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.
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.
Term vs. whole life insurance is one of the oldest debates around. We find that people are on polar opposite sides of this debate and often times for reasons that don’t make sense. I have heard, “I will only buy this type of life insurance because that is what my brother had and its the best”. Another popular one is, “Suzie Orman and Clark Howard said to only buy term insurance”.
The answer to which type wins is that it is impossible to say. Both types serve great purposes and can be used as very effective tools. Term life is just like renting your insurance and is less expensive initially than whole life. With term you will select a term period of 10, 15, 20, or 30 years and the premium will be level for that period of time. Term is a great product that you can get a lot of in your greatest time of need. For example, if you have just started a family you will want to maximize the amount of life insurance while your kids are growing up. Term is so affordable it will allow you to buy a big amount during that time.
On the other end of the spectrum is whole life insurance. When the term life’s level term is ending, the premium will start going up briskly. The whole life premium starts off being more than the term, but remains level for the life of the contract. By year 21 of a 20 year level term, you will probably be paying more for the term than the whole life at that point. Whole life is a permanent solution unlike term. Whole life is designed to build equity like owning a home and to last for your whole life. The cash value that is accumulated inside the policy can be borrowed against like a home equity line of credit.
Which type is better? The answer is neither and often time it makes sense to have some of both to meet different needs.
When you are getting a whole life insurance quote, it is important to factor in several things. Are you buying enough death benefit, or should you supplement the whole life with a term rider? Should you overfund the policy above the premium to take advantage of the tax favorable nature of the cash value? If so, how much should you overfund the policy? Do you have disability waiver of premium included in the quote? Is it a good company with a long track record of good dividends.
These are important questions that should be asked as you get a whole life quote. Whole life is not a commodity like term insurance and it is important to pick a good company and to structure it the correct way. An inexpensive term rider can be included in the whole life plan, that will increase the death benefit. This rider can not only help you meet a higher exposure level, but also give you more term that can be converted to whole life later also. This is a good option to have once you understand the value of whole life. In regards to overfunding the policy, I would highly suggest it. The more you overfund the policy, the quicker it will grow. The money the is contributed to the cash value will grow on a tax-deferred basis and can be accessed on a tax-free basis if done correctly. The IRS has put a limit on how much you can contribute on each plan for a reason. They don’t seem to be very excited about plans that can be accessed tax free. I would suggest you take advantage of this benefit as much as possible.
The policy should have disability waiver of premium on it. This will waive your premium payment in case of a disability. If you can qualify for this rider, it is really valuable. Also, it is critical that you select a good mutual company with a great track record of paying dividends.
Can you get your premiums back for your life insurance if you don’t die? The answer is yes and it can be done in two different ways. The first method is by buying a return of premium term life insurance plan. These type of plans are usually available in different term lengths like regular term insurance. The concept is simply get a full refund of all premiums paid if you live through your term period. This is a great deal for the insurance company as well as for the insured. You will pay more for this than you will for a regular term policy, but you will be pretty happy if and when the money is returned. It is a good deal for the insurance company as they can use premium and generate a good return on your money and make a profit. At the end of the term, they pay the insured back the contributed amount and they keep what they made for a return.
The other way to do it is buy using a permanent plan such as whole life or universal life. After contributing for a period of time, you can withdraw money from your cash value up to your cost basis and still keep the coverage. If you can afford to pay the permanent premiums, this can be a very beneficial strategy. If you wait until the cash value is more than you contributed, you simply pull out the cash you have contributed and you have a full return of premium. The problem with return of premium is that your insurance ends at the end of the term, but with whole life or universal life you can continue coverage.
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.
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.
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.
When you buy life insurance it is very important to check the financial strength rating for the company. It is often attractive to gravitate to the least expensive option for your life insurance. I completely understand that and that is an important component, especially if you are buying term life. The reason it is important to check the company’s rating is to make sure they will be able to pay a claim if it happened to arise. With that being said there are a lot of very good company’s that also offer very inexpensive term insurance. One good example is http://www.ING-usa.com which always has very competive rates and currently holds an A+ rating from AM Best for financial strength.
You should look for a minimum of an A rating when selecting a life insurance company. The rating services that matter are AM Best, Fitch’s, Moody’s, and Standard and Poor’s. AM best has ratings that range from A++ to an F based upon the company’s financial strength and ability to pay claims. Fitch’s assigns ratings from AAA to D, based on the company’s financial strength. Moody’s goes from Aaa to C based on a company’s financial security and Standard and Poor’s goes from AAA to CC. Ask your insurance consultant for financial ratings on the company’s that you are looking at to secure your family’s future. A lot of company’s have recently seen a downgrade in their rating, based on the fact that they were heavily invested in sub-prime, etc. Make sure you get the most recent rating and consider quality while you consider the price tag.