When looking at what type of life insurance to buy, it is important to marry affordable life insurance with the product that makes sense for your situation. For example, if you have a child that is 1 years old and you decide you need coverage for 20 years, don’t buy a 10 year term. The temptation to do that might be there, to save cost, but in the end it may hurt you. If you go and apply for a new 10 year term at the end of the first 10 year term, you may not be insurable and certainly the premium will be a lot higher.
The first thing we want to look at is how long will you want and need the coverage. You may want to have permanent insurance, but your budget will not allow for that. Maybe you can do a combination of term and permanent to meet your budget and your permanent need and want. It is important to buy the right amount of death benefit above all else. One case recently, the client wanted to buy 100,000 dollars of whole life, when the need for death benefit was closer to 500,000. We suggested supplementing the whole life with a 400,000 term rider to cover the additional exposure and the client agreed to that strategy. Very often we will see a client with a plan that is not budget friendly and the plan type makes no sense. As an independent brokerage we can shop all the carriers and all the different products. If a consumer is dealing with a captive agent, they may get stuck with one of the products in the agents limited repertoire.
Suzie Orman is a dangerous person to listen to. She is a jack of all trades and a master of none. Her blanket statements about life insurance are ignorant and without grounds. She constantly says that permanent insurance is a rip off and you should always buy term life. Why is that Suzie? Do you understand the tax advantage of life insurance with its buildup and death benefit?
While in many cases term is the appropriate direction for people to take, it is not always the best route. If you can afford to buy some permanent life insurance I would certainly suggest you do. That is the only type of insurance that is guaranteed to be in force when you pass away (provided you pay the premium). The life insurance companies love when you buy term as they pay death claims on about 2 percent of the policies. In other words, most people pay for life insurance for years and their family never gets any benefit.
On top of the permanent nature of this type of insurance, you can accumulate money on a tax free basis in the cash value. If accessed the proper way, you can avoid ever paying income tax on any of the build up and can supplement you retirement tax-free. Also, the cash value can be borrowed against during the life of the policy to buy things, invest, etc. Suzie Orman is obsessed with 401k plans and loves the tax-deferral, but tax-deferral simply means you will pay compound tax later. In addition the government controls the rules on these types of plans, while they don’t on life insurance. A good example is you can’t access until 59 and a half. What if the government adjusts the age to 62 and you are simply at their mercy.
What is the best term life insurance? That is an interesting question and how do I determine what that means?
I generally think this can be answered through a basic analysis when selecting the carrier you want to work with. Which carrier will underwrite me the most favorably based upon my specific underwriting situation? If you have sleep apnea and take medication for a couple of different purposes, then it might be one carrier. If you have type 2 diabetes it may be a totally different carrier. Based upon which carrier will underwrite your situation the best, that will determine your underwriting rating and your ultimate premium. See what offers a Florida life insurance consultant can help with you.
Another aspect of determining the best term life insurance for you is what is the company’s financial strength. Generally you want to select a company that has an A rating or better. This is something you will want to be comfortable as you select the carrier you work with.
When determining the best term you want to look at your short and long term goals and needs with the insurance. For example, will you only want the term for the term period? Will you possibly want to convert all or a piece of the term to permanent insurance? If you will want this as an option then you want to look at what the term carriers offer as conversion options. Do they have a good whole life option? Universal Life? How long do you have to convert it with no proof of insurability?
These questions might help you if you are trying to figure out what the best term life insurance is. It is going to be specific to your situation and varies per person.
We get calls all the time about AARP life insurance and that clients are interested in this. The bottom line is that AARP has partnered with New York Life Insurance Company to offer life insurance to its members. No medical exam is required and only 3 medical questions are asked on the application. Since there is minimal underwriting the premiums are note going to be more than a fully underwritten product. With that being said it may be of benefit to some to have a product not fully underwritten as health may be a concern. If that is the case there are other companies that offer similar products that may be even more competitive.
Did you know that the life insurance carriers like when you buy term life insurance? A lot of clients we speak with think that it is the agenda of the insurance company to sell them permanent insurance because it costs more. While of course life insurance carriers want you to buy permanent products, they are quite content when you buy term. Only about 2 percent of term policies ever pay out a benefit and therefore it is highly profitable for them. A good option for many is to buy a return of premium term product. This allows you to have best of both worlds with term, but return of premium if you outlive the level term. If you are not familiar with this option you should ask about it. It is usually more beneficial the younger an insured is.
What term life insurance carrier is the best for you?
This is an important question and one that should be looked at before you apply to a carrier for life insurance.
Do you have any special underwriting circumstances? Medical issues? Dangerous avocations? Family history? Medications? Weight considerations?
Based upon various underwriting circumstances, different carriers will underwrite the issues differently. Therefore, it makes sense to use a company that underwrites for that particular situation the most favorably. That is what we try and help our clients identify what those companies are going to be.
A great example is Prudential who will give an occasional cigar smoker a non-smoker rating as long as it is admitted on the application. Most other carriers will give that client a smoker rating, so that is a huge piece of information to know. Recently we had a client who had lupus and after speaking with all the various carriers we actually found one that would consider her for preferred. Most all the other carriers would consider her at at table B rating at the best. This specialized knowledge will help you win as the consumer.
Another factor in picking the right term carrier for you is if they offer a good conversion option. Does the carrier have a good universal life conversion option or whole life conversion option? While you may only want term know, it is good to have a permanent option just in case. The permanent option can be exercised with no proof of insurability. It allows you to convert all or part of your term to some form of permanent insurance.
When selecting life insurance, most clients just want a simple explanation. They are not looking for a complex analysis of all the features, riders, and insurance speak.
Here are some simple basics that can be of assistance:
1. There are 3 types of different types of life insurance- Term life, whole life, and Universal Life (Each one has many variations).
a. Term life is like a renting insurance for a period of time at a level rate (for example 10 year, 20 year, or 30 year). No equity is built and you have a death benefit only as long as you pay.
b. Whole life insurance is designed to last for your whole life (permanent insurance). It is a level premium that starts off much higher than term, but remains level for the life of the contract. When term rates go way up after the level period, they will surpass what is being paid on the whole life. Whole life builds equity (cash value) that can be used and borrowed against during the course of your life. Unlike the concept of renting with term, this is like owning/buying your insurance.
c. Universal Life is another permanent insurance like whole life, but with much more flexibility. The premium is flexible and allows the policyholder to pay the premium that best allows them to achieve their goals. For example, a guaranteed universal life is just enough premium to have a death benefit for the rest of your life. On the guaranteed universal, you have no cash value build up to speak of. If you fund the policy at the maximum level, you can create a large cash value for retirement use. The premium level paid can be adjusted at anytime to meet the owners objectives. Like whole life, it is owning your insurance, but with more flexibility than whole life.
2. Which one is right for you? Everyone is different and has different goals. The main thing is to decide what the goal is of the insurance and then to maximize based on your goals. Often times our clients will use a blend of more than one to achieve multiple goals. For a free analysis, email email@example.com.
When you are looking at purchasing life insurance you should look for various items with the different carriers. You should look at their proposed rates, financial ratings, conversion options, and specific underwriting guidelines.
The proposed rates are important as that is the amount that you will pay if you qualify for that rate. It is important to understand that a quote is just a guestimated rate. You could come back with a better rating and a better rate or a worse rating. Make sure you understand the underwriting rating that has been assigned to you for the quote. For example, did you get quoted preferred even though you have diabetes.
The financial ratings and strength of the company that will underwrite your business is important. You want to make sure they have good strength and will be able to pay the claims. It is great to get the best premium rate, but if they won’t be able to pay the death benefit, who cares.
Do the insurance companies that you are looking at have good conversion options. When I say conversion options, I mean good permanent insurance options. Conversion allows you to convert from term to either whole life or universal life with no proof of insurability. This can be a very valuable option and make sure to consider this.
The last thing to consider when you are looking at multiple carriers is how each company underwrites for different underwriting issues. For example, is there a carrier that underwrites better for smokers or high blood pressure
Universal life was created for the flexibility that it provides customers. It is a form of permanent insurance along with whole life, but it provides flexible aspects. Whole life insurance is pretty straight forward and requires that the same premium always be paid to keep the policy in force. If the premium is not paid the policy will lapse, unless the dividend is large enough at that point to cover the premium. This is know as premium offset on whole life. Universal life allows for a flexible premium to be paid. There is a range that can be paid to keep the policy in force.
For a client who wants to emphasize and grow the cash value, they should fund the policy near the MEC level. The MEC level is the maximum you can put in a life insurance policy and still qualify for favorable tax treatment. Others may only care about the permanent death benefit. For clients who just want the death benefit, we suggest they fund it at the very minimal level and this is called guaranteed universal life. Of course, a lot of clients fund the policy in between the bottom and the top level. If there is enough money in the cash value, premium payments can be skipped. This option would obviously not be there on the guaranteed UL as there is little if no cash value. The amount you pay can vary and you can start by funding it at the highest level and you can always fund it less later.
On top of that a level death benefit or increasing death benefit can be selected. You can start off with increasing and level it out later if you want. Universal life is truly a flexible product that can meet many different objectives.
Should you wait to buy your life insurance until later? That is a good question and gets to the fundamental purpose of the death benefit. Of course, if you know that you will be healthy and/or still alive and able to qualify down the road than you certainly can wait. The problem with that approach is that you never know what the future holds. It can possible save you a few dollars in premiums for the few months that you wait, but it is not worth your families future. The insured rights the small premium check and the client’s family would stand to get a big check.
The natural inclination is to put insurance off and sometimes buy it in a more reactive way. For example, I hear from clients all the time that they decided to finally move on buying it because a friend died or got sick. Another benefit to buying it is the benefit of locking in to your current age. This is important for term insurance and tremendously important with permanent insurance. With whole life insurance you buy in at whatever age you are and the premium remains level for the life of the contract. Besides that, the sooner the policy gets started the more opportunity for the cash value to build up.
To receive a free quote go to www.paramountlifeinsurance.com. Take advantage of your health if you have it.
Just getting started trying to figure out what type of life insurance you need. It can be really confusing and many people in the insurance industry make it very complicated to understand. Should you buy a term policy? What is a term policy? How many years should it be level? What is Whole life and universal life and should I create a blend of permanent and term insurance? How much coverage should I have? How do I calculate this? What does the rating of the company mean and how do you analyze this? Does this term carrier have a good conversion option for me down the road?
These are all good questions and we try to really simplify it for our clients and bring it down to earth. The most important thing we emphasize is getting the right amount of protection. First and foremost as a beginner to life insurance, get a death benefit that suits your situation (we can walk you through a simple analysis). If all you can afford at this moment is term, than get that on the books, so you have the protection. You can always convert some or all of it to a permanent plan down the road. Term is like renting and permanent is like buying and building equity. You want to select a term that will provide protection for the period that you will need it. For example, you have a child that is 2 and want to have at least 1 million dollars of coverage until they graduate college. The child will finish up at about 22, so a twenty year level term would probably be the most appropriate. A permanent plan (whole life or universal life) can be very beneficial, but starts at a much higher premium than term. The permanent plan premium will remain level as the term premium will go up after the initial level period. Obviously, being a permanent plan it sets up to last for your entire life. Blending term and permanent can be a good idea to give you the best of both worlds and a price tag that you can afford at that point.
We work only with companies that have an A rating or better. As you select a company, make sure that the company has at least an A rating and is not facing a major downgrade. We provide our clients with up to date ratings as that can change quarter to quarter. Talk to a Paramount Consultant and we can walk you through the companies and also discuss which ones have a good option to convert to permanent plans.