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

I’d like to give a simple answer to which kind of life insurance but unfortunately there isn’t one answer that fits all. There is one thing that is universally true (no pun intended) regarding life insurance: If you have people that depend on you financially – family, children, business associates – then you need to have life insurance and have enough to replace the income that wouldn’t be there if you die. To learn more about how much life insurance you should have go here.

For the quick answer: Get at least 10 times or better yet 15 times your annual gross income. Now, which kind? Term insurance is the least expensive – to start – and the most expensive over time. Term life insurance reflects the likelihood of a claim at your age. It is ideal if you don’t have the cash flow for level premium life insurance such as whole life insurance or universal life insurance but want to take care of primary target number one – Have enough life insurance.

Term insurance goes up in price for each period of time (the term) as you get older and in some policies after the term period of 10, 15 or 20 years simply goes away or gets very high in price. Whole life insurance and universal life insurance are varieties of “permanent life insurance” which means they either are guaranteed (whole life) or projected (universal life) to last for the rest of your life. How do they last for one’s whole life?

I’ll get into that in the next post on the blog but an oversimplified explanation is that you are overcharged early (more than needed to pay claims) and “undercharged” later. Part of the “overcharge” is held in a reserve commonly called cash value. Check the next post for more info on how whole life insurance and universal life insurance work.

In the meantime to learn follow this link to the lifeinsure.com site and then on the right hand side click any of the types of life insurance that you want to learn more about.

The following is general information. You should consult an attorney to advise you and to construct any legal documents. An irrevocable life insurance trust, often called by its abbreviation – ILIT, is a unique legal document to help keep the proceeds of a life insurance policy outside of the estate and thus potentially free of estate tax and income tax.

What happens is that the trust, the ILIT, is formed by one’s attorney which becomes the owner and payor of an individual life insurance policy or a survivorship life insurance policy (sometimes called second to die life insurance or joint and survivor life insurance). Money is transferred into the trust and the trustee purchases the policy. When the insured (or insureds on a survivorship life insurance policy) dies, the life insurance proceeds go to the trust for the beneficiaries – usually the children.

The purpose of this whole procedure is to have the life insurance proceeds not become part of the estate where they would be taxed. Gifts of up to $11,000 per year per parent per child are made to the trust using “Crummey” provisions which are named after a tax court case where the petitioner was named Crummey. “Crummey” provisions allow beneficiaries to have a window where they can remove the $11,000 each year.

By doing this the beneficiary changes a future gift to a present gift and qualifies for the annual $11,000 gift tax exemption. For expert advice on the most competitive survivorship life insurance policies or individual life insurance policies contact the experts at www.lifeinsure.com.

A difficulty with universal life insurance has been that if projections of interest and costs in the policy did not work out, one could lose or “lapse” the policy because of insufficent funds in the policy. Over the last few years some life insurance companies have come up with a method of guaranteeing the insurance amount even if policy cash values were insufficient to keep up the policy.

These are called “secondary guarantees.” How it works is that you make deposits to the policy of at least a minimum premium each year and no matter what happens to interest rates your policy will be guaranteed to pay the death benefit. These secondary guarantees can last a number of years or even to age 100 or beyond. This strategy works well for planning that involves insurance where there’s less emphasis on cash values because if the guarantee does come in, it means the cash values will no longer be there (but the insurance will).

To get quotes for this type of policy for one indivual go the universal life insurance quotes section of the www.lifeinsure.com site or for survivorship life insurance (also known as second to die life insurance or joint and survivor life insurance) go to survivorship life insurance quotes page.

Another unique feature that some insurance companies have for these guaranteed universal life insurance policies is a “catch up” feature. You can “underfund” the secondary guarantee universal life policy and if it doesn’t work out then make up the difference between what you paid and what you need to guarantee the policy.