Life Insurance: Coverage for you and your family

by zhl203 » Tue Dec 08, 2009 04:26 am
Posts: 10
Joined: 08 Dec 2009

When you have family members depending on your income, saving for the future of your loved ones is a good idea. Investing in life insurance will give you enough financial support to take care of the future of your loved ones when you are no longer around. A life insurance plan also makes provision for a cash value where a part of your premium is put into a savings account. Hence, while you invest for a secured future, you can make savings too.

What is life insurance?

Life Insurance means insuring your life to save for the future of your family. If you have family members depending on your income you may invest in life insurance. This is a contract between you and your insurance company where your insurer agrees to pay a certain amount of money to your beneficiary in the event of your death.
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What are the types of life insurance?

  • Term Life Insurance:

    For those who are running on a budget, you can opt for a simple life insurance. Term life insurance allows the beneficiary death benefits for a specific period or 'term'. This term may be 1 or more years and the benefits are paid only in the event of death of the policy holder within the term of the policy.

    There are certain term life insurance that can be renewed for more than one additional term. However, if you do so, your premiums may go higher. You may even sometimes be allowed to trade your term life insurance for a whole life insurance policy.

    Term Insurances are of 5 types:

    1. Annual renewal term insurance: Allows you to renew your term insurance every year till you reach a specific age which often freezes at 65.
    2. Renewable term insurance: With expiry of the term of the policy (generally 5-20 years), you can automatically renew the policy even if your health condition has worsened. It is similar to the annual renewable policy but this one is for a longer period of time.
    3. Level premium term insurance: Ensures that your premiums will not go higher for the term (between 5 and 20 years) of your policy.
    4. Decreasing term insurance: Allows your premiums to stay level throughout while decreasing your cash benefits each year. Such policies are usually used to cover items whose costs decrease with time.
    5. Convertible term insurance: With this policy you may convert your term insurance into any other type of life insurance policy that the company offers.


  • Whole Life Insurance:

    A whole life insurance covers a policy holder for his entire life. There is no date of expiry like in a term life insurance and the death benefits will be received by the beneficiary mentioned in the policy only in the event of the death of the policy holder. If you buy a whole life insurance you will have to pay a higher premium as compared to a term life insurance. The reason for this is that a certain portion of the premium paid for whole life insurance is put away into a savings program.

    When you compare the total premiums paid for whole life insurance and the total premiums paid for term life insurance it is seen that whole life insurance is less expensive. Even if you pay higher premiums for whole life insurance, the fact is that the premiums remain the same throughout the tenure of the insurance. But in the case of term life insurance, you may be paying lesser premiums in the beginning, but as you renew your term policy, premiums will increase. Hence, the total value accrued in term policy is bigger than a whole life insurance.

    Certain clauses in a whole life insurance allow you to pay premiums for a lesser period of time. The greatest advantage in this policy is that the premiums develop cash values that may be claimed or used for purchasing rider policies for more protection. Few of the whole life insurance benefits are:

    • Guaranteed death benefits
    • Guaranteed cash values
    • Fixed annual premiums

    A whole life insurance also known as "straight life" or "ordinary life" insurance, is not just an investment for your future alone, but also for the future of your family.

    To understand the basic difference between term life insurance and whole life insurance click here.

  • Universal Life Insurance:

    Universal life insurance is a flexible policy that provides security for you and your family. To know more please click here.

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How to save money on life insurance policy?

When you shop for life insurance coverage, there are certain ways by which you can save money on your policy. You must look for a policy that meets your needs and the right kind of benefits received. If you think that buying a policy with a low premium will save your money think again. If you buy inadequate insurance, it will be a sheer waste of money. However, you can maximize your life insurance dollars using some of the tips provided here.
  1. Seek financially sound companies: Look for companies that are financially strong so that when your beneficiary(s) make a claim, he may receive the benefits of life insurance without hassle.

  2. Shop around: Get life insurance quotes from more than one insurance provider. You may even ask an insurance agent or an insurance broker to get you few insurance quotes from different carriers. You may then compare the quotations and find a policy that suits your needs as well as pocket.

  3. Seek group insurance: Employer provided group life insurance is often given at subsidized rates so you may find a less expensive policy here. Even if you have to pay premiums out of your own pocket this might be a good idea for the subsidized rate they provide. However, premiums paid by you will probably be through payroll deduction which is convenient. But a comparison of group and individual rates depending on your age, health must be done to assess which is the best policy for you.

  4. Change in lifestyle: Maintain a healthy lifestyle. Smoking may rate you as a risk option and you may have to pay higher premiums. Exercise regularly and consider making more lifestyle changes if necessary.
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How to decide on the type of life insurance to choose from?

You may go for term life insurance if:
  • You need to make a short term investment and not a permanent one. With term life insurance benefits you can ensure the education of your children if you can invest in time. If there is a debt that you have to pay off, you may invest in term life insurance. Term life insurance covers you for a term of 5 to 20 years.

  • You need a big amount of life insurance with a premium that suits your pocket. A term insurance usually pays only in the event of death of the policyholder. However, if you are alive at the time the policy ends, term life insurance coverage will stop until you renew it. But here, you will not build a savings like in a whole life insurance.
You may opt for whole life insurance if:
  • You need life insurance stretching for the tenure of your life. A whole life insurance would pay the beneficiary the death benefit no matter when the policyholder dies.

  • You feel the need to accumulate a savings on a tax-deferred basis. A whole life insurance has its own savings program that puts aside a certain portion of the amount you pay as premiums into the savings program.
Click here to know more.
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Can you pay your mortgage with life insurance?

Yes. With mortgage life insurance your mortgage loan can be paid for in the event of your death in a time when the loan is not paid off fully. This insurance is available for 15 and 30 years where for the first 5 years, the amount of insurance is level and then decreases on an annual basis. The premiums for mortgage life insurance can be paid annually, semi-annually, quarterly or monthly.

How should you choose a life insurance company?

When choosing a life insurance company, take the following into consideration:
  • Identity of companies - Make sure to know the full name, office location and affiliation of the insurance company that you plan to buy from.

  • Product sold - Check out what products the company is selling. Most often the companies provide a wide range of policies. Check for what you need and if they have it you may consider buying from them.

  • Financial Security - Select a company that is strong financially and has been in business for long. Your life insurance is an investment to secure your lifetime. Be sure that your insurance company will make life easy for you and not otherwise.

  • Ethics - Check if your company abides by the codes of conducts and principles of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical conduct in life insurance marketing.

  • Agent - An agent is supposed to help you out with your insurance needs on behalf of the company. You must consider taking help from a reliable person only. If there is any discomfort in dealing with the agent, move to another one.

  • Cost of insurance - Based on your age, type of policy and features, and the amount of insurance to be purchased, compare one insurance company with the others. Find out one which offers a better coverage.

  • Claims - A national claims database will give you the complaints (if any) against an insurance company. You may want to check to find if the company you are considering buying from is listed for consumer complaint.
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How does a life insurance company choose you?

Your application for a life insurance policy has to go through the insurance underwriting process before it's approved. The underwriters evaluate the risks associated with your application and forward it to the insurance processing department of the company.

Factors that influence underwriting procedure for Life Insurance
  1. Age of the individual to be insured.
  2. Gender of the person
  3. Pre-existing medical conditions
  4. Medical records of the family
  5. Smoker or non-smoker
  6. Mental health of the person
  7. Occupation
  8. Hobbies or lifestyle habits (activities like race car driving, mountain climbing or bungee jumping might be marked as risky)
  9. Driving records
  10. Credit history
  11. Selection of coverage limits, benefits etc.
  12. Medical reports after thorough health check-up including tests like :
      13. > Blood pressure level
      > Blood sugar level
      > Cholesterol level
      > Weight of the individual
      > Urine tests
      > Blood tests
      > EKG/ECG
      > X-Rays
      > Stress tests etc.

Click here to know how the above mentioned factors affect the rates of a life insurance policy.

Your life insurance policy might not come to your assistance in your lifetime. However it'll help securing the future of your loved ones when you won't be there to take care of them. A small amount spent at regular intervals will thus be able to give you the sense of security, as you hand over the risks to your insurer. Top

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My parent bought whole life insurance that pays dividends many years ago. The sales representative told my parent that she can stop paying premium in approximately 12 years because the it policy would be able to pay for itself at that time. And at the same time the policy will make annual distributions to my parent. What does that mean? Is there such thing?

The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.

I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?

Thanks in advance for your help.

Total Comments: 282

Posted: Wed May 02, 2012 12:14 pm Post Subject: insurance

CAN MASSACHUETTS MUTUAL LIFE INSURANCE PAY MY PREMIUMS FROM THE CASH VALUE IN MY POLICIES TO KEEP SAID POLICIES IN FORCE?

Posted: Wed May 02, 2012 12:37 pm Post Subject:

NO NEED TO SHOUT.

Yes, your policy most likely includes an "automatic premium loan" provision that gives the insurance company the right to invade your cash value to pay premiums which are unpaid at the end of a grace period. They will continue to do so until there is no longer enough money to pay a full month's premium.

Is there a reason you have stopped paying premiums? If you no longer want the policy, then you should write to the insurance company and request that it be cancelled. You nay be subject to surrender charges, which allows the insurance company to keep some or all of the current cash value.

If you no longer want to pay premiums, and the surrender charge would eliminate any refund of value to you, then it would be best to simply allow the insurance company to use the cash accumulation until the policy lapses for nonpayment of premium. You will have full coverage until then, and by not surrendering/canceling the policy, you would still be eligible to reinstate it within the stated period of time in the policy (usually three years, and you would have to pay all the past due premiums and, possibly, interest on those unpaid premiums or premium/policy loans).

Posted: Thu May 03, 2012 05:42 am Post Subject:

Thanks for share information for life insurance.. I want to also share Business owners insurance – It is a package policy protects against losing to the building, computer etc, small business insurance, business owner insurance, small business liability insurance, insurance for business owners. You can also visit site on business insurance:-
[Link removed per TOU]

Posted: Tue May 22, 2012 10:12 pm Post Subject: Index UL insuance

Does Index UL policy good to own 2milion for estate planning us. Also my children have few whole life policy we own them over 20 years already, some agent tell me to use 1035 exchange to use the cash value to buy a bigger coverage index UL insurance, it it worth it to exchange?

Posted: Wed May 23, 2012 12:15 am Post Subject:

some agent tell me to use 1035 exchange to use the cash value to buy a bigger coverage index UL insurance, it it worth it to exchange?


This is probably not a good idea, unless you are the agent who wants to earn a fat new commission for the sales.

Index UL with specific no lapse guarantees and premiums can be used for estate planning purposes, however, you must plan on paying premiums every month, every year, without interruption, or you could lose the guarantees and the insurance as the result of higher costs later in the contract.

If, at your death, your estate will not exceed $5,000,000 under current law, you have little or no need for insurance for estate planning uses. Next year, the numbers could be different depending on what Congress does with the extension given to EGTRRA 2001 at the end of 2010 that kicked the can down the road two years to 1-1-2013.

Posted: Wed May 23, 2012 01:43 am Post Subject:

My children have 20-Payment Life policies with Guardian and, within the next few years, their policies are guaranteed to be paid up.

Many Whole Life plans taken out on children, have the ability to support themselves after 20 years - provided all premiums were paid and no loans exist.

Rather than entering into entirely new contracts, and higher premiums, you might want to consider giving paid-up policies to your kids. If they need more insurance in the future, you can always help guide them in that direction.

Posted: Wed May 23, 2012 04:58 pm Post Subject:

In general, Max, you are correct, but let's not forget that many states have estate tax thresholds that are lower than the federal estate tax, so we can't make the assumption that an estate of under $5,000,000 can't benefit from insurance for estate planning purposes. Let's also keep in mind that some or all of that $5,000,000 may be used during the person's lifetime.

The 1035 exchange is probably a bad idea.

Posted: Wed May 23, 2012 05:57 pm Post Subject:

Yes, you're right, we cannot overlook state estate/inheritance taxes. But only a third of the states collect them.

As of January 1, 2012, there were 18 states still collecting estate/inheritance taxes:
Connecticut
Delaware
District of Columbia
Hawaii
Illinois
Maine
Maryland
Massachusetts
Minnesota
New Jersey
New York
North Carolina
Ohio
Oregon
Rhode Island
Tennessee
Vermont
Washington

Ohio's exemption is a paltry $338,333, New Jersey's is $675,000. Hawaii's is about $3,360,000 and North Carolina's is $5,120,000 (equal to the federal exemption in 2012). The other 14 states fall somewhere between $892,865 (go figure) and about $2,000,000, with most at $1,000,000.

And, of course, the gross value of the insurance death benefit held for estate planning purposes will add to the estate tax bill itself unless held in an ILIT.

Posted: Mon May 28, 2012 10:52 am Post Subject:

It doesn't have to be held in an ILIT. As long as the insured isn't the owner, it won't be in the insured's estate at death.

Posted: Mon May 28, 2012 05:41 pm Post Subject:

As long as the insured isn't the owner, it won't be in the insured's estate at death.


No disagreement, but with another person as the owner, instead of an ILIT controlled by a written legal trust document, all manner of problems could arise, up to and including termination of the policy without the knowledge or consent of the insured, or a change of beneficiary to someone other than the insured's chosen beneficiary, with utterly no recourse.

You want to eliminate problems? You use a trust attorney and a life insurance trust. Not always a perfect guarantee (if the attorney is a slouch), but generally a better plan than leaving the policy in the hands of a living, breathing human being.

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