Life Insurance Insights

Whole Life Insurance is the original type of permanent life insurance.  The premium is level, the cash value grows every year and the death benefit is guaranteed for life.  That all makes sense.  How, then is it possible for a Universal Life policy to have a level premium with a death benefit guaranteed for life, but with a cash value that is minuscule or non-existent?  That doesn’t seem to make sense.

It’s all in the policy design… and it is possible… and if you are looking for the lowest level premium for a lifetime guaranteed death benefits, this class of Universal Life delivers just that.  This current class of Universal Life uses a Secondary Guarantee to accomplish this.  Although both the guaranteed and projected cash value on an illustration for this policy might drop to zero, there is another set of guarantees being used only for the purpose of calculating the guaranteed death benefit.

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My AARP magazine arrived recently containing a full page ad with the heading:  DO YOU HAVE ENOUGH LIFE INSURANCE?  Well, I actually do have enough, but since the subject interests me, I read on.  It’s a special program only for AARP members offered by New York Life Insurance Company—one of the oldest most financially sound insurance companies in the world.  The ad went on to point out why you might be interested…to provide extra coverage…added security for the people you love.  I can’t argue with that.  This is what life insurance is all about.

The program is term insurance and there is no waiting period.  You’re covered for the full benefit amount frown the very first day coverage takes effect. More…

Not everyone needs life insurance.  If you are single with no one dependent on your income and your liquid assets are more than sufficient to meet final expenses, then you really don’t have a current need for life insurance.  However, the operative word in that statement is current.  Is it possible that some day there may be a significant other and possibly even children who will suffer if you die prematurely with no life insurance in force?  Is it possible that someday you will want to earmark funds at your death for a particular purpose best accomplished with a life insurance policy?

Even if there is no need today for life insurance and you are currently in good health, you may want to insure your future ability to obtain insurance.  This can be done by purchasing low cost term insurance that is convertible. Term insurance gives you pure death benefit for the duration of the term selected. More…

I never set out to be a life insurance agent as evidenced by my college major—Theatre Arts.  But, in 1960 at the age of 25, finding myself unceremoniously relieved of my duties as an assistant TV producer—and finding no other film company standing in line to hire me—I had to find a way to pay the rent and buy food plus an occasional beer.  So I answered a help wanted ad in the Los Angeles Times and in short time found myself selling life insurance for Bankers Life Nebraska; an easy decision since they offered me a monthly guarantee of $500-vs-Connecticut General’s $400.  I took the job and figured I’d give it a try until something better came along.  More…

A claim made by the Auto Club referenced in my last blog triggered the topic for this entry.  It was a statement that a particular policy was recommended for all their members.  That falls in line with declarations occasionally made by agents that they never sell a certain type of policy (Whole Life is a rip off!) or that they always recommend another type of policy (Term is the only policy you should buy!).

Now, I shouldn’t fall into the same trap by saying that such statements are never correct and are always the result of the bias of an agent—but, I’ll say it anyway.  Every type of life insurance policy has positive and negative features.  Every annuity might have a place in a particular individual’s financial picture.  It is true that there are some policies of each type that are more favorably priced and provide more features than others, but blanket statements of what is always right or never wrong just don’t make sense! More…

Recently I received a mailing addressed to me as a member of the Auto Club.  My wife and I were offered life insurance and we didn’t have to take a medical exam and there were no health questions asked.  Within the 5 pages of fine print it was stated that the policy would be renewable for life, the premium would never go up, the death benefit would never go down, the policy built cash value and there was a 31 day risk free trial period.  All of this is true and we could each get up to $20,000 of coverage.

There was a lot of hype about the high cost of funerals in the United States and in the boldest print to be found within the letter was the statement, “We’re Recommending It for All Members Aged 45-85.”  Boy, this must really be a great policy to make such a broad statement! More…

Chances of dying at my young age are slight so I’ll wait until later to get life insurance.

Yes, chances of dying at a young age are slight, but that’s why premiums are so low when you are young.  And…if you also have a young family, this is the time when they need protection the most in the event of your premature death.  It does happen!  And besides, how do you know you will be able to qualify at an advanced age?

I can’t afford life insurance.  We can hardly make ends meet on my take home pay.

It’s a matter of prioritizing.  For starters see what the monthly premium for a 10 year term policy equal to 5 X your annual income would be and I’ll bet it’s no more than a daily stop at Starbucks or dinner out once a week would cost.  More…

This continues my summary of the most common misconceptions about life insurance.

Buying Term Insurance is like throwing your money down a rat hole.

It’s true that only the insurance company wins if you buy term insurance and don’t die prior to the end of the term.  Likewise, if you buy fire insurance on your house and don’t have a fire, you’ve lost the entire premium, but you still buy fire insurance and don’t feel cheated if you don’t have a fire.  Term insurance does not build cash value and if you live too long there will probably be no benefit paid to anyone, but it’s still the least expensive way to get maximum protection during your earning years when those who you care for need the most protection you can afford. More…

This continues with my last entry dealing with the most common misconceptions about life insurance.

In a family setting only the breadwinner needs life insurance.

If there are no minor children or special needs children to care for, then it is probably not necessary to have life insurance on the non-income producing spouse.  But if that spouse is providing care for the children, then there is an economic need to provide funds in the event of that spouse’s death to cover the myriad of services that would require a substantial monthly outlay.  Term life insurance on the non-working spouse during those family years is inexpensive and essential. More…

There are many misconceptions people have about life insurance.  It’s no wonder; policies can be confusing to the layman and occasionally insurance agents add to that confusion by injecting opinions primarily supported by their desire to make a sale.  But, we all have opinions, so some of mine will be included in my comments.  For the most part, however, the misconceptions I reveal will be debunked with facts.
I can get a lower premium by dealing directly with the insurance company, bypassing an agent.

This is not true; in fact you might get a higher premium.  A single insurance company is never going to have the best premiums for all policy types, ages and medical histories.  An agent can shop for the best premium for you with several companies.  Plus, the insurance company who deals with you directly has a fixed cost of employees who deal with you as opposed to the variable cost of only paying an agent a commission only when a sale is consummated.  A good agent saves you premium dollars! More…