Life Insurance Insights

How much Life Insurance do you really need?  It’s easy saying one should purchase life insurance equal to a given multiple of current income, but how can a given multiplier be accurate for all people?  It can’t be.  If you are in your 30’s with three young kids to support, the multiple of income is greater than it would be if you were age 58 with all kids grown, a spouse who is currently working and a substantial 401k plan.

The most accurate way to determine how much life insurance is enough is to determine what your family would need if you were taken out of the picture tomorrow and what assets and benefits there are to fill that need.  This is the “total needs analysis” approach to building a life insurance program. More…

Maybe I got to you in my last entry and you are going to do something about getting life insurance.  But, it’s not so simple because you already have a policy or two and you don’t know whether you should keep what you have or start fresh.  Without all the details I can’t advise you, nor can any other agent, but here’s how you should go about it.

• Don’t become emotionally attached to policies you already own.  It might be a $10,000 Whole Life policy your Dad bought for you when you were 10, but it might make sense replacing it.  Dad’s feelings won’t be hurt. More…

Do you really need life insurance?  I guess it can be argued that no one really needs life insurance.  After all, when a claim is paid on your life insurance policy, you will be dead.  Whatever your beliefs may be about a hereafter, when your death certificate is signed you no longer have a concern about future financial matters.  And there is no law requiring you to carry life insurance, so why bother?

In my previous entry I discussed the concept of human life value as expounded by the Wharton School’s Solomon Huebner.  It would suggest that the need for life insurance should be measured by the insured’s future earning potential.  But, why bother?  If you’re not around, why bother with your future lost income?

Indeed, if there is neither a legal, business or emotional justification to replace your earning potential, don’t bother with life insurance.  But, if there is anyone in your life for whom you care, or more than that—love—who would be placed in a More…

“I’m worth more dead than alive” is a comment I have heard often during my many years in the life insurance arena.  It’s usually said in jest by an individual just after he has purchased a new life insurance policy or as a put-off to the insurance agent attempting to set up an appointment to discuss life insurance.  It can’t be taken seriously; though to even be uttered, one must ask whether the true purpose of life insurance is understood.

If you are currently age 35, earning $75,000 per year and plan to work until you are 65, your total income potential, based on today’s value of the dollar, is $2,250,000.  This assumes that future income increases only keep up with inflation.  It was Solomon S. Huebner (1882-1964) who originated the concept of “human life value” as a standard method of calculating life insurance value and need.  His concept was that life insurance must be considered as more than just a burial expense policy. It is future earnings potential that must be looked upon as the major asset to be replaced in the event of an untimely death. More…

Several years ago you placed $50,000 into a deferred annuity.  You are now age 71 and that annuity’s value has grown to $75,000. As a widower you plan to leave the cash from this annuity to your grandson when you die.  You have plenty of other assets and a comfortable income. This is money you won’t need during your lifetime, so you have named your grandson as beneficiary.

He’s about to graduate from college and you know this money will pass directly to him, bypassing probate, and it is something that he will remember you for.

This is a lovely thing to do, but there might be a better way to do it.  Since you have never paid income tax on the annuity’s gain, when you die, your grandson will be hit with state and federal income tax on the gain.  This means, that if you were to die tomorrow, the IRS would tax your grandson for the $25,000 gain.  Since you are in good health, it is more likely that you will not die for several years.  In another 15 years, if the annuity continued to earn 3% per year its value would be $116,847, so your grandson would be hit with tax on the $66,847 gain.  Who knows what the tax rates will be then or how much other income he will be earning, but it is likely that at least $23,396 will be lost to state and federal taxes (35% of $66,847). More…

In my last entry I promised to tell you why term insurance premiums have been plummeting over the past 50 years.  In the early 1960’s I was sitting at kitchen tables talking to young couples about protecting their families against the financial devastation of early death, most of the term insurance I sold was as a rider on a whole life policy.  That’s because we were taught to push whole life and the price of term as a rider was less than the cost a stand-along term policy.  Still, those term premiums were much more than what is being sold today.  Or were they??

Yes, the premium charged for the best underwriting class has plummeted, so most people applying  today pay much less than they would have many years ago.  But, before I go further, let me make sure you know what I’m talking about when I banter around a term like “best underwriting class.”  Underwriting is the process insurance companies use when they determine the premium they will charge.  The companies have established premiums based upon what category you fit into.  The typical categories are determined by whether or not you use tobacco products, your sex, your medical history and that of your immediate family and any other risk factors such as build, driving record, drug/alcohol abuse and criminal record.  Following is an example of the range of approximate monthly premiums for a 35 year old man for a $500,000 Twenty Year Term Life policy: More…

There are many reasons given by young people with families who have not purchased enough life insurance to care for their children and spouses in the event of their early death:

• I don’t know what type of policy to buy.
• It’s too expensive; I can’t afford it.
• There are more important things I need to take care of first.
• I just haven’t gotten around to it.
• I don’t know how to go about it.
• I hated the one life insurance agent I talked to.
• I won’t be able to pass the medical exam.

I could go on with more of these “My dog ate my homework” excuses, but most of them are just baloney!  It’s true; some people will not be able to qualify for low cost life insurance.  Perhaps they waited too long and have just been given the bad news that the big C will take them in a matter of a few years.  The best they can hope for is a very expensive policy with a graded death benefit. More…

At the end of my last entry I promised some surprises.  I have only one surprise:  Time moves much more quickly than you could ever imagine!

Could it possibly be 57 years ago that I got word of my father’s sudden death as a moment of carelessness had him tangling with an oncoming steam engine on his job as a switchyard brakeman?  Was that my first plane ride flying back to Duluth to be with my mother and three much younger siblings?  Was that my first experience with how important life insurance can be…helping my Mom file a claim for his $10,000 GI Policy?  Not much, but it helped.

And then just one year later, my graduation from UCLA seems like yesterday as I now sit in my Hollywood Bowl box and remember being on stage belting out my solo line, “We got nothing to put on a clean white suit for,” in the 1957 Spring Sing. More…

You’re age 68 and your wife is 65.  You had a minor heart attack a few years ago, but you’re fine now…been watching your diet and lifestyle.  Your wife is in great physical condition!  Life has been good to you.  You have invested wisely, your home is paid off and the net worth of your other investments is slightly north of $3,000,000.  You were smart enough to have purchased Long Term Care Insurance a few years before you had your heart episode.  Your income from Social Security, investments and an IRA rollover is more than you will ever need to take you comfortably through your remaining years.

You have no life insurance because you figure you don’t need it.  There is no loss of income when either one of you dies and you are well under the $10 Million+ estate tax exemption.  You have grandkids who you would like to leave something for after you are gone. More…

Strokes are typically the result of a blocked or ruptured blood vessel in the brain.  They are classified as a full stroke (also Cardiovascular Accident [CVA}) or mini stroke (also Trans Ischemic Attack [TIA]).

TIA’s resolve themselves without any permanent damage to the brain.  Most TIA’s are due to a small temporary blockage of a cerebral or carotid artery that impairs neurological activity for a short period of time.  Symptoms might include temporary numbness, weakness, dizziness, vision defects, speech abnormalities and fainting.  Duration of these symptoms can be from a few minutes to several hours. A stroke is considered a TIA when symptoms last less than 24 hours and there is no permanent damage. More…