths about life insurance. Armed with the facts, you can make an informed decision, ensuring your loved ones are financially set should something happen to you.

Myth #1: Smokers can't get life insurance

While smoking is one of several factors that will determine your rate class, it is seldom the exclusive cause for denial. However, since non-smokers are typically given a better premium rate, smokers are encouraged to quit before applying for a policy. Most insurance companies require at least a year smoke-free before qualifying you for a non-smoker’s rate.

Myth #2: I'm single, or newly married with no children – I don't need a life insurance policy

When we think of life insurance, we often picture middle-aged couples with young children in the home. While life insurance is more critical for individuals with dependents, that doesn’t mean they’re the only ones to benefit. Remember – the younger and healthier you are, the lower the premium. So, planning early not only ensures your loved ones are able to pay off any outstanding debts you owe, it also locks in your premium at the lowest rate possible.

Myth #3: Life insurance is too expensive

According to a recent study, 64% of polled consumers are unaware of the actual cost of life insurance, believing it’s 3 times more expensive than it really is. The truth – while there are expensive policies available, life insurance doesn’t have to destroy your budget. Start out with an affordable policy, and purchase additional coverage as your needs and financial situation evolve.

Myth #4: I’m overweight; I’ll never qualify for a policy

To qualify for a life insurance policy, you will be required to answer some questions about your physical and mental health, including how much you weigh. While obesity will likely result in a higher rate class, it doesn’t necessarily disqualify you from a policy. If you’re concerned, open up a dialogue with your agent; they’ll be able to recommend the best policy for your unique situation.

Myth #5: I'm a stay-at-home parent with no income coming in; I don't need life insurance

Whether you're a stay-at-home parent or the primary breadwinner, life insurance is still an important component in planning for your family’s future. Consider all that you do for your family, day-in-and-day-out. If something were to happen to you, how much would it cost to replace those services annually? Life insurance could help cover these expenses, ensuring the household runs smoothly after you’re gone.

Myth #6: Buying a term policy and investing the rest is always the best option

While this is a great option for some families, it’s not for everyone. There are a number of factors to consider when deciding between term and permanent insurance. Your agent can help identify which type of policy will best meet your family’s needs, both now and into the future.

Myth #7: My employer provides me with a life insurance policy; that’s all I need

Many consumers are under the impression they can take their employer-offered life policy with them when they leave or are laid off. Unfortunately, this policy is non-transferrable, leaving you with no life insurance protection. Additionally, these policies are typically limited in coverage, with barely enough to cover funeral expenses.

Myth #8: The face value of my policy should be twice my annual salary

While there are a few formulas you can use to determine how much coverage you need, there’s no set rule that applies to everyone. Careful consideration of your family’s financial situation is necessary to determine the amount of insurance that should be purchased.

Myth #9: If I purchase a term life insurance policy, I’m stuck with it for life

Many term policies offer the option to convert to a permanent policy at a later date. When reviewing options with your agent, ask about the available riders for each policy you’re considering; and be sure you understand the terms of conversion upfront, as most policies require term conversion within a specified period of time.

Myth #10 My life insurance death benefit is only payable upon my death  

As mentioned above, most policies offer rider options for an additional premium. One rider, called the “Acceleration of Death Benefit Rider,” allows insureds access to the policy’s death benefit under certain circumstances. Qualifying injuries and illnesses vary from policy to policy, so be sure to ask your agent for details on the policies you’re considering.

Are you considering life insurance, but feeling hesitant? What’s holding you back? Please share your reservations below; who knows, maybe we can “bust” another popular myth.

11 Things You Should Consider Before Purchasing Life Insurance

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For most American families, purchasing life insurance is an important financial purchase. Upon the named insured’s death, the beneficiaries will receive a death benefit that will, hopefully, ensure their financial security for years to come. With over 2,000 life insurance companies to choose from, and a myriad of policies to sift through, choosing the right coverage can prove to be a daunting task. With that in mind, we’ve put together some tips to ensure you get the best value for your money.

1) Evaluate Your Insurance Needs

Most consumers are under the impression they only need life insurance if they have dependents. The truth is, most of us stand to benefit from owning a life insurance policy. Whether you’re young and single, the primary breadwinner, or a stay-at-home mom, you should consider all the facts before making such an important decision. If you’re unsure, meet with an insurance agent. He or she can assist you in evaluating both current and future needs and provide you with the information necessary to make a decision that helps you rest easy at night.

2) Take the Time to Really Consider How Much Coverage You Need

How many individuals depend on you financially? Are you the primary source of income for your family? If you’re a stay-at-home-mom, what does the family depend upon you for from day-to-day? What does your family’s financial portfolio currently look like? How will your loved ones pay for final expenses and outstanding debts upon your death? These are all questions you should consider when determining how much coverage you need.

3) If You Have a Current Life Insurance Policy, Assess it Carefully

Do you currently have a life insurance policy through your employer? Or perhaps your parents purchased one for you when you were a child? Speak with your agent first before canceling anything. There may be an option to change your policy to fit your current needs. Or, it could have hidden coverage that adds significant value to your portfolio.

4) Term vs Permanent

There are currently two basic types of life insurance: term insurance and permanent insurance. A term policy typically offers you more coverage for a lower premium. Coverage is offered for a set time period and the policy does not build up cash value. Permanent policies come with a higher price tag, but remain in place for as long as premiums are paid. They also build up cash value, which can be borrowed against at any time. Each policy has its own set of pros and cons that should be considered carefully before purchasing.

5) Evaluate the Future of Your Policy Before Purchasing

When evaluating potential policies, ask your agent to generate a year-to-year display of values and benefits for each. How quickly does the cash value grow? Does one beat out the other over time? These comparisons will assist you in determining which policy offers the most value for your dollar.

6) Discuss Your Rider Options

Most policies offer additional coverage in the form of riders. Some offer access to your death benefit before you die, while another allows you to use the policy’s cash value to pay for long-term care expenses. When considering policy options, be sure to inquire about these riders, as many are very low in cost compared to the benefit they provide.

7) Get to Know the Companies You’re Considering

When applying for a policy, you’ll be asked several questions regarding your health. It only makes sense then, that you should do the same. Research the companies you’re considering. How financially stable are they? How long have they been in business? Hopefully your insurance policy won’t be needed for quite some time, so it’s important that you partner with a company that is in it for the long haul. A.M. Best is a great resource, as is your state insurance department.

8) Understand the Policy Before Purchasing

It’s important that you read the fine print before signing on the dotted line. Are there certain instances where death benefits can be denied? If so, what are they? Are premiums level, or do they vary from year to year? How long before cash value starts to build? What portion of the benefits or premiums isn’t guaranteed? Meet with your agent to clear up any confusion before making your final purchase.

9) Consider Your Beneficiary Carefully

Choosing a beneficiary sounds simple, right? While it’s pretty straightforward most of the time, you do want to consider it carefully, as there are instances where the wording could result in unexpected tax or legal issues. Check out our blog Tips for Choosing a Life Insurance Beneficiary for some helpful advice.

10) If You’re Turned Down for a Policy, Don’t Give Up

Don’t get discouraged if you’re turned down for a policy; there are plenty of other options out there. In fact, the Vista Life team specializes in finding a policy for consumers who’ve been turned down in the past. While there are some instances where an individual is uninsurable, this is not the norm.

11) Review Your Policy Every Few Years

Life happens and family dynamics change. If you’ve had any major changes occur, meet with your agent to discuss. This will help ensure the policy serves it’s purpose should the unexpected occur.

Tips for Choosing a Life Insurance Beneficiary

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As you probably already know, there are multiple steps to purchasing a life insurance policy. After obtaining quotes and selecting the policy and coverage that’s right for your family, you’ll be asked to answer some medical questions and possibly undergo a medical exam. During the application process, you’ll also be required to select a beneficiary for your new policy. While this is typically pretty straightforward, there are several potential financial, tax-related, and legal issues that could emerge if your beneficiaries aren’t named properly.

To avoid these potential complications, it’s important that you carefully consider who your beneficiary should be. If this is a decision you’re struggling with, the following advice should help clear up any questions.

But first, let’s start with the basics.

Beneficiary Basics

First, it’s important to know that there are two basic types of life insurance beneficiaries.

  1. Primary beneficiary: A primary beneficiary is the first person(s) to receive the death benefit should the insured die. If the primary beneficiary dies before the insured, the policy will automatically defer to the contingent beneficiary.
  2. Contingent beneficiary: Also known as the secondary beneficiary, the contingent beneficiary is eligible for the death benefit if the primary dies before the named insured.

To avoid any complications and ensure the death benefit payout process goes smoothly, it’s recommended that you select both a primary and contingent beneficiary when setting up your policy.

In addition to the two types of beneficiaries, there are two classes to consider as well.

  1. Revocable beneficiaries: With a revocable beneficiary, the policy owner has the right to modify the beneficiary designation without the preceding beneficiary’s consent.
  2. Irrevocable beneficiaries: Under this class, the policy owner cannot modify the beneficiary designation without written consent by the original beneficiary.

Due to the potential legal complications that could arise from opting for an irrevocable beneficiary, the most straightforward option is revocable.

Now that you have a better understanding of the types of beneficiaries, how do you choose? You can name any of the following:

  • People: This could be a family member, legal guardian, or even a business partner.
  • Estate: If you choose your estate as the beneficiary, the death benefit will go to the Executor of the estate. It’s important to note that your estate can only be named if you’ve drawn up a last will and testament. If this is the path you’re considering, take a moment to discuss any tax implications with your agent, financial advisor, or accountant.
    Trusts: If you have a trust already set up, naming your trust is an option.
  • Charity: Charities can be named as either the primary or contingent beneficiary.

Many policy owners have more than one beneficiary they would like named on their policy. There are two approaches you can take in this situation: per stirpes or per capita.

Per stirpes: Under this option, the death benefit would be divided equally among the named beneficiaries and/or their surviving children. For example: You designate your two daughters, Allison and Nicole, as beneficiaries of the policy. Allison dies before you, and you pass away next. Nicole would receive 50% of the proceeds and Allison’s surviving children would receive equal amounts of the remaining 50%.
Per capita: Under the per capita option, the death benefit would be equally divided amongst all the surviving beneficiaries in the lineage line. For example: Using the above scenario, assume Allison had three children and Nicole had none, when you passed away. The proceeds would be divided equally between Allison’s three children and Nicole. Each beneficiary would receive one-fourth of the insurance death benefit.

The Dos and Don’ts of Life Insurance Beneficiary Designation

The following are a few tips to keep in mind regarding your policy’s beneficiary.

  • DO consider who has the most to lose financially when naming your beneficiaries.
  • DO name both a primary and secondary beneficiary.
  • DO designate proceeds to be paid out in percentages rather than a fixed dollar amount.
  • DO make sure your will and designations aren’t conflicting.
  • DO notify anyone who has been named as a beneficiary.
  • DO consider the language of your policy to ensure your wishes are properly carried out.
  • DO review your policy every few years.
  • DO make necessary amendments to your policy when a major life event occurs. For example: marriage, divorce, birth, or death.
  • DO discuss any tax ramifications with an agent or advisor before listing your estate as the beneficiary.
  • DON’T make generalizations, such as “spouse” or “children.” Doing so could lead to complications during pay-out time and leave your grieving family to define your intentions. Be specific.
  • DON’T name a creditor as a policy beneficiary.
  • DON’T name minors unless a guardian has been designated for them.
  • DON’T complicate things. If you have a separate named insured, owner, and beneficiary, this could result in higher tax payout.

If you’re at the beneficiary consideration stage of the process, you’ve made a great deal of important financial decisions to ensure your family is protected. It would be a shame if your intentions weren’t carried out, simply because you overlooked an important detail. Or for your family to be embroiled in a legal or tax battle that could have been avoided. Discuss your options with an experienced agent before signing on the dotted line; and don’t forget to review your policy every few years.

The Growing Importance of Life Insurance for the Modern Woman

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Women have redefined their roles both in the workplace and at home. Whether working as a stay-at-home mom or outside the home as a top executive, our value has increased exponentially over the last decade. We’re running businesses, holding political positions, and homeschooling our children, all while making sure the household runs smoothly. In fact, a recent Bureau of Labor Statistics study reveal that over 40% of mothers in the U.S. are now the breadwinners of the family. Yet, despite our ever-growing responsibilities, 1 in 3 women are underinsured for life insurance. Only 52% have life insurance at all, while those that are insured have 31% less coverage than men.

It’s important for us to remember the financial responsibility we have to our families and really consider how they would be affected should something happen. Regardless of your career choice, marital status, or annual income, life insurance is critical to ensuring our family’s financial health, long-term.

Still not convinced? Let’s consider a few scenarios and how life insurance could benefit women, regardless of their personal situation.

Single Women

It’s easy to assume there’s no need for life insurance when you’re single with no children. Life is seemingly carefree and no one would be affected financially if something were to happen to you, right? Well, that’s not always the case. As we age, we face the difficulties of caring for family members who’re no longer able to care for themselves. Stop and consider what would happen to them in the event of your untimely death. Where would they go? Who would care for them? Where would the funds come from? Who will pay for your burial expenses?

Life insurance can also prove its value to single women who have incurred debt, particularly if you carry a loan with a co-signer. Typically, when you die, the executor of your estate is able to sell off your property to cover any outstanding loans, and the rest is forgiven. But if you have a co-signed loan, the entire debt transfers to the co-signer, often putting them in a difficult financial bind.

If neither of these scenarios describe your situation, you might be okay without life insurance. Keep in mind, however, that life insurance premiums are, on the average, cheaper for women, but also increase in price, as you get older.

Stay-at-Home Moms

If you’re a stay-at-home mom, you know how hard you work. Most consumers purchase life insurance to replace a family member’s income but, what about all the hours you put in, day in and day out? You’re critical to your family 24/7, providing love and support that’s almost impossible to put a price tag on. While it’s difficult to think about, it’s important to consider how your spouse would make it all work should the worst-case scenario occur. A life insurance policy could provide your partner the financial support and security needed to get through this difficult time. He or she could use those funds to take a leave of absence from work, hire a nanny, or pay for a cleaning service – whatever’s necessary to help the household get back to some semblance of normalcy.

Single Moms

Most single moms are the ones primarily responsible for their children. Life insurance offers the peace of mind of knowing your children are cared for financially, should you die prematurely. It can provide the funds needed for childcare, college, and all the others events that will occur on the path to adulthood.

Working Women

As our day-to-day expenses become increasingly higher, many families have come to depend on two incomes. How would your family be impacted should one of those salaries disappear suddenly? A life policy can help ensure your family has the financial support needed, as they adjust to this unexpected new life.

Business Owners

Women now represent more than 30% of small business owners. As an entrepreneur, you’re now responsible for the financial well-being of your staff, as well as your family. Investing in a life insurance policy is a great way to ensure payroll and other operating expenses are covered while your estate is being settled. Many business owners also use it as a tool for organizing buy-sell agreements and as benefits for valued employees.

What Can You Do Now?

If any of these situations sound familiar to you, you might want to consider a life insurance policy. Many find the process intimidating, unsure of what type of policy is the best fit or how much coverage is enough. While most quotes can be completed online nowadays, they don’t provide answers to those burning questions. Find an agent that you can trust to offer guidance and support throughout the process. The world isn’t going to crumble if you end up with the wrong policy or you forget to add that rider that would have offered additional coverage. But it’s best to be educated on your options, so you secure a policy with the best coverage, for the best price.

No one wants to fixate on the doom and gloom of life, which is why proper planning for the future is so important. It helps alleviate present day concerns by setting the ball in motion for financial security in the future. Equally, the ones left behind are able to rest a little easier during such a trying time. And, with so many more women becoming integral parts of a family’s financial structure, life insurance has become critical for both men and women. Is your family covered? Ask the right questions and start making a plan today.

6 Items to Consider About Life Insurance Over 50

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It’s a common misconception that life insurance is only necessary for young, married adults with small children. The reality is, life insurance policies can prove beneficial at any age. As our lifespan continues to grow, people are having children later in life, further increasing the need for a policy that can take you to retirement age and beyond.

Are you over 50 and considering a life insurance policy? If so, read on for some expert advice to consider as you navigate through the decision-making process.

1) Do I Really Need Life Insurance at This Age?

This is a question only you can answer. Take a moment to consider who might be affected by your death. Who relies on you financially and how far into the future will they require your assistance? If you’re currently working, how would the loss of your income affect your family if something were to happen? What assets would your spouse or children have access to and what kind of debt are you still working to pay off?

Would a death benefit be helpful in covering the following once you’re gone:

Funeral costs –The average funeral costs more than $7,000. Have you set aside a portion of your budget to cover these expenses? Losing a loved one is emotionally taxing; adding the financial stress of paying for a funeral makes the process that much more difficult.

Medical bills –If your death is a result of an illness, you could leave behind a mountain of medical bills. An insurance policy could help relieve that pressure. When comparing policies and rates, ask your agent about the acceleration of death benefit rider. This is offered as a rider on many policies today and could help alleviate the financial pressures of an illness before passing on.

Estate taxes –Life insurance policies can help cover the costs associated with settling your estate.

Funding an education or providing a legacy – Do you have a loved one you plan on helping through college? Many consumers invest in a life insurance policy to ensure their family’s plan for a higher education isn’t derailed early. Policies are also purchased to ensure a donation is made in their honor to their favorite cause or charity.

2) How Much Coverage Should I Purchase?

While there’s no way to determine exactly how much life insurance your family will need, there are a few formulas you can utilize to determine the face value of your policy. Prior to shopping for life insurance, it’s important to consider your current financial, as well as your long and short-term goals. If your primary goal is to cover funeral expenses, you’ll require a lot less protection than the individual with a grandchild’s education to pay for or a mortgage to pay off.

3) What Kind of Policy Is Best?

There are multiple types of policies available, each with their own set of pros and cons. First, you’ll need to consider the two main types of plans and how each would help in accomplishing your life insurance goals.

Term insurance – Term policies offer a guaranteed death benefit of a specified amount, valid until the end of the policy term or until you stop paying your premiums. There is no cash value associated with term policies.

Permanent insurance – This works as a sort of savings account. A portion of your paid premium goes towards the policy’s death benefit, while the rest adds cash value. There are a number of different permanent policies available, so it’s best to speak with an insurance professional or your financial adviser before making your selection.

4) What About the Medical Exam?

The underwriting process varies from policy to policy. Some policies require you to submit blood work and undergo a medical exam, while others simply require the answers to a few questions. Once you’ve determined the amount of coverage and type of policy you need, your agent should be able to provide a clearer picture as to what will be required of you.

5) How Do I Choose the Right Company?

No matter what age you decide to purchase a life insurance policy, it’s important you select a company that will be there for you long-term. When considering your options, research the ratings of each company. A.M. Best Rating Services and Moody’s both offer a financial analysis rating that can help in identifying which company is the most stable. If you use more than one rating source, pay close attention to their rating system, as they do vary from site to site.

In addition to their financial stability, conduct some research to understand the organization’s history. A company that’s been around since the 1800’s has a proven track record that far exceeds one established 20 years ago. Additionally, visit the National Association of Insurance Commissioners’ searchable database to view any complaints lodged against the insurance company. This can provide invaluable insight into how an enterprise does business and how they might treat you or your family in the future.

6) Where do I start?

While much of the information you need is available online, it’s a good idea to discuss your family’s unique situation with an agent before making any purchases. They can help ensure you purchase the right amount of life insurance, without going overboard, and that you get the most bang for your buck. Navigating through the process is generally quick and painless; the hard part is getting started.

5 Reasons to Convert Your Term Life Insurance Policy

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Despite their advantages, many consumers forgo permanent life insurance policies for term life, instead. Term policies are often viewed as an affordable option for satisfying an immediate need for coverage. Some financial advisors even recommend purchasing term policies and investing any additional monies in the stock market for higher overall gains.

Most term policies come with a Term Conversion Rider, which allows the policyholder to convert their term policy to a permanent policy, should their family’s needs change. If you’re in the market for a policy, be sure to discuss this option with your agent.

Already have a term policy in place? Read on to find out the top reasons why you might benefit from converting your term policy to a whole life product.

1) Your Family Could be Deeply Impacted Financially Following Your Loss

Anyone who’s faced the financial challenges that come with caring for a terminally ill or developmentally challenged family member understands its far-reaching effects. While it comes with a higher price tag, a whole life policy offers additional financial security through accumulated cash value. This can be borrowed upon at any time, adding another layer to peace of mind.

2) You’ll Likely Outlive Your Term Insurance

Term insurance has the advantage of being the most affordable option. But affordability comes with a price – you could pay years of premium, only to outlive the policy term. In fact, only about 2% of term life policies actually pay out. Once the term has expired, you lose all invested premiums, unless the policy is converted. While your family was protected in the event of your death throughout the term, you’ve made an investment that resulted in zero gains.

3) Restructuring of Your Estate

Unlike term policies, whole life insurance policies are a more effective strategy for estate-planning. Not only will they carry more security and value, they’re an effective way to ensure your family doesn’t suffer a devastating blow from incurred estate taxes.

4) Restructuring of Retirement Income

If retirement is no longer in your too distant future, you might want to consider converting your term life policy. The principal of a whole life policy is tax exempt, making it the ideal savings tool. These tax-sheltered policies can help ensure a consistent retirement income, so you can fully enjoy the fruits of your labor.

5) Financial Priorities Change

If you purchased your term policy 15 years ago, you were likely in a different position, both financially and health-wise. It was difficult to anticipate what might happen next week, much less 10 years down the road. If you feel a continuation of coverage might be necessary once the term expires, conversion could be your most affordable option. A new policy means another application and medical exam. Depending upon the outcome, this could result in higher premiums or, depending upon any health setbacks you’ve experienced, a declination in coverage. Fortunately, policy conversion allows you exemption from that medical exam.

Assuming your term policy has the necessary riders, you can convert some or all of your term life insurance policy anytime before the conversion expiration date. If you’re positive this is the avenue you wish to take, the earlier the better, as permanent policy premiums increase with age. It’s a good idea to review your life insurance policy with your insurance agent annually to ensure it still fits your family’s needs. After all, what’s the point in making such an investment if your family will still be left financially exposed?

What is an Indexed Universal Life Insurance Policy?

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If you’ve been reading our posts, you, hopefully, understand the difference between term and permanent life insurance. Each has their own pros and cons that should be considered when deciding how to spend your hard-earned dollars. If you think permanent insurance is the route your family should take, there are quite a few options you should consider.

For many, understanding life insurance is confusing. The language is complicated and the various options make it that much more daunting. Once you understand the concepts behind it though, it’s fairly easy to understand. Today, we wanted to delve a little deeper into our favorite Universal Life policy – the Indexed UL, along with its pros and cons.

Let’s start with a brief definition of Universal Life.

What is Universal Life Insurance?

Universal life insurance gained traction in the late 70s and early 80s. Consumers were frustrated with the small returns on their Whole Life policies and began removing their cash value to explore other investment options. Rather than restructuring how they paid dividends, many insurance companies decided to create a new product. And the Universal Life Insurance (UL) was born.

While the UL is a permanent policy, it has often been described as having a term framework. Essentially, it is a savings account attached to a term policy. A term policy remains active, as long as the premiums are paid, until the agreed upon term length is over (120 years is standard). Unlike term, the UL doesn’t have a set length of time. It remains in place as long as the savings account maintains cash value and the policy’s expenses are paid. The policy starts out very cheap and increases incrementally as you age. For those who consistently maintain cash value in their account, the interest earned is generally high enough to cover the premium charges due upon each renewal.

Earned interest rates are set by the issuing insurance company. They are typically competitive with market interest rates and many companies offer an interest increase once the policy has reached ten years. Interest is credited to the cash portion of the account; dividends are not offered on a UL. If performance or mortality experience is higher than expected, many insurance carriers will pass this on to their policyholders in one of two ways: a reduction in term costs or as an increase in interest credited.

What is an Indexed Universal Life Policy?

Indexed Universal Life insurance is a UL policy that offers it’s policyholders two options – an earned fixed interest rate paid on cash values or a rate that fluctuates based off the movement of the index the client has chosen. While the S&P 500 is the most popular option, the followed index varies from company to company.

Due to the indexing feature, many consumers are led to believe they are exposing themselves to the risks of the stock market. This is untrue and should not be presented as such.

The index is simply the insurance company’s method of determining the interest rate the Indexed UL policy will earn. The indexing feature has a “participation rate” that defines how much of the index’s rise will go towards the policy’s interest rate. This varies from product to product, but many have a 100% participation rate, meaning whatever movement the index makes, the policy will as well (up to the cap).

As mentioned, the indexing feature will generally have a cap on it. Let’s say, for example, if the cap is set for the 13% in the S&P 500. If the S&P rises above 13%, the maximum the Indexed UL will earn is 13%.

The Pros and Cons of an Indexed Universal Life Policy

One of the biggest advantages of an Indexed UL is flexibility. The policyholder has complete flexibility and control regarding their premium amount and timing. If one falls on hard times, the planned premiums can be reduced down to zero, with these reductions made in the coming years.

For those looking for positive growth, without exposing themselves to the volatility of the stock market, an Indexed UL is a great choice. Additionally, you have the option of withdrawing cash from your policy at any time, without facing the stiff penalties and restrictions that come with early withdrawal from your retirement account.

As with anything, however, the UL does have a few cons that should be considered. Many of these policies are loaded with set-up fees that can take several years to pay off. If you’re hoping for positive growth in your cash fund right away, be sure to discuss your goals with your insurance agent, as this might not be the policy for you.

Some consumers are looking for a product that offers strong positive growth. The insurance company has their own process to determine how much cash you’ll gain from the S&P increase. They also impose an earnings cap. Make sure you understand all of the policy’s restrictions before making your final decision.

Due to its flexibility and cash value growth, the Indexed Universal Life product is one of the fastest growing life insurance products on the market. As we’ve mentioned in the past, however, there is no one-size-fits-all policy for consumers. If you’re ready to learn which policies fit your family’s needs and would like to learn more about this product, don’t hesitate to contact us. And stay tuned in the coming weeks, as we further explore the intricacies of Universal Life policies.