Your Lifestyle May Be Causing You to Pay Extra for your Life Insurance

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When dealing with life insurance, it is imperative you understand how your lifestyle can impact the financial cost for your life insurance policy. In exchanged for premium payouts set by the insurance holder, the insurance company provides a lump-sum payment known as death benefits to the beneficiary or beneficiaries (more than one person) in the event of the insured’s death. Typically life insurance is chosen based on the needs and goals of the owner. But much of your premium can force you to pay extra if you are an adrenaline junky, a cancer survivor, or a person convicted of drunk driving. For these individuals, there will be an extra charge in your life insurance quotes.

Usually, your age, health, and smoking status are the factors that most affect your life insurance rates. But there are other factors that can raise these rates. Much of this attributes to the idea of risk of death. Sometimes these charges might be temporary. But depending on the situation and your overall status, they can last as long as your policy does.

Below, you will find the three most common scenarios that can increase your life insurance rates. If you fall into one of these categories, make sure you understand your policy and why you are paying that rate.

Cancer Survivors

Depending on your specific diagnosis, your treatment, and the length of time you’ve been cancer free, cancer survivors are given a premium and a specific package when purchasing life insurance. The National Cancer Institute had recorded that nearly 40% of us will be diagnosed with cancer at some point. With those types of statistics it is no wonder why the higher rates and extra charges are set for these individuals. One thing to keep in mind is that unlike other clients, a cancer patient will have to wait one to five years to buy life insurance after their completed treatment. Depending on how severe the cancer is, a client may have to wait up to 10 years. This is done because of the high chances of death for cancer patients. Even when these individuals are eligible to buy coverage, life insurers will usually charge them temporarily flat extras.

Living Dangerously

For those of you who are adrenaline junkies, be aware that your lifestyle may take a toll on your life insurance rates. People who engage in dangerous hobbies such as jumping out of a plane, hang-gliding, deep sea diving, and rock climbing are expected to pay more when buying life insurance. For example, skydivers typically pay a flat extra of $2.50 to $3.00 per $1000 of life insurance coverage if they jump no more than 50 times per year. This number of course increases the more jumps they have.

Other dangerous hobbies involve different flat extras. Below you will find a list of the different types of rates a person will pay depending on the activity and the experience.

  • Aviation: $2.50 for pilots over age 26 who fly 301 to 600 hours per year; $5 for those who fly more than 600 hours.
  • Hot air ballooning: $0 to $2.50.
  • Hang gliding and paragliding: $2.50 to $7.50.
  • Diving: Generally $0 for those who dive to less than 100 feet; $3.50 to $5 for deeper dives, depending on number of dives per year.
  • Climbing: $2.50 to $3.50 for those who climb up to 13,000 feet; $5 to $7.50 for those who climb higher.
  • Auto racing: $2.50 for drag, sprint and modified racing. Charges for other types of racing vary.

Drunk Drivers

Understandably, those individuals who have instances or situations that put their lives at risk can ultimately cost them in the end. If you have been convicted of drunk driving within the past ten years, you will be expected to pay an extra charge on your rates. This is about $7.50 for every $1000 of coverage. In addition, there is a strong possibility that you can be denied coverage altogether if you have more than one DUI conviction. This is because you are proving to have a higher likelihood of getting into a fatal crash.

Know the Life Insurance Lingo

Life insurance isn’t a simple topic and confusing life insurance lingo doesn’t help. Confusing language often prevents people from making important and necessary decisions. According to a 2014 study by consulting firm Maddock Douglas and LIMRA, a financial research group, there are about 19 million people who want to buy life insurance but can’t understand the confusing terminology. Additionally, those who do buy life insurance don’t necessarily understand what they have just purchased. Lucky for us, the Christian Science Monitor provided these explanations will help you better understand these must-know terms.two orange question marks

  • Policy owner: This is the person who has bought the policy. They are in control of it. It’s important to note, however, that the policy owner may or may not be the one whose life is insured. For example, a husband could own a policy on his wife. The policy owner is the only one who can change the beneficiary and get policy details from the insurer.
  • Premium: The amount of money that you pay for life insurance. This is generally quoted per month or per year.
  • Beneficiary: The person who receives the payout from the life insurance policy. There may be more than one beneficiary named. A specific percentage of the payout can be designated for each beneficiary.
  • Death benefit: The amount on a life insurance policy that is payable to the beneficiary when the insured person passes away.
  • Insured person: The person whose life is being insured.
  • Term life insurance: This type of policy lasts for a specific number of years, which you select.
  • Permanent life insurance: This type of policy lasts for your entire life. It also has a cash value component. There are multiple varieties of permanent life insurance including, but not limited to, whole life, universal life, variable life, and variable universal life. Be sure that you understand the difference between permanent and term life and to work with a financial advisor if you choose to buy permanent life insurance.
  • Cash value: When you buy a permanent life insurance policy, part of your payment goes into a “cash value” account that grows in value over time. You can take a loan against the cash value and use the money for anything you’d like.
  • Accelerated death benefit: If you are terminally ill, this policy feature allows you to receive some of the insurance payout early. Some insurers now call this a “living benefit.” Make sure your policy has it, it is usually a free feature.
  • Rider: A rider is an add-on that provides an additional feature or coverage to your policy at an extra cost. There are many different types of riders. It is helpful to look into some options before deciding to buy a policy.
  • Underwriting: This is a process that insurance companies use to evaluate the risk of insuring you and determine your life insurance rate. They often look at your medical records, driving record, and prescription drug history.

These terms are just a few that will help you understand life insurance. It’s imperative that you understand all of these terms before you purchase a policy. If possible you should invest in a financial advisor to help you. When it comes time for you to buy a policy make sure that you know exactly what you are buying. Do research and ask questions. Don’t stay in the dark. Buying life insurance is an important thing to do, but ensure that you are smart about it!

Is Life Insurance a Good Investment?

In the world of portfolio investments, life insurance doesn’t seem like it would be anything too lucrative,Life preserver Marc Firestone especially when you compare it to such heavy hitters as real estate, growth stocks and exchange-traded funds.  Because of this, investors are known to skip life insurance as an investment in favor of the more profitable areas.  Yet life insurance shouldn’t be viewed as an investment product, it’s meant to serve as financial protection for your heirs.  If you were to regard life insurance as a form of investment, it will never live up to other investment vehicles.

More than a growth play, many view life insurance as more of a peace of mind play.  You don’t want to have to rely on life insurance, but it’s a good thing to have there.  With the exception of estate planning, buy-sell arrangements, executive benefits or pension maximization, most circumstances don’t call for whole life insurance; almost all other situations call for term insurance, which is far less costly.  Yet that’s not to say that others don’t benefit from whole life insurance.  Insurance can be a very smart investment; take, for example the Great Recession.  if you needed cash from your portfolio in January 2009 and had $50,000 in a mutual fund and $50,000 cash value insurance, which would have saved you $50,000 in additional mutual fund growth.  Whole life insurance can also build up tax-sheltered savings that can subsidize retirement planning, making portfolios more complete through steady balance.  Whole life insurance within a mutual company will produce 6 to 8 percent growth between interest and dividends during a down market, which can outperform the market at times.

While it isn’t an investment move, life insurance policies with cash value can also serve as part of a tax strategy.  After building up cash value in your policy, you can use it as collateral to take out a loan.  You set up your own unstructured loan with no repayment schedule, which would allow you to skip traditional bank financing.  And since it’s a loan and not a direct distribution, you don’t owe any income tax.

Even if you don’t want to do whole life insurance, don’t overlook life insurance altogether, which would be like flying without a financial safety net.  If you have others that depend on you financially in any way, then you need life insurance.

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8 Terms Everyone Should Know When Dealing with Life Insurance

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When deciding on the appropriate life insurance, buyers often find the situation difficult. Not only are you talking about an uncomfortable subject, but you are also asked to translate and understand various jargon that the insurance industry have used for years. This type of confusing terminology often prevents people from making the right decision or even a decision at all which could result in leaving many families with that safety net.

To help you cut through the difficult terminology, here are eight essential terms that will help you when making your life insurance purchase. Remember, the best way to protect your family is by understanding.

1. Policy Owner

Policy owner is the person who buys and controls the insurance policy. The policy owner may or may not be the one whose life is insured. Furthermore, the policy owner has certain rights. For instance, if you are the policyholder for a life insurance policy, you can change the beneficiary or transfer ownership of the policy to someone else.

2. Premium

No, we are not talking about gas here. Premium, by definition, is the amount of money you pay for the insurance. This amount is generally quoted per month or year, depending on the package.

3. Beneficiary

The beneficiary is the person who receives the life insurance payout, benefits, and advantages. Usually for typical life insurance plans, you can name more than one beneficiary and designate a specific percentage to each party. Take for example you have a family of four. Your wife could get 60% while your two children can get 20% each.

4. Term Life insurance

Term life insurance is a policy that last for a specific number of years. Depending on the package you can have a policy for five, ten, or thirty years. After that period expires, the coverage at the previous rate of premiums is no longer guaranteed and the client can either forgo coverage or renew with the same or different plan.

5. Permanent Life Insurance

In contrast to Term Life Insurance, Permanent Life Insurance is a life insurance plan that does not expire and combines a death benefit with a savings portion. This saving portion is what is called cash value in which the policy owner can borrow funds or withdraw cash value to help meet future goals.

6. Cash Value

As stated above, if you buy permanent life insurance, you are given the benefit of building a cash value savings. Part of your payment goes into an account that grows in value over time. In addition, you can take a loan from the cash value and use the money for anything you like such as paying for a child’s college education.

7. Death Benefit

This is the amount paid to a beneficiary upon the death of an insured person.

8. Accelerated Death Benefit

This policy feature allows you to receive some of the life insurance payout early if you are terminally ill.

Life Insurance: Understand the Policy

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When choosing the right type of life insurance, it can oftentimes be confusing. One thing that is certain is that you have made the right decision in investing in your future and your security. In this article, it will highlight various tips and helpful guidelines that can aid you in narrowing down the best life insurance for you and your family.

First and foremost, what is life insurance?

Life insurance is a savings option that pays out a sum of money either on the death of the insured person or after a set period. Putting it simply, it is the savings that can be utilized by your family or next of kin after your passing. While the thought of death could be a bit grim, it is important to consider these hypothetical situations, especially when you graduate college.

Now, when people talk about term life insurance, they are discussing a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. Take for example paying for college. Like every parent, you want to make sure your children will be ensured with the necessary funds to pay for their college education. For that type of responsibility, you may want to consider a longer-term life insurance such as a 20-year term or 30-year term.

One concern people oftentimes have with life insurance is that their finances can change. Take for example you are in your mid-twenties and decide to leave your steady job to pursue a professional degree. What will happen? If your think your financial needs may change, you may want to look into a convertible term policy. This type of policy allows you to convert to permanent insurance without a medical examination in exchange for higher premiums.

Keep in mind, premiums are the lowest when you are young. So it would be smart to get your life insurance in your twenties. Premiums usually increase upon renewal as you age. This is usually the standard for some insurance policies.

Now if you were to get permanent life insurance, make sure you do your homework and read through the information. With a permanent coverage, your policy will pay any death benefits no matter what age you are. Keep in mind that premiums for permanent policies are generally higher than for term insurances. However, one huge benefit about permanent policy is that the premiums remain the same no matter how old you are or how old you get.

Once you have decided on the overall longevity of your policy, sit down with a representative. Make sure you ask all unanswered questions so that you can truly gage which policy is the best fit for you.

How Life Insurance Can Help Small Businesses

2419d30If you happen to be a family business owner, you are responsible for both your family and a business at the time. Not only do you have children at home who depend on you for their livelihood but your employees do as well. If an unfortunate event occurs, you want to ensure that your family will have the financial stability to carry the business forward.

As we have discussed before, life insurances provides a vital safety net for your family in the event of an unfortunate death. I recently read this article, which discusses how life insurance can help a family business, which I would like to share below.

1) It Can Replace Your Income

If there is anyone that depends on your income, then it is necessary for you to have life insurance. This applies to anyone, whether you own your own business or work for someone else. If you die unexpectedly, your family can use the life insurance policy for anything from day-to-day expenses to college education to funeral costs.

2) It Can Cover Your Personal & Business Debts

As a small-business owner you have likely secured a business loan with personal assets. A life insurance policy can cover the debt and protect those assets for your loved ones. With a life insurance policy, your family will not be forced to liquidate the business to pay off lenders.

3) It Can Protect Your Heirs From Estate Taxes

A life insurance policy can help your heirs pay the estate taxes and keep the business intact. If you are cash-poor, with no life insurance policy, your business assets could be enough to put you over the federal estate tax limit ($5.43 million for a single person or $10.86 million for a married couple in 2015). A looming tax bill could force your heirs to sell the business in a hurry.

4) It Can Protect The Business

If one of your key employees suddenly died, it would be difficult for your business to push ahead without a loss in revenue while the remaining employees work to pick up the slack. A life insurance policy can provide your business with some working capital to get them through this difficult time.

5) It Can Help You Retain Talent

WIth a permanent life insurance policy, you would have the ability to provide additional compensation to key employees, enticing them to stick around. Businesses typically buy permanent life insurance policies for their key employees. The business will pay the premiums but the employee owns the policy and can even use the cash value to supplement retirement income down the road.

Life Insurance is For the Young Too

Long ago are the days of life insurance only being for the middle-aged and older. Getting life insurance early on could be crucial to living the life you’ve imagined for yourself. According to Life Insurance Product Management director Kenny Sutton, the sooner you get life insurance the better you’ll be on later in life. It doesn’t matter how young you are or if you’re single. He’s asked the question a lot, and tells everyone that it gives you options in life. You don’t have to feel stuck anywhere or anytime. He comments, “We want to make sure young people take advantage of the benefits they can take control of.”

Marc Firestone Life Insurance

The major two reasons to get life insurance? Cost savings and flexibility.

You’ll be better off paying the insurance premiums of today than those of tomorrow. The cost of life insurance policies will only continue to increase as you age. In the long run, this will help you save money. Sutton uses an example to demonstrate his point, “a 20-year-old would pay an average of $12 a month for a $100,000 USAA level term policy, but someone who waits until age 40 to take out the same policy could pay as much as $50 a month, possibly more.”

Once you have your policy, you can always revisit it when life produces it’s own necessary changes. If you get married or have children, you can always change the coverage to suit your needs and to benefit you the most.
Flexibility can be priceless in this life. These days, there are fewer and fewer employers willing to provide life insurance, putting you in a difficult position. If you have life insurance, you have to worry about this less and there will be less stress in your life. Your mind will be at ease, and it won’t feel like employers have control over you and your life. You will be able to change positions and careers as you please and won’t feel forced to be somewhere that isn’t right for you.

Info courtesy of Forbes.

The 4 Big Myths of Life Insurance

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In a somewhat unpredictable world, life insurance has become the financial blanket that has helped thousands of families through many taxing situations. While many of us like to evade the topic or sidestep the thought of losing their love one, life insurance something we all must discuss. In reality, we cannot foresee what will happen in the future. One day we can be enjoying our lives with the people we care about and another day we could be seeing the light at the end of the tunnel. Regardless of what the situation is, death is waiting. It would be to our best interest to internalize the information given to you and begin investing for your family’s future. Below you will find four common myths many people believe about life insurance. Many times this type of information can be misinterpreted and could eventually become a problem in the future.

1. I do not need life insurance my employer already provides this for me.

This is one of the biggest misconceptions that many people have when entering their careers. They hear their financial packages, then the benefits, and sign. One of the biggest problems about this is that there are various holes that a person can miss simply from just listening and signing. Understanding the fine print is incredibly imperative in situations like this. For example, while an employer may provide you life insurance equal to 1 to 2 times your annual salary, you could have purchased a package that is four to six times that amount.  Another example, a situation many people fall into, is that if you leave your company, you may lose your life insurance that you have built up for those amount years you have been working. This is problematic. As it has been the theme for life insurance, life just happens. We cannot predict the future. Building a financial safety net is incredible, but if that can go away the second you leave your company; you may want to rethink your overall strategy in preparing for your future. That is why it is important for you to look for life insurance outside of your work. Making sure that there is a financial safety net will ease your mind in protecting your future.

2. Life insurance is too expensive.

Many people have this misunderstanding that life insurance is incredibly costly. This is a huge mistake. Make sure you talk to your representative. Try and break down the overall package plans that work for you. For particular instances, some packages can be expensive, but others are fairly reasonable, even for those young professionals who are beginning to build up their own financial savings background. The cost for life insurance can rage from a few hundred dollars to thousands depending on how much you want to invest. At the end of the day, you want to make sure that your family is financial secured for any extreme situations. No matter how much you donate, you will be alleviating that headache in the future.

3. My health disqualifies me from life insurance.

While a person’s physical and mental health does play a role in the type of life insurance you will get, there are a lot of companies that cover a range of health conditions. Keep in mind, the prices for packages may change, but it should not dissuade you from not talking to a representative. Especially for those extreme situations, you want to ask yourself if your family is financially stable to handle a situation of that gravity. If the answer is no, then it should be in your best interest to see what packages best fit your needs.

4. I am young. I do not need life insurance right now.

Forever young can be an understatement when a specific tragedy hits your family. As it says throughout this article, we cannot predict the future. It would be in your best interest to begin planning early. In fact, life insurance actually makes the most sense when you’re young. Many premiums are less expensive and you will have fewer assets to add. The longer you wait, the more costly this can be for you and your future family. Do not procrastinate on your life. Your future will definitely depend on it.

Understanding Life Insurance

Though life insurance may not be a typical topic discussed at the dinner table, it is an important life decision that you should learn and care about, especially as you grow older. An article published by the Huffington Post entitled The Science of Life…Insurance explores the American perception of life insurance and why there are so many instances that people just ignore the topic completely. The article states:

“That a person should have life insurance as a way to protect his or her family from potential economic ruin is a reasonable assumption. However, 30 percent of Americans know they need more life insurance. Twenty-five percent wish their spouse or partner would purchase some or more life insurance,” (Shaw, The Science of Life…Insurance).

The reason so many Americans know they should have life insurance, or wish that their partner would purchase it, is because they know it is important. But why, then, are people not being proactive about obtaining life insurance? The main answer for this comes down to a matter of understanding.

Marc Firestone Life-Insurance

Most people shy away from purchasing life insurance because they think it is too expensive. However, what people don’t know is that cost is almost always negotiable. The Huffington Post states, “80 percent of consumers misjudge the price for term life insurance, with Millennials overestimating the cost by 213%, and Gen Xers overestimating the cost by 119%,” (Shaw, The Science of Life…Insurance). Understanding the cost of life insurance is an important factor that helps to determine why so many Americans are not signed up.

In the Huffington Post’s interview with Marvin Feldman, the CEO, CLU, ChFC, RFC, and President of Life Happens trade group, Feldman comments on the lack of education to the public about how affordable life insurance truly is. Feldman explains, “‘We’ve consistently seen over the last five years that consumers think life insurance is more expensive than it really is, and now we’re seeing many are also confused as to what factors determine the cost for life insurance,’” (Shaw, The Science of Life…Insurance).

By educating the general public about life insurance with clarity and simplicity, those skeptical about purchasing life insurance because they are afraid of the bills will come to recognize that it is a lot more affordable than they think. In return, more people will be covered and there will be less problems in the future after a family member has passed.

Remember, if you’re not sure – ask. There are always professionals who are there to help answer any questions you may have – and, if the cost of life insurance is a problem for you, there is always room to negotiate.