What Are The Different Types Of Whole Life Insurance?

What Are The Different Types Of Whole Life Insurance

Whole life is a type of life insurance that lasts for the policy holder’s entire lifespan as long as the premiums are paid on time. Most insurance companies require the potential policy holder to undergo a medical exam before coverage is given. The longer the individual pays the premium, the more the cash value is built. If the premium payments are discontinued, and the policy lapses, the policy holder will lose their insurance; some plans may still allow the individual to have the cash value.

Whole life insurance can be categorized into three subtypes: traditional, interest sensitive and single premium. Usually, each type carries an unchanging death benefit and premium unless the policy holder decides to increase or decrease coverage. A policy’s cash value will depend on the subtype; however, whole life insurance is not considered income unless the individual withdraws money from the policy.

Traditional Whole Life

Traditional whole life carries the least risk. This type of whole life insurance is well-suited for those who want a fixed and specific minimum cash value in which to invest. Monthly premiums must be paid on traditional whole life insurance. However, premium payments can be taken from the policy’s cash value if the policy has accumulated a high cash value. This benefit allows the policy holder to make payments if they run into financial trouble. As long as the policy has cash value, the premiums can still be paid.

Interest-Sensitive Whole Life

Unlike the cash value of traditional whole life, the cash value of interest-sensitive whole life insurance will fluctuate according to the current market’s interest rate. In essence, interest-sensitive whole life has varying interest rates like some credit cards and home mortgages. Because of the varying interest rates, this kind of whole life insurance is considered more risky that traditional whole life insurance.

Single-Premium Whole Life

Out of all three subtypes of whole life insurance, single-premium policies are the most expensive. The holder of a single-premium policy is expected to pay the entire amount in one lump sum. Upon the initial investment, the policy will receive interest, allowing the cash value to increase immediately. Regardless, single-premium whole life policies are not comparable to investments like 401(k)s and IRAs.

No matter the type of whole life insurance, the policy holder will receive tax benefits because the actual cash value cannot be taxed until it is used. Potential policy holders need to keep in mind that only part of the premium is converted into a cash value; the amount allocated to the cash value varies depending on the plan. Financial experts conclude that whole life insurance policies are best for people who prefer less risky investments that do not involve asset conversions.

What Type Of Life Insurance Do You Need?

What Type Of Life Insurance Do You Need

Like many people, you may be confused as to the type of life insurance best suited for you. There are quite a few factors and options to consider. Financial planners recommend that a potential policy holder review their particular needs and compares features and providers. You should think about not only your current goals but also your future goals. And after you choose a policy, it is a smart idea to periodically evaluate your coverage; sometimes changes must be made to fit new life situations.

The type of life insurance you choose will depend on your lifestyle. For instance, if you are employed, have several dependents and are still upside down on your mortgage, your insurance needs will differ from someone who is retired, does not have dependents and has paid off their mortgage. In these scenarios, the younger parent should buy enough life insurance to support the children and pay the mortgage. The older retiree needs to purchase insurance to cover their end-of-life expenses.

Do not forget to plan for the future when choosing a life insurance policy. If you are currently a parent of minor children, you will need a higher level of coverage. Once your children are independent adults, you can lower the coverage amount. Some people buy whole life policies and supplement them with term life insurance that lasts until their children reach adulthood.

You have several categories of life insurance from which to choose. A term life policy generally offers a low monthly premium, particularly when purchased early in adulthood. However, a whole life policy has premiums that do not rise as the holder ages. It is also possible to earn interest on certain policies. Other policies let the holder borrow from the principle or the accrued interest.

There are additional options you can add to a life insurance policy. Terminal illness payments allow a portion of the policy to be “cashed out” in order to cover bills associated with a terminal illness. Mortgage repayment is another extra choice you have. This option automatically pays the mortgage left on your home. Accidental death coverage is also a popular choice because the payout is increased if you were to die in an accident.

When shopping for life insurance, get quotes from a few different companies. Some companies offer discounts for those who have an auto insurance or homeowner’s insurance policy through the company. Your employer may even provide term life insurance. If so, you could possibly be able to buy more coverage at a group rate.

Tip to Save on Life Insurance

Tip to Save on Life Insurance

Every individual needs to have life insurance. Life insurance can help defray the costs that families experienced when a loved one passes away. There is no reason for individuals to spend more than necessary on life insurance. There are several tips individuals can use in order to save on life insurance.

Consumers should always purchase a policy that requires a physical. A policy which requires a physical will enable a life insurance company to underwrite the policy with a higher degree of accuracy and allow healthy individuals to be charged lower premiums. Individuals who do not smoke, stay in shape and do not have high blood pressure will be charged a lower premium.

Shoppers should purchase the policy that fits their needs and specific situation. A relatively young individual does not need a whole life policy. Older customers do not need to have a term life policy. Consumers should look for the policy that has the highest likelihood of being redeemed in order to determine which policy is the best choice for their needs.

Customers who are looking for a thrifty option for life insurance should purchase a term policy. Term life insurance policies are the most cost effective but are not redeemable for any cash value unless the covered individual passes away. Individuals who are looking for an investment opportunity should avoid whole life insurance and look for other investment vehicles for their funds.

Make certain you review your payment terms before agreeing upon a life insurance contract. Many life insurance companies charge extra for individuals to be able to pay their premiums on a monthly basis. Individuals typically receive a discount when their life insurance company is able to receive the money in one lump sum.

When you are shopping for life insurance, apply for quotes online. Many companies that offer quotes online have lower overhead and are able to pass on further discounts to their customers. Once you have completed a quote online, you will receive your monthly premiums in a matter of seconds.

Consumers should avoid any financial planner that charges them a fee. Many consumers used to opt for a financial planner to help them with the choice of their insurance products but individuals can save hundreds of dollars a year by doing their own research on policies. The Internet is a great resource for individuals who are currently shopping for a life insurance policy.

Life Insurance and Charity

Life Insurance and Charity

Many life insurance customers do not realize the advantages of the policies they hold. In particular, Americans of a charitable disposition that give cash and property to charities of their choice do not realize how life insurance can help them. While charitable donations do provide substantial benefits in the form of tax deductions, policyholders can use their life insurance policies to augment their support of favored charities. There are multiple methods to achieve this goal.

Charitable Giving Riders

These are relatively new to the world of insurance riders. They are attached to policies with a death benefit of over $1 million. Once attached, they pay one to two percent of the value of the death benefit to a charity of the policeholder’s choice. The insurance company usually has to approve the choice before the rider starts working, and there may be limits on the dollar amount of the gift. Charitable giving riders usually do not increase the premiums, reduce the cash value or decrease the death benefit of the policy. The charity chosen under such a rider must meet the IRS definition of a 501(c)3 nonprofit organization.

Policy Donations

This method is more detailed than purchasing a charitable giving rider, but it has advantages for the donor as well as the charity. Simply donating a policy can reduce the donor’s taxable estate. This saves thousands of dollars for taxpayers with higher incomes subject to the estate tax. Donating a policy also provides a tax deduction for the amount of the policy’s fair market value. Upon the death of the policyholder, the charity will receive the face value of the policy. This can be quite a substantial amount. Even more good news is the premiums made to the policy are also tax-deductible after the date when the policy was donated. There is no limit to the dollar amount of the policy. Charitable donations have no limit for purposes of the estate tax.

Naming Charities As Beneficiaries

Aside from adding a rider or donating a policy, a policyholder can name a charity as the beneficiary of his policy. This is the simplest method, but it does not carry the same income tax advantages as donating a policy outright. Despite the lack of income tax benefits, naming a charity as the beneficiary reduces the donor’s taxable estate by the dollar amount of the death benefit. Uncertainty may be dealt with by naming a revocable beneficiary like a charity. This comes in handy if the donor’s financial situation changes later on.

Donating Policy Dividends

Receiving the dividends paid from a policy in cash and donating them directly to a charity is another alternative. These donations are tax-deductible. This does not require any additional cash from the donor.

What is Decreasing Term Life Insurance?

What is Decreasing Term Life Insurance

Decreasing Term life insurance is a policy whose benefits decrease over time. These policies are often used by people who need to ensure a large debt, such as a mortgage or childcare expenses, will be covered in the event that the insured dies. For those that have the need, there are many benefits to buying this kind of policy.

With this type of coverage, a specific dollar amount of life insurance is purchased. Over a period of time, the benefit amount will decrease to a predetermined minimum and eventually expire. This is strictly a death benefit, which is payable to a beneficiary. The premium is usually a fixed amount that is paid monthly.

The length of time that the policy is in effect, or term, can vary between 10 and 30 years. This is called Level Term life insurance. The rate is guaranteed over the course of coverage. The exception is for Annual Renewable Term policies. For these, the policy renews each year, and the premium is based on one year. There is often an option of renewal, which is guaranteed for a set number of years.

An insured can designate the money to cover their financial obligations in the event of their death. Common uses include:

  • Mortgage coverage
  • Dependant child care expenses
  • Educational expenses for dependant children
  • Personal debt
  • Funeral expenses

The downside is that while the premium remains the same, the value of the policy decreases annually. As opposed to whole life insurance coverage, a Decreasing Term policy is a temporary solution. The ideal situation in which this would be used is for there to be an adequate amount of money in savings at the expiration of the policy.

Decreasing Term life insurance is a popular choice among working class families. This is largely due to the relatively low cost. Whole Life or Universal coverage tends to be more expensive, since the benefit amount does not decrease.

However, beneficiaries do not receive the full cash value of Whole Life policies. They are only paid the face value. This increases the attractiveness of Decreasing Term policies, since the difference in premium could be invested elsewhere.

Decreasing Term life insurance is also helpful for those that expect to have accumulated a substantial savings upon their death. It protects other investments, such as an IRA, from being used to pay estate or inheritance taxes. As much as 80% of these benefits can be lost due to such expenditures.

What is Variable Universal Life Insurance?

What is Variable Universal Life Insurance

Variable Universal Life Insurance refers to a type of insurance that creates cash value. With regard to a VUL, the cash amount can likely be invested in an array of varying accounts not linked to one another. The component found in the name has to do with the ability to put away money in different accounts with differing values. The reason why the values tend to vary is because they are placed into bond markets. Premiums will vary at certain times, starting with nothing and moving all the way up to their subsequent maximums, which are setup by the IRS and its relevant insurance plan.

A permanent life insurance setup such as this one is in place so that the benefit upon death will be paid if the insured individual dies, but there has to be enough of a cash value in order to pay the entire cost that the policy requires. There is absolutely no endowment age, and so this is a major advantage of VUL over other kinds of programs. With standard whole life policies, death benefits can only reach the actual amount given in the policy, and at the age of endowment, the face amount is paid in whole. So with either endowment or death, an insurance entity will retain any value that has been created over the years.

In the case that certain investments, which have been made in different accounts, do better than the common account of the insurance company, then a higher rate-of-return will take place. Mostly, the higher rates take place with those plans that belong to the fixed rates configuration of the whole life plan. With a combination of this magnitude, which refers to the amassing death benefit, a higher value might be awarded to the beneficiary than that which typically belongs to the whole life policy.

There are regulations that belong to the VUL providers, so it makes sense to become acquainted with what some of them are. A representative that provides a VUL has to be working in regulation with the securities and laws of the country by which it operates. Because these are in fact life insurance policies, VULs can only be sold by those providers that have all of the proper licensing. In addition, it is only possible to sell insurances in the locations of which the rules apply. Lastly, the insurance company itself has to be licensed as an actual insurer—anything short of this leaves all parties involved operating outside of the context relating to the policy.

How to do well on the Life Insurance Medical Exam

How to do well on the Life Insurance Medical Exam

A healthy lifestyle is the best way to prepare for any medical exam, but the exam for a life insurance policy is different from regular check-ups because of the financial incentive. The better the results from this exam, the lower the premium the policyholder has to pay. This gives rise to all manner of fraudulent attempts to fudge the exam, but it is difficult to lie about how healthy someone really is. A few simple tips on the day of the exam can go a long way towards improving the results.

What to Do Before the Exam

Getting plenty of sleep is the best way to prepare during the night. A well-rested body gives off positive signals and contributes to emotional well-being. Avoiding alcohol, smoking and caffeine at least 24 hours before the exam is a must. These three substances drastically interfere with the body’s normal cycles and can skew the results from a medical exam. Avoiding food may also be beneficial, aside from following the normal dietary routine already in place.

The Day of the Exam

The medical exam will probably take a short while, and it will likely involve blood tests. Wearing a short-sleeved shirt or a shirt with sleeves that can easily be rolled up is a simple matter of courtesy. The doctor performing the exam will need to see all of the medical records from previous tests. Information about any active health insurance policies or statements and documentation from previous physicians may also be necessary.

Photo identification will be required so the life insurance company can verify the identity of the policyholder. A list of currently prescribed medications is also very helpful. Including any over-the-counter or non-prescription medications will prevent any potential complications. Finally, simply remaining relaxed and calm throughout the exam is also a must, but it is particularly helpful if the insurance company wants an electrocardiogram (ECG) test. An ECG test monitors electrical impulses in the heart of a patient, so remaining calm will help produce reliable results.

Why Medical Exams Are Necessary

The purpose of the medical exam is to reassure the lift insurance company that the potential policyholder will not die soon, forcing them to pay out a death benefit earlier than they wish. The healthier the policyholder is, the lower their premiums will be. Medical exam results feed into the actuarial tables used to calculate life expectancy, which is the entire point of life insurance.

How To Find Out If A Deceased Person Had Life Insurance

How To Find Out If A Deceased Person Had Life Insurance

Planning a funeral is costly, therefore it is important to find out as soon as possible if the deceased person had a life insurance policy. People who have life insurance policies usually tell someone that it exists. Others get the life insurance policy, tuck it away and do not mention it to anyone. That is when the search begins for possible hidden life insurance that will help with funeral expenses.

There are several things that family members can do to seek out possible life insurance policies. It can be a difficult task if there is no clear indication of such a policy. Follow the list below to find those hidden life insurance policies.

Paperwork- Search through all the paperwork in the home of the deceased. Life insurance policies require a lot of paperwork and signatures. Look at every single piece of paper in the home. If there is excessive paperwork, have several people help in the task. If you are not sure if something might be life insurance, put it in a pile for later use.

Make phone calls- Find phone numbers on paperwork you are not certain about. Call those businesses to find out if there was a policy. Most companies will require a death certificate before they will give out information. Death certificates cost money, so use them sparingly and only for places that insist they have one before they will do anything.

Job- Many companies offer life insurance for their employees. Call the human resources department where the deceased last worked to find out if he or she carried life insurance through them. The benefit amount is usually double the annual salary of the employee. The human resources department can guide you to the next steps in collecting on the policy if one exists.

Checkbook- Most life insurance policies need to be paid on a monthly or yearly basis. Look through the entries in the deceased person’s checkbook to see if there are any entries for life insurance. This is the best way to find out about whether a person had life insurance or not. If there are payments to an insurance company for anything at all¸ such as car insurance, call the agent to find out if there was a life insurance policy as well.

When dealing with the death of a loved one, the last thing people want to think about is the money. Unfortunately, it is one of the first things they have to think about. Money for the funeral has to come from somewhere and not everyone has that kind of cash lying around. Do not be too disappointed if there was no policy. Not everyone carries a life insurance policy.

Life Insurance and Divorce

Life Insurance and Divorce

All divorces involve a division of assets. And many times, the division of assets includes difficult settlement negotiations. If either party in the divorce proceedings holds a life insurance policy, they must make some determinations as to how the policy is handled, particularly when the other party is named as the beneficiary.

The first order of business is to inform the insurance company of the pending divorce. The company will give the policy holder instructions on how to change the beneficiary. If this change is not made, the policy holder will risk their ex-spouse receiving the money from the policy when the holder dies.

In some cases, the policy holder can transfer the ownership rights to their policy in order to ensure child support or alimony payments. Regardless of the type of life insurance, it is imperative that both parties agree as to who will own, and subsequently control, the policy. One option to consider is naming the custodial parent of all minor children involved in the divorce as the policy owner; this will help guarantee the insurance policy is maintained as per the divorce decree.

The current insurance policy holder can even request a stipulation be included in the divorce judgment that further protects the policy. This stipulation will state the ex-spouse allows the policy to lapse or changes the beneficiary, the current holder, or the current holder’s children, will receive a portion of the ex-spouses’ estate; this amount will be equaled to the life insurance policy’s death benefit.

In a divorce, an insurance policy can be a helpful financial tool. The policy can be used to compensate children from a prior marriage in the event the ex-spouse is awarded alimony and the involved children are awarded child support. Sometimes, adult children from a previous marriage can sue the policy holder’s estate if the splitting of assets is not deemed fair. Permanent life insurance is an excellent solution to this potential issue.

By naming the adult children from the prior marriage as beneficiaries on a permanent life insurance policy, those children will receive the monetary benefits in the event of the policy holder’s death. If the policy holder ever remarries, his current spouse, and their children, will be awarded the policy holder’s assets and accumulated property. Doing this ensures the policy holder provides for all families. With careful planning, it is possible to not only protect the policy but also use the policy to one’s benefit.

Who Needs Life Insurance?

Who Needs Life Insurance

Life insurance is intended to help families or other beneficiaries financially if the person they depend on for financial support dies. If a person has dependants which includes children, spouse, aged relatives or dependant sibling they need life insurance. The cash the beneficiary receives from the life insurance will help with funeral costs, living expenses, debt relief and college funds.

Couples who are considering starting a family need life insurance. The rates will be less expensive for younger people than if they wait until they are older. Their future children will depend on their income.

For those who have not purchased life insurance before they started a family, should do so as soon as possible. Life insurance is not only for the parent or parents who provide income, but also for a parent who works in the home. If the homemaker dies, it will be very costly to pay for childcare and domestic help.

Working couples, who would have no problem living on their individual incomes if the other person dies, may not need life insurance. If they would like to leave their partner better off financially and they can afford it, they can purchase a low cost policy.

Life insurance is not necessary for a single young adult unless he or she is supporting aged parents. If there is no one dependent on their income, then no one suffers financially if they die. They may want a small policy to cover funeral costs, but if they have other means for funeral costs they do not need any kind of life insurance.

It is not advisable for elderly people to purchase life insurance unless they still have dependents. It can be very costly because pre-existing medical conditions and simply old age will make the premiums higher. There are other ways to cover funeral costs through savings accounts which are a better option than life insurance.

For people who are a partner in a business which depends on them to generate income. A life insurance policy could save the business for the other partner while he or she is finding a new partner or learning how to run the business alone.

Wealthy people may think they don’t need life insurance because their investments and assets will provide for their dependents. If their assets are not liquid enough to pay estate taxes, then life insurance is the best option. It is a small investment that will save the beneficiaries of the estate a lot of money.

Some things to consider before deciding if life insurance is required are:

  • Cost of family lifestyle
  • Non-working spouse with no income
  • Working spouse may need to quit job to care for children
  • Debts that need repayment
  • College expenses
  • Special needs for disabled parent or child
  • Financially dependent parents
  • A business partner