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

The Fourth of July weekend is traditionally a weekend of fun, family, fireworks and, unfortunately, a higher number of  fatalities than any other weekend period.   As a life insurance agent, I prefer my clients to outlive their policies.  Therefore, I offer these three Fourth of July safety tips:

• Don’t drink and drive.  This should go without saying, but the National Highway Traffic Safety Administration reported in 2008 that 43% of the 491 traffic fatalities were alcohol-related.

• Drive defensively – 4th of July weekend has the highest incidence of auto accidents than any other weekend of the year.  You might be an excellent driver who is paying attention to the road, but the person in the car next to you might have had one too many beers at the barbecue.

• Leave the fireworks to the professionals.  The U.S. Consumer Product Safety Commission (CPSC) reported 7 fireworks-related deaths in 2008.  As there are thousands of injuries due to fireworks reported each year, 7 deaths may sound like a low number.  Tell that to the 7 surviving families.

Celebrate responsibly our founding fathers’ dream of the freedoms of  life, liberty and the pursuit of happiness and take a moment to reflect upon what they endured to give us those freedoms.

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.

In insurance a rider is a supplemental agreement attached to and made part of a policy, usually to expand the coverage of the policy. Typically these riders require additional premium to be paid
These are the most common riders that can be attached to a life insurance policy:

Accelerated Death Benefit Rider

This rider allows the insured person to use (a percentage of) the death benefit if he or she is diagnosed with a terminal illness that carries a prognosis of death within a year. If benefits are paid in this manner, the death benefit will be reduced by the amount of accelerated death benefit paid. Some insurance companies charge no extra premium for this rider.

Please note that receipt of benefits received in this manner can have a negative impact on any potential Medicaid or Social Security benefits.

Accidental Death Rider

This rider pays out an additional amount of death benefit due to an accident which was the direct cause of death. Normally, the additional benefit paid out upon death due to an accident is equivalent to the face amount of the original policy, which doubles the benefit. This is often called double indemnity when the additional benefit equals the face of the policy.

Child Rider

This rider provides a death benefit for children up to a specified age. Coverage can include multiple children with a maximum benefit for each (up to $20,000). Once the child attains the maximum age of the rider, the term plan can typically be converted to a permanent policy (usually up to five times the original face amount).

Waiver of Premium Rider

With this rider, the future premiums are waived if the insured becomes permanently disabled for a specified period of time (typically six months). While disabled, the insured is exempt from making premium payments. The definition of “totally disabled” can vary from one insurance company to another.

Conclusion

Riders allow you to modify your life insurance policy according to your needs. When purchasing a new policy, discuss these options with your advisor to see if they fit your needs. Adding riders can significantly add to the cost of your policy, so it becomes an economic choice as well.

According to a recent survey conducted by the research firm of Mathew Greenwald & Associates, many American breadwinners have less than half the life insurance protection they need to adequately protect their families in the event of death. According to the study, the average household breadwinner has enough life insurance to cover expenses for only four years after the loss of the breadwinner. However, eighty percent of the survey’s respondents stated that they are at least somewhat confident that they have enough coverage

According to the survey, the average breadwinner’s policy has a death benefit of $300,000. When asked how they would use the proceeds of a life insurance policy, the respondents’ first answer was typically to replace the breadwinner’s salary. Others indicated they would use the proceeds to fund retirement or pay for college expenses. However, when these costs were tabulated, the total life insurance necessary to cover these expenses came closer to $600,000, almost double the cost of the life insurance death benefit. Apparently, a wide gap exists between the perception and reality of what the correct amount of life insurance one should have to adequately protect one’s family.

How does one determine the correct amount of life insurance one should have so this gap won’t exist? Life insurance companies typically recommend anywhere from 10 to 20 time one’s gross income, depending on your age. A life insurance agent or broker can perform a needs analysis to help you come up with the right amount of coverage. Many life insurance websites, including www.LifeInsure.com have life insurance calculators to help you determine the appropriate amount of coverage you should have.

If a stay-at-home mother earned a paycheck for all her services, her annual income would be $116,805 (national median), according to Salary.com.

Whether working in or out of the home, a life insurance policy for the wife should be a major consideration in any family’s financial plans. However, according to recent studies by Massachusetts Mutual Life Insurance Co., the man of the house has more life insurance than the female, which could be a huge mistake.

According to an article recently published in the Nashville Business Journal, only 36 percent of women are protected with group life insurance at work and 40 percent have their own individual policies (source – LIMRA, a think tank for financial and insurance service companies).

The article goes on to state that women who do have life insurance on average have much less coverage than men, the organization found.

However, if the matriarch of the family dies, her family could be thrown into financial chaos.
“I think under-insuring the female, whether she is a working or stay-at-home mom makes no more sense than under-insuring the male,” said Beth Wood, assistant vice president of business and women’s markets at Massachusetts Mutual Life Insurance Co. “There are just too many uninsured couples putting their families at risk.”

For example, if a working woman dies or becomes disabled and cannot work or take care of the family, her husband may have to cut back his hours to stay at home or hire someone to care for the children, which could make financial matters worse.