There are more and more affordable life insurance options with all the companies vying for the business.   On top of that we are seeing people live longer than ever before.    With competition and different product lines that are designed for different lengths and flexibility,  it creates a lot of affordable life insurance options for consumers.   Term life insurance is almost a straight commodity if you have no interest in converting to a permanent plan ever.   Term rates have gone down so much it is pretty staggering.  A couple things to keep in mind is just because a company is saying that a policy could cost X doesn’t mean you could qualify for that rate.   The company who is actually showing up as the second, third, or fourth best quote may actually underwrite more favorably and end up being a better rate.

Other very affordable options are return of premium term,  which will return all premiums paid if you outlive the term.    This will cost more money than regular term, but few people ever die during the term of the policy.  It is especially affordable if you live through the term and get all your money back.   Guaranteed universal life is also considered to be  very good affordable option  and the most affordable for plans that are permanent (guaranteed to 100 or 105).  This type of plan is almost like a permanent term and lasts to 100 or so, but the premium never goes up and little if no cash value is built.

Life insurance is something that is often times not kept during retirement years.   With the opportunity to presumably self insure at that point, many people will drop their term or let it expire.   While this is a strategy of many, it is not always the best one to pursue.   You may assume you don’t need or want life insurance after retirement, but how do you truly know how you will feel when you reach that age.

We speak to clients everyday that are looking to qualify for coverage that are 60 years old and over.   They consistently say that they wish they had bought when they were younger or planned for some coverage into retirement.  With that being said, it is certainly very possible to still qualify for coverage and the premiums will be determined by health.  Premiums have become more and more affordable due to life expectancy increasing.

The amount of coverage and reason for coverage may be totally different than when the client was 35.  At 35, they might have had a primary focus of replacing income if a premature death occurred.   At 65, income replacement might be less important and it might be about estate planning, mortgage protection, and final expenses.    When you are looking at your financial plan it is important to consider changing items of importance in your life.   It is always a good idea to look at your plan every year or two, to make sure nothing has changed.  If something has changed it may be something to address, or it may simply be something to keep in mind going forward.

The best time to have life insurance is when you die or when you need access to money for opportunities and purchases.     The reason I say the best time to have life insurance is when you die, is so your family gets a death benefit.   It does you little good other than protect your income years, if you pass away with no insurance.   If you paid for term for 20 0r 30 years and now you die with no coverage, that is quite unfortunate.   Most assume that once you get to a point and you have accumulated enough money, you can self insure with your existing assets.  This is a strategy that the life insurance carriers certainly like as they don’t have to ever pay a death benefit.   All of the premiums paid during those years were pure profit to the company.   Only about two percent of term life policies ever actually pay a death benefit.

The other time it is great to have life insurance is when you need capital for whatever reason.  The reason could be  for investing or buying a new property or a car.  If you have a cash value policy, you can have access to the cash value that you have accumulated and you can borrow against it, to buy whatever you want.   I promise you will be happy when you want to make a down payment on a new home and there is enough money you can access in  your policy.   The other beautiful thing about a cash value policy is that it is permanent and your family will eventually get a tax free death benefit.

The various life insurance carriers have different niches that they focus their attention on.   Some carriers will focus their efforts on being ultra competitive with individuals that are over 50 looking for term insurance.   Other carriers, will not be competitive with over 50 and will be mostly focused on competing with individuals in their 20’s and 30’s.

Some of the carriers don’t try and compete with the other companies on the cheapest term rates.   These type of carriers may put more of their efforts in having great permanent products.    A good example, would be Mass Mutual Life Insurance Company.   They are very highly rated with a AAA rating, but are not very competitive with their term insurance rates.   On the other hand they have extraordinary financial strength to back up their promise to pay and they have some of the best cash value plans on the market.   Their dividend paying whole life insurance is at the top of the industry.   If you are looking for a inexpensive term plan than they are the wrong carrier, but if you want great whole life, than they are perfect.

It is important to find a company that is good in the areas that you want for yourself.   If financial strength of the company is very important to you, than we are looking at one set of companies.   If you want a company that has an A rating or better and want the cheapest term possible, than that is a completely different company.   We understand the niches and based upon what you want, we can help you find the right company.

Often times the service that is provided by a life insurance agent is underestimated.   You might think that the only thing the agent does is sell you the policy and then moves on.   We focus on providing great service to our customers during the underwriting process and after they are officially a policyholder.   I have heard many customers, say that they didn’t know who to call and had to call someone at a call center for a basic policy question in the past.   We are available to our customers at anytime to answer whatever questions they have and whatever adjustments they might need to make.   For example, if they need a change of beneficiary form or need to adjust their address, we help them with that.  If they have a claim, then we are there to help them through the process.

Another aspect of what we do from a service perspective is keeping them informed of any changes, updates, improvements in the industry.    It is important to know what is going on as changes can effect them.  On top of that, we stay in touch about their conversion options.   If they don’t already have a permanent life policy, such as whole life or universal life, it is important to keep them posted on options.   With most carriers there is the option to convert all or part of your policy to a permanent plan with no proof of insurance.   Clients are often not aware of this option and it can be of great benefit.   Service is an important component of what we offer our clients.

Since term life insurance is basically a commodity the life insurance carriers have had to make it very affordable to compete.   The ability to keep it cheap is centered around a few factors.   One is that the insurance companies rarely ever pay a death claim on a term policy.   Typically, less than two percent of people with term policies ever make a claim.    Since so few people actually die, it is a big money maker for the life insurance company.    It is a win for the consumer because they were able to get a good amount of coverage for a very reasonable price.

The other big factor in keeping the premiums down is that fact that life expectancy has increased.   People are living longer and that contributes to being able to offer reasonable rates to an aging population.   Over the last few years rates have come down to the lowest they have ever been.  In the last couple years, we have seen some companies have modest price increases due to their overall portfolio taking a hit financially.  To make up for their losses elsewhere they had to charge a little bit more for life coverage.

Another main reason, that rates are so cheap is the amount of competition.   With so many carriers offering life insurance at competitive rates, it is imperative to be in that ballpark to be successful selling term.  Some carriers are not trying to compete with their term products as their focus might be on high quality permanent plans.

Did you know that you can convert your term life insurance to a permanent plan with no proof of insurability?  Many times clients will not be aware of this fact and are excited to hear about this valuable option.    Depending on the carrier, there is a period of time that all or part of the policy can be converted to a permanent plan offered by that carrier.   Just about every carrier will offer a whole life and or a universal life as a conversion option.   For example, if you have a 500,000 20 year term and decide to convert 100,000 to guaranteed universal life, you will then have 100k of guaranted universal life and 400k of 20 year term.  It is important to note that this conversion can be done with no proof of insurability.  Even if you are uninsurable, you can still do the conversion.

Some companies will actually allow you to convert another companies term to their permanent plan.  Usually to be able to exercise that option the company will require that the policy was issued within a certain number of years, with at least a standard non-smoker rate.    This can be a great option if the term carrier doesn’t have good permanent policies to convert to.  For example, we had a client who had term but wanted to convert part of his plan to dividend paying whole life.   The term carrier he was with didn’t offer a whole life product.  We were able to place the conversion to whole life with a highly respected mutual life insurance company.

As your needs change, it is important to understand this option.

Life Insurance is one of the best risk management tools that are available to businesses and individuals.   The loss of a key executive or key person for a company can be devastating in multiple ways to the company.  Not only do you lose someone who is integral in what you do as a company, but you have a need to find a replacement.   There is no telling whether you will be able to find a suitable replacement quickly or if you will even be able to find a comparable replacement.   The loss of this key person can affect sales, productivity, and overall morale.  Since the business will have all these obstacles with the passing of this person, it makes sense to have life insurance on that person.   If that person happened to pass away, it would provide a windfall of money that could go towards hiring a new employee and help offset losses in productivity and sales.

On the individual side, life insurance is a very powerful risk management tool as well.   It will guarantee that certain things will happen, even if you are no longer in the picture.   For example, that your income will continue, debts will be paid off,  and the kids will still go to college.   It is possible to get a very inexpensive term policy, that will guarantee the money will be there when your family needs it.   When you are building a financial plan for yourself, it is important to manage the risks that exist out there.   Make sure you take a look at your life insurance program and consider whether it is adequate to manage your risk.

Many of the clients that we speak with don’t know the exact amount of  life insurance coverage that they want.   In many cases the amount of coverage they want is dictated about the cost of policy.  To determine the cost on the policy it requires them to go through the process of underwriting.  At the end of underwriting they will get an insurance rating, such as preferred elite, preferred, standard, etc. and that will actually determine the rate.     With the rate established, we will truly be able to tell them the cost of the various face amounts.   If they are up in the air then we will suggest that they underwrite and get approved for the maximum amount of coverage that they might want.    During the underwriting process, which takes about 6 weeks, they can think about what they truly want for face amount.

It makes sense to underwrite for the max, as it is easy to go to the carrier to cut down the face amount to a lower number.  The only thing that they can’t do is go up.   In other words, if you try and go up in coverage amount it may require new underwriting.   If you have to re-underwrite that can present a hassle for the client and really makes little sense to do it that way.   When you  apply with a carrier for coverage, you have no obligation to the face amount or even to accept the policy, so why not just underwrite for the most you might actually want in coverage.

Whole life is a great product to buy and the younger you are when you buy it, the better off you are.  When you buy whole life insurance you lock into the mortality of the age of purchase.   In other words, the younger you are, the lower the mortality of the policy and the lower the premium is you lock into.  The premium of whole life never increases, so it will remain level until age 100.  

On top of locking into the mortality of whole life, it is also beneficial to get the policy going early from a cash value perspective.   The earlier you start the more time you have to accumulate a very significant amount of cash value inside of the policy.   The cash value can be used for policy loans to buy things during the course of your life, make investments, etc.    The cash value also can grow into a substantial amount of money and can be used as a source of retirement income.    The money grows inside of the policy on a tax-deferred basis and can be drawn out in retirement on a tax free basis.   The way that you would do this is to take withdrawals from the policy until you reached your cost basis.   The withdrawals wouldn’t be considered taxable as it is return of the money you have contributed.   Once you reach the cost basis, then you start taking money out with preferred policy loans.   Some interest will be charged, but you will avoid paying taxes on the loans.

It is great to have a permanent whole life policy when you reach retirement.  Many folks will be ending their terms and have no insurance.   It will allow you to have insurance into your retirement years and have a very reasonable premium.