Business owners have different needs when it comes to taking out life insurance which differs from individuals who are employed. Life insurance is there to help look after loved ones, should the unthinkable happen. But if you own a business and die unexpectedly then you need a life insurance plan which will not only keep your family provided with an income, but also to ensure that the business can continue as usual.

Which Type of Life Insurance Would Best Suit you as a Business Owner?

When taking out life insurance as a business owner there are some things which should be considered such as whether to take out term or permanent insurance. Term life insurance is a relatively simple idea – you decide on the level of cash payment which would be paid out upon the event of your death, and also on the term of the coverage e.g. $400,000 over 25 years. This can be a good way of making sure a mortgage balance would be repaid for instance.

This might also be a good type of life insurance for a business owner with a partner who is planning on retiring at a fixed date. For a couple running a business together they could agree that if either one dies before their planned retirement date, the partner left behind would be able to purchase their deceased partner’s share in the company. Term policies could be taken out making either partner the beneficiary.

This could be a good option to cover the business – but the problem with term insurance is that once the qualifying period runs out – say, after 20 years, then the company would no longer be covered. And, as the business gets older, so do the owners, which means taking out term insurance later on will be more costly. When term insurance ends without the policy owner having died, there will be no cash payment.

Would Permanent Life Insurance be a Better Option for Business Owners?

Permanent life insurance policies include both insurance as well as some investment, or ‘cash value’. The premiums pay, not only for your life insurance coverage, but some is used for investment purposes. The upside of this is that – when the term of the insurance ends, you will still have the investment element to call upon. Plus, permanent life insurance continues for the whole of a person’s life – and so may be more attractive to those wanting coverage for longer.

Plus an additional benefit to a business owner is that the investment component of the policy can be borrowed against and used to further the company – or the policy owner can use the funds to repay premiums.

Life Insurance for Key Employees

Life insurance can also be taken out by business owners on key employees to cover them in the event of their death – should that employee die the insurance would cover them for the loss of income entailed and help fund them in finding a replacement.

Life insurance for a business is often in place for buying out the remaining partners in the event of the premature death of one of the owners. The insurance can cover all the key members of the business. Before deciding which type of insurance to buy – business owners should get in touch with a financial advisor who can help identify the pros and cons of the various life insurance policies on offer.

Source: Karin Price Muewller at Entrepreneur.com

photo credit: Greg317

According to the Population Reference Bureau[1] the number of single moms in the US has risen dramatically over the last 40 years. In 2009 a massive 18.1 million children were categorized as living in single-mother households (a single mother household is one in which a family is headed by a female with no spouse present). Although children brought up in single-parent households can and do succeed many are hampered by poverty, and have an increased risk of dropping out of school or becoming teen parents.

Majority of Single Mothers have no Life Insurance

Having sole responsibility for the children means single mothers must consider the welfare of the kids in the event of their death – a necessary (albeit unpleasant) task you might think, but worryingly estimates show that almost four in ten single parents do not have any life insurance cover – and those who do have often not arranged enough.

Single moms must make life insurance a priority so that their children do not suffer financially as well as emotionally should the unthinkable happen– their Life Cover must ensure sufficient resources for children to live on as well as perhaps the opportunity to go to college later on. Life insurance which would pay out on the death of the policy holder (term insurance) might be a good option to consider, however it’s worth discussing possibilities with a good insurance agent who will be able to give an expert opinion on the best low-cost life insurance policies for those on a low income.

Obama aims to get Single Moms back to school

In an attempt to lift single mothers out of poverty Barack Obama is attempting to make prospects better for single moms who want to return to study but are hampered by lack of finances. Grants are available to enable single mothers to get a second chance at education – education which can only benefit both their families and their future employers.

The Scholarships for Moms program has increased funding via Pell Grants ,which have been around for some time – the maximum amount of aid has been increased to over $5000 –$1000 more than previously. Also importantly the range of study options for which funding is available has increased to cover part-time and distance study, thereby making it far easier for a single mother to access learning whilst working or caring for children. A further $10,000 worth of financial aid via a Scholarship is available for some single mothers – in order to qualify you must be female and have a child.

The Obama Scholarships give single moms a real chance at improving prospects both for themselves and their children – but they must also consider how important life insurance is to their offspring’s potential happiness and security.

photo credit: meemal

Termed the ‘black widow,’ 51 year old Tami Duvall of Indianapolis has been accused of murdering her husband. Her motive: cashing in her husband’s $100,000 life insurance policy.

Alan Duvall, 61, died at his home in Columbus back in 2007 and the cause of death was initially determined to be alcohol poisoning. Tami Duvall confirmed these findings, stating that she believed he had ‘drunk himself to death.’ But Mr. Duvall’s blood also had a high level of morphine in it at the time of death – around 82 times the recommended therapeutic level.

Increasing Suspicion from Life Insurance Company and Victim’s Family

The presence of drugs in his system made Mr. Duvall’s family suspicious: Duval’s stepbrother stated that Alan Duvall enjoyed his drink but strictly abhorred the use of drugs – he told the Republic newspaper that “if someone walked in his house and had drugs, he would throw them out.”

Working at a local nursing home, Tami Duvall would have easy access to certain drugs such as morphine, which killed her husband. Prosecutors affirm that the cause of death was drugs which were placed in Alan. Duvall’s food by Tami Duvall on the night he died.

Life Insurance Policy Worth $100,000 Believed to be the Motive

The prosecution reported that just a month prior to his death Tami Duvall persuaded her husband to take out a life insurance policy of $100,000 naming her as the beneficiary, even though she had recently told friends that she intended to divorce her husband.

Duvall Anxious to have Life Insurance Payout Released

Tami Duvall began acting suspiciously after her husband’s death; she became anxious to get the body cremated as quickly as possible and asked investigators several times how much longer they were going to take since she needed to collect on a life insurance policy.

Tami Duvall later changed her statement to police about what happened the night of her husband’s death. She stated that Alan Duvall had taken the morphine himself in order to commit suicide.

Tami Duvall has been charged with murder, insurance fraud and obstruction of justice. A plea of ‘not guilty’ has been entered for her at a preliminary hearing and the trial date is set for January 2011.

Source: Chicago Tribune August 2010

Regulators are hot on the trail of insurance agents who dealt in ‘stranger-originated’ life insurance policies (known as STOLIs or Life Settlement plans) whereby seniors, often people in their 70′s, were encouraged to take out life insurance policies which were then sold on to investment companies; the investors took over the premiums, and would receive the lump sum paid out on the original policyholders death. Cash-strapped elderly clients were often attracted by the promise of an early payout from the sale of the policies.

Dubious Ethics Not an Issue for Insurance Agents or Investors

Regulators were startled by the huge rise in the number of ‘stranger-originated’ policies being sold in this way – between the years of 2004 and 2008 it became a billion-dollar industry. Although the agents often set up the deals at huge financial gain to themselves, it has to be noted that investors were happy to climb on the bandwagon.

Despite only narrowly skirting the “insurable interest law” which prohibits a third party owning an insurance policy when they could have no conceivable interest in the well-being of the person holding it – (far from it in fact), the practice was legal across quite a few states until recently.

A bar graph showing the growth in life settlement policies.

Insurers File Civil Actions against Agents for Life Settlement Policies

Insurance companies claim insurance agents misrepresented their clients’ assets when looking to purchase life insurance policies for them, with many committing acts of outright fraud when filling in the application forms. According to them, in an attempt to secure policies, over eager agents, fueled by greed, inflated the estimated wealth of their clients and fraudulently answered ‘no’ when asked if they had any plans to sell the policies on.

For this reason insurers such as AXA have voided many of these insurance policies, leaving investors with now-worthless investments – unsurprisingly they are also suing the brokers for compensation.

Wealthy Insurance Agent in Trouble for Life Plan Fraud

One insurance agent being pursued in a high profile case, is Steven M Brasner, accused of committing grand theft and fraud when acting as the middleman in securing $78 million worth of insurance policies, netting him over $2 million in commission.

An illustration of the life insurance securitization process, which is complicated and similar to mortgage securitization.

He is charged with lying on his clients’ application forms in order to secure life insurance policies for them.  As well as facing state prosecution Mr Brasner is also being pursued through the civil courts by the insurance companies and investors he dealt with.  Mr Brasner is believed to have inflated his client’s net worth sometimes by up to six times in order to secure business. Steven Brasner is just one among many agents who are being pursued – there are over 200 civil lawsuits pending, filed by insurers. Judge John Meyer noted that the level of fraud was ‘astounding.’

Mr Brasner has declared himself innocent of all charges. He is quoted as saying that the companies he dealt with such as the investment group G111 Accumulation Trust (part of Deutsche Bank) were culpable and ‘had the expertise’ to ‘conduct due diligence’ prior to buying ownership risks.

More Information

See the New York Times article on Life Settlement Securitization here

photo credit: VoisineN