Life Insurance

Life Insurance like any other type of insurance is purchased because of certain needs.
When thinking about Life Insurance you need to ask yourself two very important questions.
What do you want the coverage to accomplish and how much can you honestly afford to pay for it? Both parts of this equation are equally important. The reason is your agent will be able to design a program for you so the coverage will be there when you need it.

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The information contained herein is to be used as educational material only and is not intended to provide advice, legal or professional. This information should never be used as an original source of authority on any legal matters. Any laws and regulations concerning this material should be directed to the proper regulatory authority. Always review the regulations and statutes of the state in which you reside or are purchasing the insurance. The information contained herein could become obsolete due to legislation, legal situations or industry practices. You must consult your own advisor

for any and all legal or professional advice on any information contained herein.

Life Insurance,
a product that fills the pages of volumes of books and numerous IRS publications and yet it will be the briefest product we discuss. The reason for this is quite simple. You need to sit down and talk openly with your life insurance agent about the benefits of Life Insurance.
Although Life Insurance is a simple product designed to pay a beneficiary after you die, today there are so many variations to the product that even the living can benefit. That’s right, even while you are alive you can benefit from the purchase of a life insurance policy and these benefits could be substantial. Set up an appointment with your agent to discuss your needs and ask about the living benefits of life insurance.

Life Insurance like any other type of is insurance is purchased because of certain needs.
Life insurance can be bought to cover personal needs as well as business needs. The need could be to cover a mortgage or other type of loan.  You might want to make sure there is sufficient money available for your children’s education if you should live but also if you should die before they get there. If your policy has cash value, you might want to take some of that money for a down payment on a home. It could be possible. Maybe you might want to make sure that when you die, there will be enough money to pay for your funeral, pay off your outstanding debts and any other expenses that will arise due to your death. Some people want to leave a gift to a charity when they die and a life insurance policy can make that happen.  A business might want  to cover  a loss due to the death of a key person or the stockholders of a closely held corporation might want to cover a buy and sell agreement so if one should die, the company will buy the stock of the deceased stockholder at an agreed upon price from the deceased stockholder’s beneficiaries. The list is endless. The best person to talk to is your life insurance agent who can help you prepare.

When thinking about Life Insurance you need to ask yourself two very important questions. What do you want the coverage to accomplish and how much can you honestly afford to pay for it? Both parts of this equation are very important. The reason is, your agent will be able to design a program for you so the coverage will be there when you need it.

To get a better understanding of life insurance, one needs to know the different types of Life Insurance coverage available.

Term Life Insurance is usually temporary insurance protection that one would buy to cover a short term need. Term Life Insurance can be bought so the face amount of the policy will stay level during the term of the policy. Others will reduce every year by a dollar amount or percentage. Term Insurance is the least expensive type of life insurance because it provides coverage for a certain period and usually has no cash value buildup.  Term Life is usually refereed to as “renters insurance” since there is no equity build up within the contract. If the insured dies during the term of the policy ,and as long as the policy is in force, the insurance company will pay the beneficiary(ies) the face amount of the policy.
With some policies the premium stays level for the duration of the policy while others increase every year you own the policy. This type of plan is called an ART, Annual Renewal Term Policy. Have your agent explain the different types of term policies to you.
Some forms of term insurance are mortgage life insurance and credit life insurance. Mortgage Life Insurance is a form of reducing term insurance usually recommended for the borrower. Basically this type of insurance policy guarantees that if an insured dies, the mortgage will be paid in full. Credit Life Insurance is a special type of insurance coverage designed to pay off your loan or charge account balance if you should die.  This type of coverage is purchased through the loan institution or credit card company. There are pros and cons for this type of coverage. Check with your life insurance agent/financial planner to see what alternative are available to you.

Whole Life, Ordinary Life and Permanent Life are life insurance plans for which one pays a set annual premium, for a specified amount of death benefit ( face amount), for the life of the insured. These type of products offer guaranteed death benefits, guaranteed cash values and guaranteed premiums.  Premiums can be paid monthly, quarterly, semi annually and annually.  These type of products are considerably more expensive than term insurance because they build cash value.

Due to consumer demand for more flexible products that can accommodate an individual’s life changes, the insurance industry designed two very unique products.

1. Universal life. This is a product that combines the uniqueness of term insurance with a cash value portion of permanent insurance. Unlike traditional permanent policies, universal life divides the death protection and the cash value sections into separate accounts. Premiums can be flexible and for different amounts. The policy owner may change the death benefit from time to time (with evidence of insurability for increases) and vary the amount or date of premium payments. Premiums, less expense charges, are credited to the policy’s account value and from that account mortality charges are deducted and interest is credited at varying rates. As long as there is enough money in the account value to pay for the monthly mortality charges, the policy should never lapse.

2. Variable Life Insurance. With a variable life insurance policy, the death benefit and the cash value of the policy fluctuates according to the investment performance of the separate account funds that you select from the list of funds available for investment. Most variable life insurance policies guarantee a minimum death benefit. That is to say the death benefit will not fall below a specified minimum. The policy owner assumes the investment risk under a variable life insurance policy. Because of this, these contracts are considered securities contracts and your agent needs to be securities licensed as well as life licensed.

Do you have some questions about what you have? Are you unsure what is best for you or how much you need? For answers to your questions and concerns simply Email your agent. If you want a one on one consultation just let them know. Your agent is available to serve you.

A few things to consider before you replace your existing life insurance policy.

Before you replace your existing life insurance policy you need to make sure it is in your best interest and your decision to replace it is a good one for you.

You should always do a side by side comparison of all costs, fees, benefits, riders, exclusions and inclusions of your existing policy verses the proposed policy. If the information on your existing policy is unavailable call your agent and request it be sent to you. Better yet, ask the agent to review it with you.
If the agent is unavailable call the company and have them mail it to you. A thought to remember. You bought your existing policy for a reason. If that reason has change why can’t the existing policy cover the new reason?
* Why do you need to replace it?
* Why is the new better than the old?

* What is the new premium?
* What is the old premium?
* Can you afford the new premium now and say 5 or 10 years from now?
* Can the premiums change?
* How and by how much?

* How old are you now?
* At what age did you take out the policy you are thinking of replacing?
From an actuarial standpoint the older you are the more expensive the cost of insurance.

* How long will you have to pay on the new policy before 100% of the cash value can be withdrawn by you without a fee being imposed.

* Does your existing policy have a cash value?
* How much is it and when is it 100% yours penalty free?
* How long will it take the new policy to equal what you have now?
New policy’s have new acquisition costs so it take time before cash values build and for dividends to start.
*  What are the costs and when will you start to see a cash value and dividend?

* What about dividends?
* Does the old policy pay dividends?
* What about the proposed policy?

* Do you have a loan on your policy?
* How will the loan affect the replacement?

* Are there any tax consequences by cashing in the old and purchasing a new?
( talk with your tax adivsor or check with the IRS)

* Are there any policy guarantees with the old policy or new policy and if so what are they?

* Are you using any of the cash value from your existing policy to pay for your new policy?
If so why is this to your advantage?

* Does the new policy provide for more insurance coverage?
* What is wrong with keeping the existing policy and purchasing a new policy for the difference?

* How is your health?
* What is your weight and height?
* Do you need a medical exam for the new policy?
* Will you be able to pass it?
* Will your new policy be issued preferred, standard or will it be rated or declined due to a medical condition or other reason.

Note: Your new policy will start a new two year contestable and suicide period.  If the policy you are thinking of replacing is older than two years you and your beneficiaries don’t have to worry about the company refusing to pay.

* Will your existing insurance company be willing to change your existing policy to meet your new needs?

* How does the quality and financial stability of the new insurance company compare with the existing company?

* Have you done your homework and checked the credentials of the company with the regulatory authorities?

Replacing ones existing life insurance is not always a bad idea. You need to be 100% certain that it is in your best interest and the decision to move is a good one for you. For answers to your questions and concerns email your agent. Don’t let them go unanswered. Your agent is there to help.

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