Ideas, tips and news about life insurance and the uses of life insurance

Okay, you’ve done it again – as soon as the ball dropped in Times Square, you pulled out the pad and pen and wrote down your resolutions.  Hopefully they’re not the same ones you made last year, as that would indicate  less than successful outcomes of those resolutions.

I would like to suggest that, if you insist on making New Year’s resolutions again, make only one – qualify for lower life insurance premiums.  If you don’t succeed, you can admit to only failing at one resolution.  However, if you succeed, chances are you have made some changes and improvements in your life that would give you a year of well-deserved bragging rights.  This list of typical resolutions contains those life changes that would most probably lower your life insurance premiums:

1.  If you use tobacco products…quit.  Nothing will lower your premiums more than this action (you will probably have to wait a year or more to enjoy non-smoker rates, but it is worth the wait).

2.  Lose weight.  Not only will you enjoy lower premiums for weighing less, the potential residual effects (lower blood pressure and cholesterol) could favorably affect the premiums too.

3.  Exercise.  See #2.

4.  Get regular medical check-ups.  Early detection can prevent major health issues, which always raise your premiums and can often lead to being declined coverage.

5.  Drive more carefully.  Fewer traffic tickets and accidents result in lower premiums.

6.  Lower your stress levels by not sweating the small things.  In the end, they’re never worth it, are they?

These six are resolutions people often make so, by making only the one to lower your life insurance premiums, you’ve saved yourself some time.  If you do 1 through 6 above, not only will you (most probably) lower your life insurance premiums, you will have gained some bragging rights in 2010.  Good luck and Happy New Year.

I was inspired by a segment of 60 Minutes I watched this past Sunday.  The story was about the people in Wilmington, Ohio, who are in the grip of a brutal series of layoffs at DHL, the shipping company.  Before the layoffs, one of three households in Wilmington had a family member working at DHL.  As expected, the layoffs have left this town decimated.

I was particularly touched by the strong sense of community these folks displayed, reaching out to help the less fortunate until they no longer had the resources to help.  When some helpers stumbled, others reached out to those in the most dire need of help.  Once again, my cynicism of the increasing materialism of Christmas was allayed by a story of goodwill and hope.

One of the stories revolved around a mother who was laid off after her husband had passed away, leaving her with a young child to support on her own.  What made her plight even more difficult was the fact that her deceased husband hadn’t owned a life insurance policy, leaving the family with meager resources.  Working several part time jobs, she was barely able to keep her family afloat.

Based on her experience, life insurance was so important to her that she did everything she could to hold onto the policy she purchased after her husband passed away.  She even dropped her health insurance so she could continue making her life insurance payments.  Making sure her daughter wouldn’t have to suffer financially if she was no longer around to support her, she made the decision that her health would have to suffer rather than not providing for her daughter in the event of her death.  While I wouldn’t recommend her to drop her health insurance, I can’t argue her act of selfless giving.

I hear this quite often when speaking to couples in their twenties and even into their thirties.  However, according to the Life and Health Insurance Foundation for Education (LIFE), there are several compelling reasons to reconsider this line of thought:

Protection…just in case.

Statistically, you’re unlikely to die in your 20s or 30s.  But the truth is, there’s no way of knowing for sure.  That’s why you should buy life insurance as soon as a need arises, like when you become engaged to be married or decide to have children.  If you are already married and/or have children, you most probably have a need for life insurance.

Guaranteed Insurability

When you’re young and healthy, your insurability is at its peak and, if you’re in good health,  you’ll be rewarded with preferred rates.  If you wait too long, there’s always a chance that you might develop health problems that could compromise your ability to afford or qualify for coverage.

Low Cost

All forms of life insurance get more expensive as you get older.  So if you know that you’ll need coverage soon or already have a need, you can lock in a low rate now and rest easy in the years ahead knowing your loved ones are protected.  As an example, a healthy twenty-five year old male, if in excellent health, could purchase a $500,000, 30 year term policy for as little as thirty dollars a month.  If he waits another ten years, he will pay an additional ten dollars a month (based on current rates and provided he remains in excellent health.

For more unbiased information on life, health and disability insurance, I recommend LIFE’s website at http://www.lifehappens.org/welcome-consumers.

If you’re thinking of replacing your life insurance policy with a new one, here are some things you should consider, according to the Life Insurance Buyer’s Guide published by the National Association of Insurance Commissioners:

1.  If you decide to replace your policy, don’t cancel your old policy until you have received the new one.  You then have a minimum period to review your new policy and decide if it is what you wanted.

2.  It may be costly to replace a policy.  Much of what you paid in the early years of the policy you have now paid for the company’s cost of selling and issuing the policy.  You may pay this type of cost again if you buy a new policy.

3.  Ask your tax advisor if dropping your policy could affect your income taxes.

4. If you are older or your health has changed, premiums for the new policy will often be higher.  You will not be able to buy a new policy if you are not insurable.

5.  You may have valuable rights and benefits in the policy you now have that are not in the new one.

6.  If the policy you have now no longer meets your needs, you may not have to replace it.  You might be able to change your policy or add to it to get the coverage or benefits you now want.

7.  At least in the beginning, a policy may pay no benefits for some causes of death covered in the policy you have now.

In all cases, according to the Buyer’s Guide, if you are thinking of buying a new policy, check with the agent or company that issued you the one you have now.  When you bought your old policy, you may have seen an illustration of the benefits of your (permanent) policy.  Before replacing it, ask your agent or company for an updated illustration.  Check to see how the policy has performed and what you might expect in the futuree, based on the amounts the company is paying now.

Some states require this guide to be included with the application for life insurance.  It has so much valuable information in it for consumers that I will be selecting excerpts from it for this and future postings.  Today, I will include the section “How Much do you Need?”

Here are some questions to ask yourself:

1.  How much of the family income do I provide?  If I were to die early, how would my survivors, especially my children, get by?  Does anyone else depend on me financially, such as a parent, grandparent, brother or sister?

2.  Do I have children for whom I’d like to set aside money to finish their education in the event of my death?

3.  How will my family pay final expenses and repay debts after my death?

4.  Do I have family members or organizations to whom I would like to leave money?

5.  Will there be estate taxes to pay after my death?

6.  How will inflation affect future needs?

As you figure out what you have to meet these needs, count the life insurance you have now, including any group insurance where you work or veteran’s insurance.  Don’t forget Social Security and pension plan survivor’s benefits.  Add other assets you have:  savings, investments, real estate and personal property.  Which assets would your family sell or cash in to pay expenses after your death?

The National Association of Insurance Commissioners (NAIC) is an association of state insurance regulatory officials.  This association helps the various insurance departments to coordinate insurance laws for the benefit of all consumers.  They produce a Life Insurance Buyers Guide which has some very helpful information.  The following excerpt is titled, “Important Things to Consider:”

1.  Review your own insurance needs and circumstances.  Choose the kind of policy that has benefits that most closely fit your needs.  Ask an agent or company to help you.

2.  Be sure that you can handle premium payments.  Can you afford the initial premium? If the premium increases later and you still need insurance, can you still afford it?

3.  Don’t sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.

4.  Don’t buy life insurance unless you intend to stick with your plan.  It may be very costly if you quit during the early years of the policy.

5.  Don’t drop one policy and buy another without a thorough study of the new policy and the one you have now.  Replacing your insurance may be costly.

6.  Read your policy carefully.  Ask your agent or company about anything that is not clear to you.

7.  Review your life insurance program with your agent or company every few years to keep up with changes in your income and needs.

I hope this is helpful.  I will include excerpt from this buying guide in future posts.

In Celebration of Life Insurance Awareness Month in September, LIFE (Life and Health Insurance Foundation for Education) published “The Seven Wonders of Life Insurance” on their website Life Happens. I recommend this website for consumers and insurance industry professionals as it is full of unbiased information .

The Seven Wonders of Life Insurance are:

1. Buys Time: Allows loved ones to focus on their grief by helping to pay for the funeral and other final expenses.
2. Provides a Fresh Start: Lets loved ones start with a clean slate by helping to pay off credit card bills, outstanding loans and even the mortgage.
3. Generates Income: Helps replace lost income for years to come so that surviving family members can continue to pay for life’s necessities.
4. Offers flexibility: Gives a surviving spouse the chance to take time off from work or to switch to a job that offers a more flexible work schedule.
5. Creates opportunities: Can provide funding to start a business, or pay for schooling so surviving family members can train for a new career.
6. Funds the future: Offers a way to fund longer-range goals like a college education for the kids or a secure retirement for a surviving spouse.
7. Leaves a legacy: Gives parents the chance to leave future generations with the legacy of long-term financial security.

Life Insurance Awareness Month – what better time to review your financial plan with a professional to make sure your family benefits from these seven wonders?

Term life insurance premiums have been at historic lows for the past several years. Unfortunately, the recent credit crunch is having an effect on life insurance premiums, according to Bob Barney, president of Compulife Software, Inc., a company that manufactures life insurance comparison software that is used by insurance companies and agents and brokers (including www.lifeinsure.com).

Many companies have been raising their premiums and/or canceling some of their longer term policies (30 years). According to Barney, while a number of companies have recently raised premiums, there are a number who have not yet done so. For this reason, it makes sense for consumers to do some comparison shopping now.

It is important to note that if you have a term policy with guaranteed premiums, the insurance companies cannot raise your premiums. The premium increases will only apply to newly-issued policies.

Some companies announce premium increases and give agents time to get outstanding applications in before the deadline date established by the company. If you are contemplating a new policy and shopping for quotes, be sure to ask your agent if the company whose policy you are applying for has announced impending rate increases. If so, be sure to get your application in before the deadline. Otherwise, you might be surprised by a higher premium when your application is approved.

Having attended various industry seminars and conferences, I am not a big fan of motivational speakers. However, I recently had the pleasure of seeing Dr. Jerry Linenger, retired U.S. Navy flight surgeon and NASA astronaut, speak at such a conference.

During what has been reported to be one of the most dangerous and dramatic missions in space history, Jerry spent nearly five months aboard the Russian space station Mir. He faced numerous life threatening events, including repeated failure of critical life support systems, a near collision between the space station and a massive re-supply spacecraft, and multiple computer failures that sent the space station tumbling uncontrollably through space. As if these problems were not enough, he narrowly survived a raging, smoke-billowing fire that was later described as the most severe fire ever aboard an orbiting spacecraft.

During this fire, the overwhelming thought Dr. Linenger had was that he hadn’t left anything behind or his new-born son. Of course, as a life insurance agent, I first interpreted his statement as, “I didn’t have enough life insurance.” He went on to explain that he wished he left a letter for his infant son that he would be able to read when he got older. He wanted to tell his son about himself and how much he was loved. His regret was that his son would never hear the words, “I love you,” coming from his father.

Dr. Linenger survived the fire and made a vow to himself that he would tell his wife and children daily how much they meant to him and how much love he had in his heart for them. Having confronted the possibility that he would never be able to do that again, he now makes sure that they hear those words from him every day.

While you might not be going to be on a space station for months, you never know what tomorrow will bring. Other than the financial wherewithal to continue the lifestyle you have created for your family a good life insurance policy will permit, what will you leave behind for your family? Will they have certainty that you loved and cared for them to the best of your ability? Will you have instilled in your children the values you would like to see carried forward to the next generation? While financial planning is a necessity for your family’s future wellbeing, Dr. Linenger realized the importance of this other planning at a time when it might have been too late. Don’t miss your opportunity to leave something behind for your family.

Megan and Ryan Collins are fictional characters created from stories we have heard from clients over the many years in the insurance business. This is one of those stories:

When their first child, Emily, was born, Megan and Ryan Collins decided that Megan would leave the workplace and become a full-time mom. They had many such discussions before Emily was born and decided that this was the best solution for their family.

Losing one income would be difficult but, by cutting down on some expenses, they created a family budget they could live with. By the birth of their third child in six years, the budget had become stretched as tight as it could and they would need to cut expenses further. Looking for additional ways to cut down on spending, they decided to cancel Megan’s life insurance, since she wasn’t working anyway and, if something should happen to her, there would be no income to replace.

A month after canceling the insurance, Megan began to complain about headaches and blurred vision. Six months after that, the non-operative brain tumor got the best of her and, a week shy of her 38th birthday, Megan Collins passed away.

As tight as the budget had been prior to Megan’s passing, it was nothing compared to what it would be when all of her household duties were replaced. Matt couldn’t afford to lose any pay from missed work, so he had to hire a full-time babysitter to take care of the baby and another one part-time to drive the older ones to and from school and to after-school activities. He was able to take on extra work to do at home, but that would leave him no time for cleaning the house and caring for the property (lawn mowing, gardening, etc.), so he had no choice but to hire people to take over those duties.

The children needed more of his time in this difficult period but he had to work the extra hours to help pay for these services. If only I hadn’t canceled Megan’s life insurance, he thought, I would be able to spend more time with my children, time they truly need now.

Don’t let their story become yours.

A non-working spouse should have life insurance. The death benefit typically doesn’t have to be as much as the working spouse, but there should be coverage for both parents.

Do you have a similar story you would like to share?  Send it to stories@lifeinsure.com so we can share it with our readers. Anonymity is guaranteed, as your stories will be told through the eyes of Ryan and Megan.