There are basically two types of life insurance policy available known as ‘whole life’ and ‘term’. Whole life policies are there to provide benefits to the owners throughout their entire lives, whereas ‘term’ policies are taken out to provide coverage for a set period of years.

Life insurance needs should be re-assessed at regular intervals to ensure the policy or policies taken out are still adequate for their purpose. Policies taken out 10 -15 years ago may have outlived their use, lapsed, or premiums may have gone up due to underperformance in a volatile market place. Examples of underperformers include many of the ‘permanent’ life policies available over recent years –‘whole life’, ‘universal’ and ‘variable’ life policies which are linked to interest rates, which can go up as well as down.

No ‘One size fits all’ Life Insurance Policy

There is no ‘one size fits all’ insurance policy out there and it may be a case of combining different types of life coverage in order to ensure future financial needs will be met. Many people decide to re-assess their requirements for life insurance after experiencing a big life change which affects their finances – such as having a baby, or taking out a mortgage. The implication of leaving behind dependents or partners who may be left with big financial commitments motivates many to plan a financial future which includes life cover.

As well as meeting the needs of their beneficiaries in their ongoing lives, another common reason to take out coverage could be simply to cover short term funeral costs (costs which are rising every year).

How to calculate life insurance requirements

An appraisal is needed as to how any current policies are performing, and an honest calculation of their projected value going forward is needed. You may find that there are better products out there in the marketplace to suit you. Restructuring may seem like a hassle, but lower administrative fees and the fact that insurance companies have re-designed their cost structures mean that changing policies is not the financial headache it used to be.

Alternatively – you may discover through the process of re-evaluation that your life coverage is just fine, thank you – but taking stock of finances in an uncertain economic climate has to be a good thing.

Source: Stephen Smith, Delmarvanow.com

 photo credit: SMJJP

Divorce is right up there with bereavement when it comes to raising stress levels, and – as well as being one of life’s most unpleasant experiences, a break up also seriously impacts on your financial health. This is why it pays to plan ahead – and life insurance, as ever, should be an integral element of planning for life’s undesirable eventualities.

Unfortunately, however, married couples neglect to consider negative outcomes. As Carole Peck, president of Carole Peck Financial Center puts it “Couples often overlook the financial ramifications of their split, or assume lawyers will hammer things out to everyone’s satisfactions.”

Female Spouse often Loses out Financially in Divorce

Very often it is the female partner who gets to keep the family home in the event of a divorce, in order to carry on looking after the children in familiar surroundings.

In exchange the main wage earner, (usually, but not always), the male spouse, tends to keep control of IRAs and other long term financial assets; and while he continues to reap the rewards from their previously joint financial portfolios the family home may start to seem  less of an asset and more of an intolerable financial burden.

Even with decent alimony and child support there may well not be sufficient funds to keep up with mortgage payments, property taxes and home repairs. And if payments cease due to the illness or bereavement of an ex-spouse the family face eviction.

Life Insurance can Provide Financial Stability in the Event of Divorce

Ellie DeLano writes a blog – the ‘Divorce Diaries’ about her personal journey through the divorce process and urges women to think about the importance of life insurance in the event of divorce . The spouse considered to be the most financially well-off (usually the male) should be encouraged to take out a life insurance policy which includes the children as beneficiaries, until they can be considered independent.

In her case she was lucky – a divorced friend had urged her many years previously to have it written into the parenting agreement that Peter, her husband, be “required to name me as beneficiary on his life insurance, until the children are no longer my dependents.” Now that the couple are divorcing Ellie is thankful for this timely advice.

As she says, “If I were to die unexpectedly, Peter would have more than enough money to buy and keep a roof over the kid’s heads, feed them and even probably send them to college. If the situation were reversed, I’d be in serious trouble. We’d lose the house without his support check, and life would certainly be much harder than I complain about now.”

Life Insurance could be a Lifeline – so it Pays to be Practical

In her ‘Divorce Diaries’ Ellie advises even the most happily married to plan for any contingency:  “Don’t sell yourself short just to seem like the ‘nicer’ person.”

We all enter into our marriage contracts thinking it will last forever- but it is imperative to use your ‘practical head’ when planning the future. Setting up adequate life insurance has to be a priority when it comes to safeguarding a future for you and your children – something which you may be very thankful for one day.

Source: mainstreet.com posted 02 December 2010

Divorce Diaries, posted in WomansDay.com Editors on 29 December 2010

photo credit: epSos.de

There are lots of great deals on the market currently if you are looking for term life insurance and critical illness cover. Term life insurance is cheaper than whole life insurance because it only covers you for an agreed term, whereas whole life insurance provides coverage for life. Plus, you do not get any return on investment with term life – but can reap good dividends with whole life coverage.

Critical Illness Cover is a Welcome Boost to a Life Insurance Policy

Term life insurance can be boosted by adding on critical illness cover to it and many life insurers can offer this benefit at a very cost effective rate. Critical illness insurance means you are insured against the main critical medical conditions and illnesses including cancer, heart attacks and kidney failure – insurers will publish a comprehensive list of illnesses they cover.

Make sure to carefully check out exactly what is covered, since you could get a nasty shock if it later turns out that e.g. the loss of one limb is not considered ‘critical’ by the insurer, whereas losing two e.g. legs is. Similarly, some insurance companies will only cover you for certain types of cancers – so check the terms very carefully. And speak to an advisor before taking out critical illness protection.

Take the time to Check Terms and Conditions of Life Policies

Many of the term life insurance policies being offered seem like really good deals – the policy premiums often look like excellent value as far as the policy cover amount. For example, a 40 year old non-smoker could arrange a $1 million dollar term policy to run over 30 years, and only pay around $2,500 per annum for it.

Use a top Rated Company

But –make sure you are buying a policy from a trusted and known source. If you don’t you run the risk of being shortchanged in the event of a claim. The best way to check out which life companies are reliable is via a broker or the internet.  Make sure you check out whether the life insurer is financially stable, too by looking up its rating on Standard & Poor’s or AM Best – and go with an insurer that has an A rating or better.

Use ‘Execution Only’ Brokers for Cheaper Life Insurance Deals

Also it’s worth noting that life insurance prices change on a daily basis – so it’s a case of ‘best buy brokers’ rather than ‘best buy insurers.’ Brokers take on the job of finding the lowest priced insurance companies – but – some brokers receive extremely large commissions from the insurance providers and this can have a big impact on how much you end up paying. The best way of getting round this is to utilize ‘execution only’ brokers – they give you the commission, and charge a small fee in return.

Other things to check are that life premiums are ‘guaranteed’ rather than ‘reviewable’ so that know exactly where you are when it comes to monthly payments. The most important thing to remember when you are trying to get the cheapest life insurance and critical illness deals is that it pays to get advice.

Source: Amy Perry, Allvoices.com Jan 2011, and MoneySavingExpert.com Oct 2010

photo credit: allaboutgeorge

A recent report shows there is a substantial gap between the amount of life insurance taken out by men and women who are married with children under 18. The research was carried out by MetLife in its annual ‘Study of Employee Benefit Trends‘ and it shows that working married men take out far more cover than their partners. Working dads take out an average of five times their earnings in life cover, while moms take out on average just three times their annual income.

The report was based on 382 interviews with working parents at companies who had at least two employees and was completed over the last quarter of 2009.

The Gap in Life Coverage is a ‘Worrying Trend’

According to Bill Rackzo vice president of US Business at MetLife this is a worrying trend since “Life Insurance can provide a family with substantial peace of mind. It is important to not only have coverage but to make sure coverage amounts are adequate. That is why it is concerning to see the income of working mothers is not as adequately protected as that of fathers.”

The gap in life coverage amounts is surprising given the survey also showed that both working moms and dads say they are concerned about not having enough life coverage, with six out of ten saying they felt ‘very’ concerned. So why are women not taking out enough life insurance? MetLife believes the reason may be down to poor communications from their employers about benefits – only 26% of working moms thought they were receiving adequate information compared to 46% of working dads.

(more…)

There has been a recent clampdown in places such as Oklahoma on the unscrupulous practices of buyers and intermediaries of life policies sold by seniors; there have been numerous instances where $1million policies have sold for as little as $35,000.

Despite this there is, according to Kim Holland, the insurance commissioner of Oklahoma “a legitimate purpose in viaticals and life settlements.”  The sale of a policy whereby the seller is not expected to live more than two years is known as a Viatical and these payments are not subject to income taxes. Life settlements on the other hand are made on policies surrendered where the owner has a longer life expectancy, and are subject to taxation.

Jonathan Pond, a financial advisor from Newton, Massachusetts agrees that cashing in a life insurance policy sometimes makes sense and states “If you really need the cash then it’s certainly worthwhile to consider”.

Substantial number of Seniors Seek to Cash in Life Policies

The trade in selling viatical policies emerged in the 80’s as individuals with AIDs, for whom death suddenly loomed large cashed in their policies to get quick access to finance either because they had lost their jobs or had to pay huge medical bills. Since then another group of people have taken their place – people approaching their seventies who wish to surrender or sell their life insurance policies for reasons such as needing money for long term health care, for vacations or just cash to make ends meet. Alternatively, some older people find that they have amply provided for themselves and their spouse via other investments and have no need of the policy any longer.

Seek Financial Advice before Cashing in a Life Policy

Although Jonathan Pond believes that cashing in a life policy can be a valid way of raising money he urges his clients to try other routes first. Typical life policies will reserve some of their value as a death benefit even after it has been surrendered. And the policy owner may be disappointed with the amount after tax is applied. The amount they get depends on a number of factors, including their age, sex, health, and life expectancy, the type of policy it is, and the cash value of the policy.

Those selling Life Insurance Policies should shop around

Gloria Grening Volk has written a book entitled “Cash for the Final Days” (Bialkin Books 1997) and she says selling a policy should be looked upon in the same way as selling a house – “Don’t go with the first one that makes you an offer.” Matthew J Gaul, deputy superintendant for life insurance at the New York State Insurance Department agrees that sales were “something where consumers really need to price comparison shop among different providers.”

Source: Charles Delafuente “When Life Insurance is More Valuable as Cash”, NY Times Mar 3 2010

photo credit: Hakan Dahlstrom