When you’re considering term life insurance, you need to understand the different types of term life available today.  Term life is the least expensive insurance available today and if used correctly could be the best insurance for you.  In fact many people supplement permanent life insurance (universal, indexed universal or whole life) with term life insurance.

Term life insurance provides coverage for a defined term, i.e. a period of time. It does not accrue cash value like a permanent life insurance policy does. The basic premise is you have a financial risk you want to insure for a period of time in case you die prematurely.  The risk might be your mortgage, a vacation home mortgage, your children until they have moved out, kid’s college education, etc.  Once you determine what the length of time you need to cover the risk, you purchase a term life insurance policy for that period of time.  If your untimely death occurs, the insurance policy will pay your beneficiaries the tax-free insurance benefit.

There are several different types of term life insurance to consider when educating yourself on what is necessary for your specific situation.  Different insurance companies will have one or all of the following available:  Guaranteed Convertible, Annual Renewable, and Level are the common types of term life insurance.

Level Term Insurance

Level Term Insurance requires payment for a fixed period for the duration of the term.  Common terms are usually in 10-year increments because 5-year increments are more expensive than.  Premiums are level during the term of insurance and do not increase.  If you decide to cancel the policy, you just let the insurance company know, any time during the term of the policy, and stop paying the premiums and the will policy lapse. 

Convertible Term Insurance

Most companies offer convertible term insurance.  Here the insured is eligible to convert all or some of the amount of coverage to a permanent universal or indexed universal life insurance policy during the term of the insurance policy.  Most insurance companies allow this during the first 10 years of the term or possibly the first half of the term policy.  If it is converted, the premium will be higher because it is permanent insurance for the rest of your life. 

Annual Renewable Term

Annual Renewable Term is a one-year life insurance policy where the insurance company guarantees to insure the covered person for one year and will issue the same or higher policy at the end of the term without regard to health of the insured.  This is similar to a guaranteed renewable term life policy.  However, the premium will increase because the age of the insured has increased and if the amount of insurance is increased.

Return of Premium Term Life Insurance

This is the newest term life product on the market today and can be quite useful for certain situations.  First thing you need to know is that it will cost more than a standard term life policy for the same amount of insurance benefit.  The unique feature of this policy is that if you pay the premiums through the end of the policy and you are still alive the insurance company will return to you 100% of every single dollar you paid into the policy… TAX-FREE.  There are some very specific advantages for using this type of policy.  Talk with your Retirement Life Solutions Specialist before you decide to buy this type of policy.  If you cancel the policy during the term, the insurance company will not return any of the premiums to you.

Our final Thoughts

Unlike universal life insurance, term life does not provide the tax benefits or cash value buildup of permanent life insurance.  Term life insurance is useful for people who need life insurance at the least expensive price for a specified time frame.  It can also be useful to supplement a universal policy for a defined period of time. 

Besides speaking with a Retirement Solutions Life Specialist, you’ll also want to consider the following factors as a starting point:

• Are you still young and in good health?
• Are you looking for simple, inexpensive insurance to protect your family?
• Is permanent universal life too expensive for you today?

Finally, don’t be misled by a common misconception you may have heard, “buy term, and invest the rest.”  Sometimes this may not be the best choice for you with the uncertain economic times present today.  Who can afford to put their retirement money at the risk of market volatility?  If you can afford a universal or indexed universal life insurance policy, there are some excellent tax-deferred benefits you can maximize no matter what age you are.  If you are able to purchase a universal life policy at a young age, you have the flexibility to increases the cash you add to it (max fund it) and significantly increase your cash value in a safe and guaranteed method to create an additional stream of tax-free income ready for your retirement.

Make sure you speak with a Retirement Life Solutions Specialist to determine what life insurance is best for your specific situation.  Click here to find one in your area.

What is Life Insurance?

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Remember… “You do it For Love”

Here are a few short videos that will bring a smile, laughter, and maybe a tear to your eye about some things you may not have thought about this year as you decide what to buy your loved ones for Valentine’s Day.

What would you do for love?

Bad Cupid

A Meaningful Gift

Crazy 4 Love

We’re glad we’re able to share these heartfelt images from The LIFE Foundation’s web site with you about this year’s Valentine’s Day gift.

Thinking of you always,

Your friends at www.lifeinsurancethinktank.com

What is Life Insurance?

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Whole life insurance (WL) is permanent insurance and covers you as long as you live.  You pay the same premium for a specific period (usually the rest of your life) to receive the death benefit.  This type of insurance provides life insurance coverage and a savings feature.  

With whole life your insurance company puts part of your insurance money in a declared interest bearing account. With every premium payment your cash value increases. The savings element of your policy builds up cash value on a tax-deferred basis.  This cash value can be utilized in a few common ways.  You can borrow the cash TAX FREE or surrender it for cash.  If you surrender the policy you will pay tax on the interest gains that the cash value earned over the years.

Whole life can be participating or not.  If it is participating, you get to participate in the surplus of your insurance company’s excess earnings and receive dividends annually.   You have the choice to either receive your dividends in cash or let them accumulate interest.  You may also use your dividends to reduce your policy’s premiums or buy additional insurance coverage.  Talk with a Retirement Life Solutions Specialist before buying a whole life policy from an insurance company because dividends are not always guaranteed.

Universal Life Insurance

Universal life insurance (UL) is also called “flexible premium adjustable life insurance,” because it offers more flexibility compared to whole life insurance. You have the option to reduce or increase your death benefit and also pay your premiums at any time and in any amount (subject to certain limits) after your first premium payment has been made.

With many companies you can purchase an increased death benefit periodically without having to undergo medical underwriting.  This can be advantageous as someone becomes older and begins experiencing medical problems.  

Some companies will allow two options to the death benefit – a fixed amount of death benefit or an increasing death benefit equal to the face value of your policy, plus your cash value amount. Most times however, the death benefit does not increase and the cash value is there and grow to be used by the policy owner (hopefully they know they can use this money since it is their money).

You also have the opportunity to change the amount and frequency of premium payments. So, you can increase your premiums to increase your cash value or may also even add a lump sum according to the specified limit in the policy. As you know, part of your premium is put into an investment account and the interest therein is credited to your account. In this way, the interest grows on a tax-deferred basis, which increases your cash value.

In case of a financial challenge, if there is enough cash value accrued, you can reduce or stop your premiums and use your cash value to pay premiums.  Make sure to discuss the status of your cash value fund with your Retirement Life Solutions Specialist before stopping the premiums. Your policy may lapse if you cease to pay premiums and have insufficient cash value to cover the cost of insurance.

The downside of a universal life insurance can be the interest rate.  If the policy performs well, there are chances of potential growth in the savings fund.  On the other hand, if interest rates are low over a period of years, then the estimated annual returns are not earned.  

A recent addition to universal life market is called Indexed universal life.  In this type of policy instead of a fixed interest rate from year to year; your cash values earned interest is tied to a stock index such as the S&P 500.  The performance works exactly like that of a fixed indexed annuity.  If the index goes up during the period, you will get all of the gains up to a maximum CAP in place that year.  If the stock index falls negative or is flat, you will receive no interest performance that year.  While this may seem risky, your cash is not invested in the stock market.  It is just using the stock market index as a means to credit interest to your cash value.  Reviewing the historical performance of the S&P 500, you could have made more interest performance in 10, 20, or 30 year periods than if you had been in the fixed interest account of a universal life policy. 

Universal life insurance offers all-round protection to your loved ones, thanks to its security, flexibility and variety of index crediting choices options.  In times of low financial liquidity, you can alter your premium payments or may even withdraw from your cash value fund. In addition, you can increase or decrease the face value of your insurance to an extent if needed.

Universal or Whole Life?

When buying any life insurance policy, you need to focus on the needs of your family in the future. Permanent life insurance is designed to give you and your family lifelong security.  Whole life insurance protects your beneficiaries in your absence and acts as an asset-accumulating tool.  Universal life insurance gives you the chance to regulate your insurance premiums to keep current with your financial situations. Universal Life also gives you more control of your earnings because of the crediting strategies that can be changed at any time during the year.  Your Retirement Life Solutions Specialist can provide you the education and knowledge about all life insurance products available today. Take the time to learn from their expertise before you decide what your family needs.

What is Life Insurance?

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Furthermore, many statistics indicate that 54% of Americans have less than $25,000 in savings and investments.¹   As you can imagine, even with Social Security income, these people will soon outlive their savings and become impoverished. Some advisors recommend that someone who is working to begin saving at least 8-12 times current salary for retirement.  Then make sure they’ve saved at least eight times their final salary in order to retire at 67 years old.²

So how can a permanent life insurance policy help in advanced planning?

The cash value in your life insurance policy is your money.  You can take it out as a TAX-FREE loan. There are some concerns by doing this, but if created correctly in the first place, this can become an additional source of income during your retirement years.

So who do you talk to for more information about setting this up correctly? Retirement Life Solutions Specialists are advisors who can help you plan to use life insurance for other things than just the beneficiary’s life insurance payment.  They can show you how to fund a life insurance policy to help pay for children’s college, large purchases without borrowing from your bank, starting a business, and retiring on your own terms.

How can I help pay for my kids college education?

Most parents would rather their children not have to work their way through college or have large loans to pay off when they graduate.  A permanent life insurance policy correctly set up to build cash value can be used for college expenses.  When the child enters college the policy owner can take a TAX-FREE loan from their insurance policy each year to pay for some or all of the annual expenses. 

During this time, they should continue to pay the monthly premiums as well as the loan back.  By paying the loan back they are paying the principal and interest into their own cash account not the bank or lender who they might have had to take a loan from.  This continues to rebuild and grow the cash value in the insurance policy for future use.

Other mid-life uses

The policy owner can also use their cash value for other large purchases rather than borrowing from a lender and paying interest. Buying a car, down payment on a home, or other large purchases is easily done by borrowing from the insurance policy.  How about starting a business?  The policy owner can borrow from the cash value of their life insurance policy and quickly access startup capital.  Did you know that a few famous entrepreneurs – Walt Disney and Ray Kroc – used this exact method to start up Disneyland and McDonald’s?

Using life insurance in retirement

The use of a permanent life insurance cash value accumulation to add to other retirement savings can make perfect sense.  If a policy owner has done a good job building up their nest egg of cash over many years they have more flexibility to use this as an extra source of funds.  These funds have grown tax-deferred and now can be borrowed as a TAX-FREE loan to supplement monthly income as needed.  More importantly, at this point there is no rule that you have to pay the money back into the insurance policy.  Finally when the policy owner dies, there still is a life insurance benefit paid to the family for protecting their family.

The best time to begin funding a permanent life insurance policy is as young as possible.  However, at just about any age there are numerous ways to buy a permanent life insurance policy and still take advantage of this benefit.  Talk with your Retirement Life Solutions Specialist about your family’s specific situation.  They can educate you on the best choices available today.

¹ Brandon, Emily “Planning to Retire” U.S. News & World Report | Money, 10 February 2011, Accessed February 7, 2013

² CNBC Online, “Think Magic Numbers (Plural!) for Retirement Savings” cnbc.com, 25 October 2012, Accessed February 7, 2013.

What is Life Insurance?

Cost of Life Insurance?

An ROP Term Life insurance policy costs a bit more than a standard term policy.  Depending on your specific situation, it has its place among the varieties of life insurance.  There are many reasons why you might choose a ROP Term Life policy.

For example, many people going through a divorce and consulting with an attorney may have to carry life insurance on one or the other spouse for a period of time.  A divorced spouse may be required to purchase a term life policy on the risk that they might die during the time they are required to pay for alimony and/or child support. In these siutations, the beneficiary is the other spouse or children.  This insures that if they were to die, the insurance policy would cover the remaining alimony or child support. 

However, if the paying spouse is still alive at the end of the term, than the money paid for the life insurance policy could be considered wasted since “risk” they paid for did not occur.  By using a Return of Premium Term Life Insurance policy, the divorced spouse who paid for it would receive all the money back used to pay for the insurance policy. This money is TAX-FREE!

• In-depth review of using a ROP Term Life Insurance in a divorce decree.

Check with your Retirement Insurance Solutions Specialist to determine when and why you might want to use a ROP Term Life Insurance policy for your specific situation.

What is Life Insurance?

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This is something that everyone here at Life Insurance Think Tank has a strong desire to educate consumers about.  If set up the correctly, permanent life insurance can be more than just life insurance.  Talk with your Retirement Life Solutions Specialist about your specific situation.

Click here to read his complete article

What is Life Insurance?

Cost of Life Insurance?

Recently, LIMRA (Life Insurance and Market Research Association) provided a life insurance IQ test to 4,000 Americans to gauge their knowledge and understanding of life insurance. Less than a third (1,200) passed the 10-question exam and the majority (55 percent) answered fewer than five questions correctly.

As an industry, life insurance companies and their agents are failing on educating consumers on life insurance knowledge.  While this is a poor reflection on the industry it validates our Mission Statement at Life Insurance Think Tank to provide valuable education to consumers.  You can help your family and friends increase their understanding about life insurance by sharing www.LifeInsuranceThinkTank.com  with them.

To read the full article Click Here

To check out your own life insurance knowledge, take the survey.

What is Life Insurance?

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An IUL provides the value of a permanent life insurance with the cash value of the policy invested into an account that is “linked” to the performance of a market index like the S&P 500. The value to the insured by linking to the index is exactly like a Fixed Indexed Annuity…in a positive year the account can earn some of the gains of the market-linked index and in a negative year none of the losses. In addition, this cash value account has other benefits including a minimum guarantee on performance and tax advantages.

The IUL cash value can never lose money due to the market-index having a down or flat year. The insurance company guarantees your account value every year and locks in the previous year’s earnings. During the next year, the account value and earnings posted to your account are locked in until the next anniversary date of the policy. At that point if the market has grown from the previous year, then a percentage of the growth is applied to the account value. If the market has fallen, there is no change to the previous years locked in account value.

The cash value and the earnings of an IUL grow tax deferred like a qualified retirement plan (IRA and 401K). This means your account actually benefits from triple compounding earnings… you earn interest on your account principle, you earn interest on your interest, and you earn interest on the money you aren’t paying in taxes on your interest earned.

This money is your money for use at the time you decide to use it; for your children’s college education, purchases, and even retirement income – TAX FREE. Seek out your local Retirement Life Solutions Specialist to determine if an Indexed Universal Life Insurance policy may be an benefit to your family’s protection and an addition to your retirement portfolio.

What is Life Insurance?

Cost of Life Insurance?

So that brings us to today’s life insurance environment.  Can you guess what the dominant life product for this decade is?  If you said there is NO dominant life product, then you would be correct.  Today’s life insurance market is all about variety and choice.  There are six very popular life options with not one single one standing out among the rest.  The leaders today are Universal Life, Term Life, Whole Life, Universal Life with Secondary guarantees, Indexed Universal Life, and Variable Universal Life with Guarantees.

It will be interesting to see if any one life product makes a move to stand out as the top seller for the remainder of the decade?  In the meantime, both consumers and advisors can feel lucky that there are so many relevant and popular options for life insurance.

Life Insurance Education