Life Insurance Insights

Hello, and welcome to my blog.

Since the early 1960s, I have enjoyed a long and satisfying career in the Life Insurance industry. I have served as an expert witness before the California State Senate Committee, as a licensed Continuing Education Instructor, and as president of several industry organizations. I remain active today as a consultant.

Here you will find regularly posted articles designed to educate individuals and families about the value and importance of Life Insurance today. I welcome your feedback, and invite you to follow me on Twitter and Facebook.

- Mike (info@lifeinsuranceinsights.com)

19 August 2014 0 Comments

Special Estate Needs of Foreign Nationals

shutterstock_129797951Non-resident aliens who own U.S. real estate.

Non-resident aliens who directly own certain U. S. assets are exposed to U.S. estate tax liability and only $60,000 may be exempt from this tax, not the $5,000,000+ exemption normally allowed for U.S. citizens.  Here’s an example:

Pedro Sanchez is not a U.S. citizen and is a resident of the Dominican Republic.  On his last trip to Miami he purchased a $4,000,000 condominium in South Beach which he visits three times a year.  By buying this property and owning it outright, Pedro created a U.S. taxable estate and as a Non-Resident Alien he is only afforded a $60,000 estate tax exemption. More…

15 August 2014 0 Comments

The Flexibility of Universal Life

shutterstock_148496540My previous entry dealt with how Universal Life (UL) could be structured to resemble a 20 year term policy.  This is just one of the flexibility features of Universal Life.  There might also be some flexibility in amount of death benefit, but here I’ll deal just with premium flexibility and access to cash value in Universal Life policies.

Universal Life policies have no stated premium.  There may be a premium that you pay on a regular basis, but that is the planned premium, not the stated premium.  If you skip a planned premium, it does not mean that the policy will lapse.  The cost of insurance and policy fees are withdrawn from the policy’s account value and as long as there is enough value to pay for these items the policy will continue in force.  More…

12 August 2014 0 Comments

When You Want Term, But Conversion is the Only Answer

shutterstock_146949359 (2)I previously discussed how converting term insurance works.  It’s when you decide you no longer want term insurance and you exchange your term policy for a permanent policy without having to provide any current personal information to the insurance company.  The new permanent policy is issued in the same underwriting class as the term based on premiums for your then attained age.

Here’s an interesting scenario where a man purchased a $1,000,000 20 year term policy when he was age 32.  At the time he was a Preferred risk.  He is now age 52 and his 20 year term policy is coming to the end of its term.  If he does nothing the policy will continue as term insurance, but the premium will immediately quadruple and will continue to increase each year thereafter. More…

7 August 2014 0 Comments

Help Yourself to the Best Premiums

shutterstock_89752360There are many factors that go into what you will be charged for life insurance.  There is really only one of those factors that is totally out of your control:  family history.  If your father died of a heart attack at the age of 55 there’s nothing you can do about that, and that would disqualify you as being eligible for the Preferred-plus premiums with all companies.  But even with this totally uncontrollable factor if you are age 65 when you are applying for insurance, have never used tobacco, have no other cardio vascular risk factors and your father was a 2+ pack per day smoker, some insurance companies might be convinced to bend that rule and give you Preferred-plus premiums if you would otherwise qualify. 

Here are some other things you can do to get the best premium: More…

5 August 2014 0 Comments

Why You May Not Be Eligible For The Lowest Premium

shutterstock_185407481Years ago the majority of life insurance applicants received a policy with the lowest premiums.  You could smoke two packs a day and didn’t have to provide a blood draw.  Insurance companies paid little attention to family medical history. The problem with that simplistic pricing approach was that the person in pristine health paid more than what he should have and the nicotine addicted couch potato whose father keeled over at age 55 from a heart attack paid less than his fair share. Standard premiums were the best available and were what were issued to both of these categories.

Then, in the 1970’s the premium advantage for non smokers was introduced followed several years later by the concept of preferred and then preferred-plus premiums for the best risks.  The result of these concepts was to produce lower premiums for many people, but higher premiums when justified by medical records, life style or family history.  Since no one is legally required to carry life insurance, this approach of assigning premiums appropriate to an individual makes sense. More…

31 July 2014 0 Comments

When Feel Good Vanishes

shutterstock_81547240Having discussed how the purchase of life insurance should, and usually does, produce an everlasting good feeling, I’d be less than honest if I didn’t admit that that is not always the case.  There are times when the life insurance purchaser becomes engulfed in buyer’s remorse, or at least uncertainty. “Did I buy the right policy?”  “Can I really afford this?”  “My cousin seems to have a better deal.”

When this happens, before you rush to the incinerator to dispose of your policy, pause.  What has suddenly caused your self doubt?  If it’s another insurance agent, consider that agent’s motive.  Though it might be a desire to provide you with the best policy, it might also be spurred on by the commission to be earned if you replace your current policy with one recommended by him.  Always ask the agent who is promoting the new policy to put his recommendations In writing:  what is wrong with your current policy and why is the one he is recommending better? More…

30 July 2014 0 Comments

The Feel Good Factor

shutterstock_94700359 (2)Buying a new car can make you feel good…until the new car smell wears off and you no longer bother to get it washed every week.  Moving into a new home always makes you feel good…until the newly escalated real estate taxes come due.  Partying with a bunch of your pals from college, reminiscing about the good old days , makes you feel good…until the next morning when your head feels like someone buried an axe in it.  Many of life’s experiences generate a good feeling…it’s just that many of them are short lived.

There is one event that doesn’t always produce good feelings at its commencement, but should certainly cause you to feel good—about yourself and what you have done—for many years into the future.  That “feel good factor” comes with the purchase of life insurance in an amount significant enough to maintain your family it the same level of comfort they enjoy today if you were to die tomorrow. More…

24 July 2014 0 Comments

The Best or Worst Retirement Tool

shutterstock_143828704The primary purpose of life insurance is to provide a death benefit, not to build cash value.  Its main function is not to supplement retirement income.  With that said, however, life insurance policies have some advantages not offered by any other financial vehicles that can provide for a very efficient retirement resource.  They can also produce some of the worst results when improperly used.

First, for the good features:  cash values can be accessed from life insurance policies during your lifetime without creating any taxable income and without having any negative tax effect on Social Security retirement income.  Income received is even more tax efficient than tax free municipal bonds inasmuch as their interest may be free of income tax, but it does count when calculating tax on Social Security benefits.  More…

22 July 2014 0 Comments

The Permanent Policy With No Cash Value

shutterstock_92389585Whole 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.

More…

16 July 2014 0 Comments

Who Should Buy The AARP Life Insurance Program?

shutterstock_124272760My 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…