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

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.

I don’t know when it happened for me, but I think it was about 3-4 years ago when my online purchases outnumbered the purchases I made in a typical sales environment. It is now rare that I don’t at least do some comparison shopping online before I make a purchase (as I did recently when purchasing a new car). I love the convenience (don’t even get me started on shopping for clothes in a mall) of sitting at home or work (during a break, of course) and doing my research and, ultimately, making the purchase online. I even get excited when the UPS man makes the delivery.

When we started our life insurance website six years ago, after having sold many policies over many years in the manner (in my clients’ homes or offices), we were excited about the prospect of simplifying the life insurance buying process. We started out wanting to create such a website where people could research different types of policies, estimate their needs and search a database of life insurer’s quotes (anonymously), and ultimately leave us their contact information so we could follow up with a phone call and conduct the sale transaction over the phone in much the same fashion as we did in their homes and offices.

While many people still want to have these discussions (in person or on the phone), we have found there is a large portion of the population that would prefer to conduct their business solely via the Internet. While we are always more than happy to discuss life insurance needs with a prospective client, we now know that in order to accommodate the Internet-Only Folks, we need to automate as much of the process as possible. You can now learn about life insurance, compare quotes from the major insurance companies, begin the application process and schedule the required medical exam all with a few keystrokes and button clicks. Of course, if a person has questions or concerns that need to be addressed, our representatives are always available via telephone or email.

We are looking forward to making improvements to our process in the near future to the end of a fully automated system. To that end, we will be conducting surveys to find out what people need and want in this experience. Once we have compiled this data, we will incorporate changes (that are technically possible) to the system that fill these needs and wants. And to all those who still want to hear the voice of an experienced insurance representative, we will always make that available to those who don’t want a Fully Automated system.

You know you need term life insurance but you can’t decide on the death benefit amount or the length of term because you see the needs changing over time. You might be a good candidate for layering or laddering several term policies.

As an example, we have a 45 year old married male with two children, ages 5 and 10. He has 10 years left to pay off his mortgage. Looking at his needs, we see his insurance needs as the following:

• Ages 45-55 – $2 million to replace his income, cover the mortgage, college costs and final expenses.
• Ages 55-65 – $1 million to replace income, cover college costs and final expenses.
• Ages 65-75 – $500,000 to replace income (or pension) and final expenses.

Typically, he might look at these options;

• He could purchase a $2 million permanent policy but the premiums are cost prohibitive;
• He could purchase a $2 million 30 year term policy, but the premium might still be more than he wants to spend;
• He could purchase a $2 million 10 year term policy and plan to purchase an additional policy in 10 years but he might not be insurable at that time or;
• He could purchase a $500,000 30 year term policy but that would leave him under insured for the first 20 years.

Here’s where layering can come in handy. I would recommend:

• A $1 million 10 year term policy and;
• A $500,000 20 year term policy and;
• A $500,000 30 year term policy.

This would give him $2 million for the first 10 years, $1 million for the next 10 years and $500,000 for the next 10 years.

As you can see above, this would provide the right amount of coverage at the lowest possible premium. We don’t recommend this for everybody, but in the right situation, it saves the client money while giving him adequate coverage.

The cost of life insurance, specifically term life insurance, has been at historic lows for the past several years. I believe that anyone who has secured term insurance, especially with terms of 20 and 30 years, has gotten a real bargain. Insurance companies have been jockeying around for competitive position and the consumer has been the real winner.

We have seen several companies increasing their premiums and/or removing longer term periods (30 years) from their product lines. Others have removed popular products such as Return of Premium Term life insurance. We’re even seeing some tightening of the permanent life insurance market, with many carriers raising their premiums.

If you need life insurance, I truly recommend that you purchase it soon, as we expect the market to tighten some more, resulting in even higher premiums. We’re not getting a lot of advance notice about increases, either. Your may have received a quote and submitted your application, but the insurance companies are giving very little grace period to the increases.

If you have a group policy at a job that will be phased out soon, look into replacing the group policy as soon as possible. It will probably save you some money in the long run.

Have you reviewed your life insurance policy recently? I recommend doing so annually for the following reasons:

• Your needs may have changed since you purchased the policy. Maybe your income has increased and you need to supplement your current policy with another one to bring the benefit more in line with your new income.
• Perhaps you have changed jobs or careers (not unlikely in the current economic environment) and you’ve lost your group coverage.
• Your health may have improved since you purchased your policy. If you quit using tobacco, you might be eligible for non-tobacco rates. If you’ve lost weight or lowered your cholesterol or blood pressure (even with medications), you might be in an improved health class, resulting in lower premiums.
• Your new age might make you eligible for less stringent underwriting guidelines. At older ages, insurance underwriters expect your blood pressure and cholesterol to be slightly higher (varies by carrier) and might bump you up to a better health class. Another very good example of this happened to me today when looking at quotes for a new policy for me. As I recently turned 60, one insurance company might now allow the best health class for me, something I have never had due to my father passing away from a heart attack prior to age 60.

If your insurance agent doesn’t contact you annually for a policy review, call him/her and tell them you want to review your current policy to see if it still meets your needs. If you need additional coverage, you can either look at adding a new policy to supplement your current one, or in some cases, replace it altogether.

We hear all sorts of real-life stories concerning how people have been affected by having or not having life insurance. In the following story, Ryan and Megan are fictional characters made up of a composite of several of these stories. We are launching a campaign in which Ryan and Megan will be representing many of these stories we have heard.

Megan and Ryan Collins, both in their early 40s, were living what they thought was an idyllic life. As recently as 2006, the American Dream they had long sought had become a reality. The mortgage brokerage company Ryan built over the past ten years provided his family with the lifestyle he always wished for. Their home, which they purchased when Ryan started his company, was worth well over double the $500,000 they paid for it 10 years previously. When Ryan expanded his business to several additional offices, they used some of the equity in their house to finance the expansion. Their three young children were going to the finest private school in the San Fernando Valley, a sprawling suburb of Los Angeles.

Following the advice their financial planner gave them many years ago, Ryan regularly invested in mutual funds in his 401K. His account was approaching $300,000 and if he continued his usual contributions to the plan, they were well on the way to being able to have a very comfortable retirement. As their assets were growing continually, they didn’t see the need to purchase life insurance to supplement the $250,000 policy they had purchased for Ryan when they bought the house. If something should happen to Ryan, they reasoned, they’d have enough assets to get Megan and the children on their feet again.

And then, the economic downturn began. The dream house was now worth about what they had paid for it. However, because they had taken the equity out of the house to finance Ryan’s business expansion, they were now upside down on their mortgage. The funds in Ryan’s 401K were now also worth approximately 50% of their peak value. Due to the crashing real estate market, Ryan’s business suffered huge losses and he was forced to close. He was doing some refinancing so, along with some money he withdrew from his 401K, they would weather the storm. And, weathering it they were, until Ryan’s heart stopped working.

Thankfully, Megan was able to sell the house on a short sale. She and the children rented a modest house in another community. The children had to enroll in public school, as they could no longer afford the private school tuition (in addition to moving away from the area). They would have to live on the proceeds from the life insurance e policy until Megan found a job . She soon learned how difficult it would be in this job market, especially since she had been a stay-at-home mom for last fifteen years.

Megan was now facing the cold reality that Ryan had not evaluated his life insurance needs as his situation changed.  Instead of increasing the coverage to protect the growing assets, he made the assumption that, if needed, Megan, could liquidate enough assets to keep the family living comfortably. He didn’t foresee the economic meltdown that was now affecting the whole planet, nor did he reconsider his life insurance needs after the assets were nearly gone. If he had increased his coverage after suffering huge economic losses, the family would probably still be in the same house and the children in the same school.

Don’t let their story become yours. Review your life insurance policies annually and make adjustments to your coverage as needed so your family will be fully protected.

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.

If you are like most Americans, your net worth has probably taken a big hit in the last eighteen months. With some stock portfolios down 50% and home prices falling faster than the Federal Government can produce new schemes to bail us out, it doesn’t take a math whiz to see that your nest egg isn’t what it once was.

Why am I rehashing this bad news in a blog about life insurance? It’s simple – many folks, when evaluating how much life insurance is needed to adequately protect the family in the event of the breadwinner’s death, consider that liquidating some of the accumulated assets would provide some funds for the family. These assets, along with some life insurance, would be enough for the family to live on for some time.

Maybe, in light of these shrinking assets, one should reconsider how much life insurance would be needed to keep the family comfortable in the event of the breadwinner’s death. I have spoken to many clients recently who have taken a look at their assets and realized they had better add more life insurance to their financial plans.

When this financial mess improves and your stock portfolio and real estate do so too, you can reevaluate whether to reduce the amount of your life insurance or to keep it in place to protect your assets, so the family wouldn’t have to liquidate them to survive.

Okay, you are applying for a life insurance policy and you have been told the insurance company requires a medical exam (paid for by the insurance company). The exam typically consists of blood and urine samples, blood pressure readings, height and weight measurement and a medical questionnaire. The health class the insurance company assigns you will determine your rates. Information from the medical exam will be used by the insurance company to help determine your health class, so it is important that you get the best results possible.

The following tips are to help you attain the most favorable and accurate exam results possible:

• If you can, it’s best to fast for a period of at least eight hours prior to the exam. This will result in more accurate blood test results. Early morning appointments may be appropriate.
• If you must eat prior to the exam, no heavy meals and little or no caffeine on the morning of the exam. Decaffeinated coffee and a light breakfast would be best.
• Stay off salt for 3-4 days prior to exam. This may have a beneficial effect on your blood pressure.
• No alcohol for 24 hours prior to the exam, as alcohol tends to elevate blood pressure for 12 -24 hours.
• Get a good night’s rest before the examination.
• If you smoke, don’t smoke within 30 minutes of the exam. Smoking tends to constrict artery walls and elevate blood pressure.
• If you have an acute illness (i.e. the flu), you should consider rescheduling the exam as some acute illnesses affect the urine and blood tests.
• (For females) You should tell the examiner if you have your menses as this affects the urine and a notation can be put on the lab slip.

I hope this helps.

I thought long and hard on President’s day of a relevant topic to post, but I could not think of an adequate tie-in. However, all those thoughts of men in white wigs reminded me that, although never president, one of the founding fathers of the U.S. is also responsible for starting the modern-day insurance system in the U.S.

In 1751, according to PBS.org, Benjamin Franklin and his Union Fire Company met with other Philadelphia fire-fighting companies to discuss the formation of a fire insurance company. Out of those discussions, the Philadelphia Contributionship was formed, which was the first successful fire insurance company in the colonies. About seventy Philadelphians initially subscribed to the contributionship.

In May 1752, the board of directors, of which Franklin was a member, decided to form an insurance company. Members agreed to make equal payments to the contributionship, which would be used to pay for losses any member would sustain through fire to his property.

Mr. Franklin also proposed other forms of insurance, including life insurance and annuities, according to PBS.org. In his Silence Dogood letters, he recommended insurance for widows and orphans, much like a current-day pension. Late in life, he also proposed crop insurance, based on the same type of organization as the Philadelphia Contributionship.