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

When purchasing life insurance, you are often presented with the choice of term or permanent insurance.  The choices for term life insurance policies are typically 10, 15, 20, 25 or 30 years.  Choices for permanent insurance are usually whole life or universal life.  Universal life can be broken down further – traditional universal life, guaranteed universal life (with lapse protection) or variable universal life.  For whole life, you can purchase a participating policy, which pays dividends, or non-participating, which doesn’t pay dividends.

When you first set out to  purchase life insurance, you thought it would be fairly simple.  However, being confronted with all these options can make one’s head spin.  Then, you start getting conflicting opinions from different sources – whole life is the best choice, buy only term life, buy term and invest the difference, etc., etc.

I can make it fairly simple for you to make the right choice.  What are your needs for life insurance?  Are you interested in death benefit only or are you looking to accumulate some cash value with your policy?  Are you looking for coverage for a specified term or will you need life insurance for your whole life?  Once we determine the length of time you need the insurance, we then look at what product is the most appropriate for you.

If you are only interested in a death benefit for a finite period of time, the choice is easy – term life insurance is most probably the best choice for you.  You can also look at a return of premium policy, which pays you all your premium back at the end of the term (provided you survive the term period).  Return of premium term is usually priced well for younger ages.  As you get older, the added cost for this type of product might have you looking at regular term insurance again.

If you’re looking for a lifetime benefit with the potential of accumulating cash in the policy, I believe that whole life insurance, when structured properly, is a wonderful product.  It has guaranteed death benefit, guaranteed premiums and guaranteed cash values.  The only reason I don’t recommend it to everybody is because it can be cost-prohibitive to many folks.  However, if you have a positive cash-flow and are fully maxed-out in your qualified plan (401K, IRA, etc.), this is a great vehicle for accumulating additional tax-favored savings, in addition to the life insurance benefit.

If you want lifetime protection and don’t care about cash accumulation and whole life premiums don’t fit your budget, I would recommend a universal life policy with lapse-protection.  These policies will not generally accumulate much cash value and, even if the cash value drops to zero, the death benefit and premium are still guaranteed.  We often call this product lifetime term insurance, because it guarantees the death benefit and premium and will most probably not accumulate cash, and you are covered for your whole life, rather than a specific term.

Once we ascertain a client’s needs (and budget), we will assist in choosing the right product.  Sometimes, we will present a combination of term and permanent, as the immediate need for life insurance may be greater than it will later in life, although there will still be a need (funeral costs, debt elimination, etc.).

We recommend to our clients to do a policy review every couple of years, as needs change and, when needed, policies can be modified, dropped or added to.

Life insurance underwriters work off of actuarial tables, which catalog risk factors a life insurance applicant presents to the insurance company.  The higher the risk of your dying prematurely, the more premium you’ll pay.  It’s as simple as that.  What are two risks you can reduce or eliminate and save money by doing so?

• If you smoke cigarettes…quit.  I know how difficult it is to do this as I was once a chain smoker. My wife could tell you how unpleasant I was to be around when I did this some twenty years ago.  I am not going to lecture you as an ex-smoker, because I used to really hate that when others did it to me.  You already know it’s not good for you.  I am only addressing the expense it adds to your life insurance policy.  Look at some quotes on our Term Life Quote Engine for a smoker and then go back and try it as a non-smoker.  You will be amazed at the difference in cost.

• If you’re overweight, lose some weight.  I know – you probably want to dump a gallon of cookie dough ice cream on my head for saying this.  Remember, I’m not passing judgement here – I’m only telling you how to lower your life insurance premiums.  Not only will you enjoy lower premiums if your weight loss moves you to a better risk category, but the weight loss might also have a positive effect on your blood pressure and/or cholesterol levels.  High blood pressure and high cholesterol often are causes of higher premiums, so this might lower your premiums even more.

I have seen premiums cut in half by folks who have both lost weight and quit smoking cigarettes.  I’m not suggesting either is an easy task (especially if you attempt to do both at the same time), but doing so might just be beneficial to your wealth (pun intended).

You’ve made the decision to purchase life insurance and you thought, “I’m going to simplify this process by researching and  making the purchase online.”  However, when you Google the words “life insurance,” or “life insurance quotes,”  you are presented with many choices.  You were looking for a simple solution, so how can you simplify the process?  The first step is to gain an understanding of the types of life insurance websites on the Internet:

• The Broker:  This is most efficient way of purchasing life insurance.  You enter a little information and the web site’s quote engine will give you several choices, based on your information.  If the quote takes into account health questions (e.g. blood pressure, cholesterol, family history, etc.), your quote will probably mirror the insurance companies’ underwriting guidelines and will most likely be closer to the final premium determined during the underwriting process (the actual premium may vary from the quote if other medical and/or lifestyle information comes up in the process).

• Insurance Company:  A few insurance companies have their own web presence and even offer quotes on their websites.  In most cases, your information will be forwarded to agents or brokers who will contact you.  Many people go direct to an insurance company’s website, thinking the premiums will be less expensive than going through a broker.  As the premiums are set and filed in every state, the price is the price, no matter who you purchase the policy through.  The downside of going through insurance company sites is that you will have to go to many different sites to comparison shop several companies.

• The Lead Generator:  These websites generally don’t give you instant quotes.  They will require that you complete an online form and will forward your information to one or several agents or brokers, who paid the lead generator for your information.  You can usually expect several phone calls from these agent/brokers, as they are looking for a return on their investments.

• The Lead Generator Aggregator:  This is my least favorite of the online options.  With this type of website, you enter your zip code and a list of companies comes up.  Usually, it’s a combination of brokers, insurance companies and lead generators.  You now have to sort through all the offerings and see which one you’d like to use.  It’s basically a duplication of websites you can find yourself in Google (or Yahoo or Bing) and will only add to the time spent shopping for life insurance.  There has recently been a rash of these types of websites popping up out of nowhere.  Most, in fact, are owned by the same company.

I would recommend checking out several broker websites and work with an established firm with a process that simplifies the shopping experience for you.  Several websites, including LifeInsure.com, meet these requirements.

If you Google the terms life insurance or life insurance quotes, you will have literally hundreds, if not thousands of websites to choose from.  How do you know which website is going to give you the best quotes?  Here are a few tips for getting the best term life insurance quotes on the Internet:

• The website does not need your name, address, phone number or email address to give you a quote.  They are collecting this information to either sell your information as a sales lead to insurance agents who are willing to pay for the information or to contact you to attempt to sell you a policy.  Some websites will sell your information to multiple websites, resulting in numerous phone calls to you.

• Regarding lead-generating sites mentioned above, you can often tell these websites by the multiple companies listed on their home pages.  They will not be involved with finding you the best rate.  Instead, they will list several companies on their website and charge each website a fee for all the times someone clicks on that name and redirects to their site.

• If the website doesn’t require any health information, the quotes will most probably be lower than you will pay.  Any quote you receive is not necessarily the price you will pay for the insurance – that will be determined during the underwriting process, which will take into account your medical history and medical exam.  The most accurate quotes will be based on multiple health factors:  height/weight, tobacco use, family history, blood pressure, cholesterol and driving record, to name a few.

• Sometimes an insurance company will give you a quote on their website.  However, as most insurance companies use agents and brokers to sell their products, your information will most probably be passed on to one or more agents.  The rates are not less expensive if accessed through the companies’ sites directly.  If you want to compare these rates to other companies, you will need to continue shopping.  This can be time-consuming.

The best websites to visit for quotes are those that provide quotes from multiple companies (without having to enter your personal information), base the quotes on a basic health profile and, if you want to apply for a policy, act on your behalf as a broker to assist you in purchasing the policy.  There are only handful of life insurance websites (including this one) that fit this profile.

Your decision to purchase a life insurance policy is a good one.  Make the best of it by following these tips.

Unlike the consumer electronics industry or wireless industry, life insurance products don’t change frequently…that is, until recently.  In the past, the choice of life insurance products was fairly limited – you could choose whole life, universal life or term life.  In recent years, we have seen the insurance industry invent innovative products to meet the needs of the consumer.

Within the last several years, we have seen the birth of Return of Premium Life Insurance and Universal Life Insurance with secondary guarantees (lapse protection), to name a few.  Recently we have seen the “creation” of another new product – I’ll call it “Term UL (Universal Life),” for lack of any other name.  One insurance carrier recently replaced their term products with Term UL.  This product is basically Universal Life Insurance with a guarantee for a specified “term,” be it 10, 20 or 30 years.  In essence, it works just like a term policy – you have a death benefit for a specified number of years and at the end of the “term,” the policy is “done.”

The advantage of this product is that you can choose to pay more premium to extend the guarantee at any time during the term period.  If, at the end of the term, you decide you still have a need for life insurance, you pay a specified premium, and the policy will continue.  The rates are guaranteed when you purchase the product, so you know from the beginning what you will pay if you extend.  With a term policy, you can always renew the coverage at the end of the term (on an annual basis), but the premiums are usually cost-prohibitive.  You can also convert to a Universal Life policy, but you won’t know the rates or policy details until you do convert.

I have already place a few clients with this product, where I thought it was appropriate and will continue to check its appropriateness with future clients.  It looks like some other companies will be releasing a similar product soon, so competition should keep the premiums within a reasonable range.

Life insurance underwriters go by the “book” for the most part.  In the case of life insurance underwriting, the “book” is based on actuarial experience of many years.  The underwriter lives and breathes by the “book” and establishes a health class and rates for an applicant based on information attained therein.

There are times we look at underwritten case results and can tell the underwriter went strictly by the book and allowed no flexibility in the rates.  If it makes sense to us, we usually won’t question the underwriter.

However, there are other times we look at the results and have to go back to the underwriter because the “book” just didn’t make sense.  Case in point, we recently had a policy approved at Standard Plus (third highest class for this carrier), based on the client being underweight, according to the “book.”  Our client contested (and we agreed), so we went back to the underwriter.  After reviewing the case again, the underwriter came back with the same results.

Our client then got a letter from his physician stating that he was healthy and his weight had been stable for as long as he was a patient (6 years).  We sent the letter into a more senior underwriter, who agreed with us (and the doctor) and approved the policy at Preferred Plus (the carrier’s best health class), resulting in a significantly lower premium.  Needless to say, our client was quite pleased.

I’m not saying that this is the norm and we will always be able to get better underwriting results by contesting them, but when it makes sense, a good agent should never accept underwriting decisions where the “book” seems misguided.

According to a new joint project conducted by LIMRA (Life Insurance Marketing and Research Association) and LIDMA (Life Insurance Direct Marketing Association), sales through direct channels represented more than 20% of the life insurance policies sold and about 5% of the premium sold in 2008.

“For the first time, we have been able to quantify the amount of individual life insurance sold through direct channels, like the Internet, direct mail and telephone,” said Ron Neyer, senior analyst, LIMRA Distribution Research.

LIMRA and LIDMA researchers estimate that over 2 million individual life insurance policies sold in 2008 were purchased through direct channels.  In addition, direct response sales totaled $675 million in new premium in 2008.

The number of consumers who bought life insurance online has doubled since 2006.  Price, convenience and a good Web site were the top factors that influenced these consumers.  With advances in technology, researchers anticipate that more consumers – especially younger generations – will use direct channels to buy life insurance in the next 5 to 10 years.

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.