Purchasing a life insurance policy is an important decision. We want to be able to provide financial security for our family in case we die unexpectedly.

Many people do not realize how a sudden death can cause a severe financial hardship.  There are funeral expenses, rent or mortgage payments, loan and credit card expenses. A sudden loss of income can greatly enhance these burdens.

Most people have to budget themselves and can’t afford the more expensive premiums required for Permanent Insurance polices such as Whole Life or Universal Life.  This is the main reason why a Term Life Insurance policy may an ideal choice.

What is Term Life Insurance?

Term Life Insurance is the most basic life insurance policy you can get without any of the bells and whistles found in Permanent Insurance policies. Why?  Simply put, a Term Life Insurance policy only covers a lump sum death benefit.

More importantly, the death benefit is non-taxable when it’s paid out to your beneficiary.

This policy is called ‘Term’ because it is for a fixed period of years, hence the name. You buy this coverage to last from anywhere from as short as one year, to other fixed periods or terms such as 5, 10, 20 years. You can even get some policies that cover you to a specific age such as 65.

Why Get Term Life Insurance?

The reasons you might want this coverage can vary. It may be the only form of life insurance you want, or you can use it cover you for short periods of time as a financial safety net when you are the most vulnerable financially.

You can also use it instead of purchasing more expensive mortgage insurance which is a real advantage. Other reasons could be to create an estate for your heirs, provide for your children’s tuition, and cover existing business loans or to handle estate taxes. Alternatively, you can simply use this type of policy as a short term supplement to a Permanent Life Insurance policy.

Term Life Insurance is also an ideal short term solution if you’re let go from your job and lose the life insurance coverage you had with your company.

Additionally, there are many policies you can purchase which can be done so without requiring you to get a medical examination.. Most Permanent Insurance policies require you to get a medical examination before you can qualify for a policy.

How is Term Insurance Different from Other Types of Policies?

The other type of life insurance policy you can purchase is Permanent Insurance. Permanent insurance policies such as Whole Life, Universal Life and Variable Life differ from Term policies because they are cover you for life. Additionally, they not only have a death benefit along with an investment/saving feature which allows you to build up a cash value over the life of the policy. A term life policy strictly pays out for death benefits only.  

How Much Coverage is Enough?

It all depends on your needs and your objectives. The amount of death benefits is strictly your decision and the reasons you want the coverage. You can check out our ‘Life Insurance Calculator’ to help you decide how much coverage you need, or how much your premium would cost for the amount of coverage.

Who Would Benefit from Term Life Insurance?

This form of life insurance is ideal for families on a budget, couples just starting out, or people in their 50’s. It is also a good fit for those individuals who want life insurance but prefer to invest their money on their own and have greater control over their retirement investments.

Pros of Term Life Insurance

• Cheaper Premiums – The premium you pay is usually much cheaper than what you would pay for Whole Life or a Universal /Variable Life insurance policy.

• Fixed Premiums – Premiums are fixed for the term of the policy.

• Convertible – Term Life may be converted to a Permanent policy at any time with some types of Term policies, and in some instances may be done so without the requirement of a medical exam. However, you need to confirm this you’re your agent when you are looking at the available policies.

• Renewable – In many instances, the policy may be automatically renewed so your coverage continues, but this feature should be discussed with your agent as not all policies are the same.

Cons Of Term Life Insurance

• No Investment Feature – With this policy you get death benefits only. If you are not too knowledgeable about investments and would like a more comprehensive financial portfolio, then a Whole Life or Universal Policy may be more suitable.

• Premiums get more Expensive – Term Life policies are considerably cheaper when you buy it at a younger age, but the premiums get substantially higher the more you age.

• Conversion Can be Expensive – Although you may have the option to convert a Term Life policy to a Permanent policy, the increase in premiums could be very expensive.

There are a variety of different life insurance policies available for people who want to provide financial security for their family.  Whole Life Insurance is one of your options but is it a good fit for you?  Let’s take a look at this type of policy and explain how it works and the pros and cons so you can make an informed decision.

What is Whole Life Insurance?

Whole life insurance is one of the policy choices in what is called ‘Permanent Insurance’. This type of policy is intended to cover you for life. It is a complete package of insurance coverage that is used to cover the policy holder for long term financial obligations. When you are considering this policy there are 2 components that make up this type of life insurance coverage and includes:

1. Death Benefit – This is a fixed level benefit that exists for the life of the policy and is paid to your named beneficiary. The death benefit is tax deferred which means that it cannot be taxed when it is paid out.

2. Cash Accumulation – A portion of your premium is set aside and invested by the insurance company in interest bearing account. Over time, the investment portion accumulates in value through the interest earned. Like the death benefit, the cash amount accumulated is tax exempt both during the accumulation phase and even can be withdrawn tax free if taken as a loan.

The cash value generally has a minimum guaranteed rate of interest and can be borrowed against or used to pay premiums if you find yourself in a stringent financial situation.

Who Should Get Whole Life Insurance?

Whole Life insurance is ideal for comprehensive estate planning, death taxes and to cover your family for your entire life span. It is an ideal plan to supplement your retirement needs as the accumulated cash value will be available because you can cancel your policy at any time or, as it can be used as a financial cushion for your surviving spouse, then this type of policy can be a good choice.

If you need life insurance for a shorter duration, then term life insurance may be more suitable (and less expensive).  Universal life can also be used for a shorter term insurance need with the potential to cover you for life.

How does Whole Life Insurance Work?

When you decide on the amount of coverage, your premium is used by the insurance company and divided between the following costs:

1. Administrative Costs – For administering the policy.

2. Mortality Cost – Applied toward the death benefit coverage.

3. Investment or Savings Portion – Is put toward the savings/investment feature after the above costs have been applied.

Pros of Whole Life Insurance

• Estate Planning – This is a good policy for estate planning because it covers you for life, and provides a death benefit and cash value which are both tax exempt.

• Guaranteed – The premium you pay, the death benefit, and the cash value is guaranteed. Although it might seem more expensive at the outset, you also have to remember that inflation rises over time which in effect decreases the cost of your premiums over the life of the policy.

• Convenience – This is an excellent type of policy if you are primarily concerned about providing both a fixed death benefit and an investment feature, but have little understanding about investments.

• Premium Costs – When you buy this type of policy, your premiums are fixed for the life of the policy. Initially, they will be more expensive than what you would pay for Term Life Policy, but reach greater parity as you age.

• Available Cash – You can borrow against the cash value as an added convenience, or access the entire accumulated cash value should you cancel your policy at any time.

• Exempt from Creditors – The cash value and death benefit may be exempt from creditors in the event you are sued as the money is intended for your beneficiary.

Cons of Whole Life Insurance

• No Investment Choice – A Whole Life policy does not allow you to invest in separate accounts like a Universal or Variable Life insurance policy so you cannot move your money between the money market, bonds, or stock market account. You cannot split your money into different accounts or move you money to different accounts.

• No Premium Flexibility – Your premium is fixed and you cannot change it for the life of the policy.

• No Premium Disclosure – You cannot see how the insurance is splitting your premium between, administrative, death benefits or investment expenses.

• More Expensive – Because of the investment and administration costs, your monthly premium is much more expensive than Term insurance which covers death benefits only.

• Repayment of Cash Value – If you borrow against the cash value, you have to pay it back and are also charged interest as it is treated much like a loan.

• Conservative – The interest you earn is conservative and the investment returns may be much less had you invested the money yourself.

People who have families and those who are single want to ensure they have the means to at least cover their debts and funeral expenses should they perish unexpectedly. Also, many people want their loved ones to have a financial legacy to help cover the costs of their children’s education, mortgage payments, debts, and to have a financial safety cushion.

A life insurance policy is one of the best ways to address these concerns, but with so many choices, you might find it difficult to choose which type of policy is best for your circumstances.

For those people who are in certain age groups, have limited financial circumstances or who are seeking a short term policy to bulk up their existing life insurance policy, a 10 year life insurance policy can be an ideal choice.

10 Year Term Life Insurance Explained

This type of policy is brand of Term Life Insurance. This form of life insurance covers you and offers guaranteed level premiums for a specific period of time known as a ‘term’.  Terms can vary for this type of life insurance policy and can range from 5, 10, 25 or even 30 years, for example.

A term life policy differs from a ‘Permanent Life Insurance’ type of policy, which includes Whole Life, Universal and a Variable Life insurance policy in that there is no investment or cash value options, and term insurance is generally used to cover a short term need, rather than coverage for life.

So, a 10 Year Term Life Insurance policy would cover you for a period of 10 years without your premiums increasing during that period. Depending on the policy, it will either expire, be renewed, or can even be converted into a universal life or Whole Life Insurance policy. It just depends on your particular needs.

What Does a 10 Year Term Life Insurance Policy Cover?

A Term Life Insurance Policy is your most basic life insurance policy. In essence, it strictly covers the policy holder for a defined death benefit which is only paid to your beneficiary should you die during the term of the policy. The amount of death benefits available varies.

The best thing to do is to sit down and do some number crunching to see what your loved ones would need before deciding on what death benefit amount is most suitable. It may also depend on what you can afford. A more expensive death benefit will result in a correspondingly higher premium.

The death benefit paid out under a 10 year Term Life insurance policy, like all other life insurance policies, is income tax exempt. The death benefit is non-taxable (except in the case of estate taxes.)

Who Should Buy a 10 Year Term Life Insurance Policy?

This type of policy is very suitable to people for different reasons. If you are just starting out in your early 20’s and need some life insurance to tie you over until your economic circumstances are more stable, then this can be an ideal start.

It is also a very suitable policy for people who are in their late 40’s and 50’s, or nearing retirement. They can use this policy to cover to cover children who are just about to enter college or university, or nearing the completion of the mortgage payments on their home.

Use a 10 Year Term Life Policy Instead of Mortgage Insurance

If you just bought a home, you know you need insurance to cover the mortgage. Many lenders sell mortgage insurance to their clients. Although, mortgage insurance may seem like a good idea, that may not be the case. The reason is that mortgage insurance is a form of decreasing term life insurance. The coverage corresponds to the amount you owe on your mortgage. As your mortgage is paid down, so does your amount of coverage.

Additionally, with many types of mortgage insurance, the bank is the beneficiary, not your family. And, not only do the premiums stay the same, the premium for mortgage insurance also tends to be a lot more expensive than what you pay for a term life policy.

And while 10 years may not be as long as your mortgage, you will have the option at the end of the term to buy a new policy, convert the policy, or pay renewal premiums.  If you prefer coverage for a longer period of time, you might consider a 20 or 30 year term policy.

Other Advantages of a 10 Year Term Life Policy

Other advantages include:

• Convertible – Most policies allow you to convert your term life policy into a Whole Life insurance policy, and often without the need for a medical examination. However, you should always confirm that with your agent.
• Renewable – Most policies are automatically renewed at the end of the term.
• Affordable – Term life insurance is the cheapest form of life insurance available. It’s great when you are just starting out, or if you’re older.
• Supplement Insurance – This type of policy can be used as a convenient supplement to your existing life insurance to temporarily cover you for a short period of time to ensure you have enough coverage.
• Medical Exam Exempt – There are many policies you can purchase without the need to undergo a medical exam, but again, talk to your agent first.  A lot of the lowest priced policies do include exams.

For quotes on 10 year term life insurance, use our quote form on the right or call us at 877-443-9467.

Universal Life insurance Pros and Cons

Everyone wants to protect and give their family financial security in case of an unforeseen calamity.  Life insurance is one of the most convenient methods to achieve this most important goal. But, which life insurance policy is the best product for you particular circumstances?

One of the many life insurance products to choose from is Universal Life Insurance.  Is it a good choice for you?  I’m going to explain exactly what universal life insurance is about and outline the pros and cons to help you decide if this is the right route for you and your family.

What is Universal Life Insurance?

Universal life insurance is also know as ‘Permanent Insurance’ and is relatively similar to Whole Life Insurance, but with a difference. There are three main components of this type of policy.

The first aspect of the policy entails:

1. Death Benefits – You basically have 2 options to choose from when deciding how you want death benefits to be paid to your beneficiary. You can choose a level death benefit, that starts off as one amount and stays level for the life of the policy, regardless of cash value (known as “level death benefit” or “death benefit type A”.  The other option is a combination of a specific death benefit plus the cash value which has accumulated over the life of the policy (“type B death benefit”).

The second component involves:

2. The Cash Accumulation Portion – However you make your premiums, a portion is allocated by the insurance company into a interest crediting strategy of your choosing.  One popular strategy, called equity indexed universal life, allows you to participate in the gains of a major stock index, such as the S&P 500, with no risk of loss of principal.

You are guaranteed a specific rate of return in many of these strategies, regardless how well the market does.  But, if the market performs better than the minimal guaranteed amount of investment, you reap the benefits as well, and usually participate in some percentage of the gains of the index, or are capped at a certain percentage.

3. Flexible Premiums – The big difference between Universal Life Insurance and a Whole Life policy, is that with universal life the premiums can be paid as the payer desires, as long as sufficient cash values are present to pay of the cost of insurance.  With a Whole Life policy, you can’t change the premiums to suit the economic situation.

The Pros of Universal Life Insurance

This type of policy offers:

Flexibility – If your financial circumstances tend to fluctuate, you can opt to pay either higher or lower premiums. Even if your economic circumstances are rock solid, you can conveniently opt to pay a lower premium when the market is performing poorly and up the premium when the market is bullish and thriving to make more on your interest crediting strategy.

Interest Strategy Choices – You aren’t forced to accept where the cash accumulation portion goes into because the insurance company will give you several strategy options. This can be either an equity index strategy, a guaranteed one year term deposit, or a general interest account based on the interest rate market.

Permanent – You get coverage for the life of the policy for your entire life so long as you keep up  with the premiums.

Cash Value Availability – As you increase the value of the policy over time, you might wonder what happens if you get jammed up financially – will you have to cancel the policy to get the cash value?  No, you can keep the policy in force and your family protected at the same time because you can borrow or even withdraw the cash value you have built up to date. You will still not only have the unused portion of the cash value but the availability of the death benefits.

Tax Deferred –  Both the cash value investment portion and the death benefits are tax deferred which means no IRS will bother you with their hand out when benefits or even when the cash value is paid out, if taken as a loan.

Premiums are Covered – If you find yourself in a financially strapped position and can’t make the premium, the insurance company will pay the amount of the premium from the accumulated cash value which can be very convenient.

Cons of Universal Life Insurance

• More  Expensive – This type of life insurance policy costs a lot more than other polices in terms of cost of insurance, premium fees, allocation fees, etc., especially when comparing universal versus Term Life Insurance, for example.  Universal life is usually at least 3 to 4 times the cost of term.  Also, a universal life insurance policy has higher fees and administration costs.

• Mortality Cost – Be cautious when choosing your policy.  With some policies, you have 2 choices. The first is LCOI (Level Cost of Insurance), which means the amount of mortality payment never changes.
• The second option is Yearly Renewable Term which means the mortality portion of the premium will change over time. It’s relatively cheap if you buy the policy when you’re younger but gets progressively more expensive over time.  If your mortality expenses increase annually, you’ll want to be sure to request illustrations frequently to be sure your policy benefits are in good standing.  Alternatively, you may want to add a no lapse guarantee rider to your policy for whatever length you MUST have the policy in force, to ensure the premiums stay level and death benefit stays level for that period.

• Must Repay Borrowed Cash Value – Although borrowing against the accumulated cash value is convenient, you have to pay it back. What’s even more inconvenient, the insurance company will also charge you interest. Also, borrowing money on some universal policies may also reduce your death benefit.

• Have to Monitor your Cash Values – This is not a type of policy you want to just stick in the drawer and simply pay the premiums as they come due. You need to keep track of how your cash value account is doing, and frequently request in force illustrations. If you’re a person not too savvy with knowing how investments work, this may not be the best policy choice for you.

• Interest Rates are Conservative – If you’re hoping to stuff premiums into your policy and treat universal life as an investment and make a lot of money, you may not get the yields you’re looking for, as interest rates are relatively conservative.

For more information or to apply for universal life insurance, call us at 877-443-9467.

In a recent blog post, I had discussed the benefits of using life insurance in estate planning, such as adding liquidity to an estate that may owe estate taxes, effectively paying the estate’s tax bill for pennies on the dollar.

I asked C. Tucker Cheadle from Cheadle Law to comment on my post, and he had some very interesting input… so good, in fact, that I’m going to use his response here as somewhat of a guest post.  Enjoy!

Benefits of Life Insurance Held in Trust

Chris, in addition to providing liquidity for estate taxes, life insurance held in an irrevocable trust is generally exempt from the judgment of creditors, spouses of beneficiaries and is held and distributed in accord with the trust which can be specially drafted for the needs of the family.

I am a big believer in life insurance.

Life Insurance Trusts & Asset Protection

A little know aspect of life insurance trusts is their ability to assist in lawful asset protection.  With a properly drafted life insurance trust, the policy proceeds are generally held for the benefit of the surviving spouse and then any children or grandchildren.

Protecting Your Estate from Transferring Out of the Family

Often the surviving spouse remarries and upon remarriage the policy proceeds, if not held in a life insurance trust, are commingled with the new spouse and then often distributed to the new spouse who then distributes them to his or her children and not the children of the decedent.

Protecting Your Estate from Creditors

Another potential risk without a life insurance trust is that claims from creditors, partners or shareholders may be asserted following a death simply because the existence of life insurance becomes known.  At that time the decedent is unable to defend against claims and the family, unaware of the facts and now defenseless, is forced to settle or litigate.

But if a trust is present, for example in the case of creditors, their attempts to collect from the estate simply cannot be fulfilled, as the trustee is limited in how he or she can distribute funds.  Since the trustee can only legally distribute trust proceeds as the trust instructs, this is the basis of how asset protection is accomplished with a life insurance trust.

Tucker Cheadle

Mr. Cheadle is a California attorney, and may be contacted at 949-553-1066 or at www.cheadlelaw.net .

Huntley Wealth and its representatives do not give legal or tax advice. Information contained on this page simply reflects our understanding of the tax rules and regulations in effect at the time of publication. Please consult your personal tax and/or legal advisor regarding estate tax law as it applies to you.

I can’t tell you how many times I’ve gotten a call from a prospective client asking for a life insurance application, where the call goes something like this:

CLIENT: “Chris, the reason I’m applying for this coverage is to replace a current 10 year term policy I have.  I’ve been paying $54 per month for the last 10 years, but now they’ve sent me a premium increase to $603 per month.  How quickly can I get this coverage in place?”

ME: “Well, when are your premiums set to increase?”

CLIENT: “My first $603 premium was due a week ago, but I haven’t paid it.  I was hoping to be able to purchase a cheaper policy.”

Ladies and gentlemen, please don’t let this happen to you.  Read through the timelines below, and allow yourself the appropriate amount of time to get your new policy in force.  Or if you are applying for life insurance for the first time, please understand in most cases, especially if a medical exam and medical records are required, this is a bit of a process, and will not happen overnight.

No Exam Life Insurance – Takes Approx. 7-10 Days to Make Effective

In the case where no medical exam is required, as is the case with Fidelity’s Rapid Term policies, there are 3 steps to making a policy effective, which can take as little as 1 week.

1. Application – If you called me to apply today, we could have your application emailed to you, which you could then complete and email or fax back the SAME day.
2. Phone History Interview – Most no exam policies require a short phone interview, where most of the same questions from your application are re-questioned to you.  This call may be made within 1-3 days of receiving your application.
3. Policy Issue – Your policy may be approved and issued within 2 days of your phone history interview.  Your policy is then mailed you, which may take 2-3 more days.  In most cases, your policy will have a couple “delivery requirements” that may need to be signed and sent back, such as a policy delivery receipt.  This can be done by email or fax on the same day the policy is received, and once received by the company, your policy would be placed in force either the same or next day.

Please note, however, that No Exam policies typically cost more money than a type of policy that requires a medical exam.  The more information a company knows about you, the less risk they take on, and can therefore charge you less.

So if you want to pay less, you might elect to apply for a policy which requires a medical exam, as I describe below.

Traditional Application WITH Medical Exam & No Medical Records Necessary – Takes Approx. 2 Weeks to Make Effective

When you apply for a traditionally underwritten policy, where a medical exam will be completed, you could have the policy in your hands and effective approximately 2 weeks from the day you first apply, IF no medical records are needed.

Quickest Example Timeline Possible

1. Application – 1 day
2. Medical Exam – 2 days after application submitted
3. Approval – 3-5 days after exam completion
4. Policy Issue – 5-7 more days to deliver policy

As in the case with No Exam policies, we can send out and receive an application in 1 day.  Then we order for a medical examiner to call you (they typically call within 24-48 hours to schedule your exam).  If you can get your exam scheduled and completed right away, this will give you a chance to have your policy effective within 2 weeks.

Typically, your case will be assigned to an underwriter after you’ve completed your exam.  The underwriter then reviews your application and lab results to determine whether medical records are necessary.  If everything looks good on your application and blood work, your underwriter will likely approve you immediately, without ordering records from your attending physician.  After approval, your policy may be delivered to you and placed in force within a week.

If your underwriter determines more information about your health is needed, however, the insurance company may order medical records from 1 or more of your attending physicians, as I describe below.

Traditional Application WITH Medical Exam & WITH Medical Records – Approx. 4-8 Weeks to Make Effective

In this third scenario, when your underwriter reviews your life insurance application answers and/or exam results, he or she orders medical records from your doctor/s.  Obtaining medical records adds 3-4 weeks , on average, to the underwriting process.

While it typically takes 3 to 4 weeks to obtain a set of medical records, we’ve seen them come back very quickly… sometimes in just a few days from the date of originally requesting them.  On the other hand, it could take months to obtain them.  The process of obtaining records varies so much for the following reasons:

• Most doctors’ offices are inundated and backlogged with these requests.
• Many offices charge a fee, such as 25 cents per page.  It usually takes a week for payment and processing.
• Occasionally, records are lost, incomplete, difficult to locate, etc.
• Often times, your general records are ordered from your general MD, and information is discovered in those records necessitating additional records from other doctors.

We’re really at the mercy of the doctor’s office here, and how quickly they get the records out.  In one extreme example, we ordered records for a couple living in Michigan over 3 months ago, who previously lived in England.  It took over 3 months to locate their records and obtain them!

I Would Like to Apply for Life Insurance – What Now?

You can get started with an application either by calling us toll free at 877-443-9467 or by filling out a quote request using our form on the right, and when you find the policy that suits you best, select “Request Application”.

I had a married couple in their 30′s ask me today about whether they should be buying 20 year term or 30 year term life insurance.  Both of them work, and they do not yet have children, but plan to.   They were inquiring about a $500,000 policy for the wife and $1 Million policy for the husband.

Their main concerns with the 20 or 30 year term were:

1. Cost – 30 year term costs more than 20 year
2. Children – Although they do not yet have children, the wife indicated she basically wanted something to cover them if they were to die while they have kids.  Since they don’t yet have kids, they weren’t sure if 20 years was long enough.

Since probably the most common two questions I get are how much life insurance do I need, and what type of life insurance do I need, I figured I would share my response to them with you.

The Most Honest 20 or 30 Year Term Life Insurance Review on the Web

The problem getting a straight answer from a life insurance agent about what type of insurance to take is we get paid more commission when our clients pay a higher premium.  So the first lesson in purchasing term life insurance of any duration is to use an agent who doesn’t seem “needy”.  If you can tell your agent is pushing you to take a certain policy, and he or she really wants you to take it more than you do, beware.

I don’t say this to brag, but I’ve been in the business for 7 years, and while I would not call myself rich, have done pretty well in the business.  I try to advise my clients from every angle, pointing out the pros and cons of each type of policy, and even playing devil’s advocate to help people see that sometimes a cheaper option makes sense for them.  Plus this couple happens to be long-time friends of mine, (I’d like to say all my clients get the same advice I would give my own mother), but maybe this means something extra to you.

Here is a copy of the 20 and 30 year quotes I sent them for the husband and the letter I wrote them:

“A lot of people in your age group struggle to decide between 20 or 30 year term, so please me to make a couple comments here.  First of all, when you apply, nothing is set in stone.   For example, you can apply for 30 year, and when your policy is approved, you can change your mind and have it issued at 20 year, so you may have a couple weeks to discuss this.

Secondly, most people purchase life insurance for income replacement purposes, so you need to think about where you’ll be financially 20 years from now.  If you can reasonably expect your debts to be paid down, and have plenty of money in savings and retirement by then, perhaps you’ll no longer need coverage, in which case the 20 year will suffice.  However, if you expect you’ll still be depending on each other’s incomes 20 years from now, I would suggest the 30 year.

A lot of couples at your age will buy a 30 year on the main breadwinner (if there is one) and a 20 year on the other spouse…. And if you still can’t decide, you could take both.  Have 1 policy issued for 20 yr and 1 issued for 30 yr.  In John’s case, for example, if he had two 500K policies, the total cost for the first 20 years would be $74 per month.  After 20 years, the first policy would drop off and you’d be left with just the 30 yr payment for 10 more years of $45 per month.

The life insurance industry has made great strides in the last 5 years in an attempt to provide greater benefits to policy owners, other than just a life insurance policy’s death benefit.

One additional feature now added to some policies is the ability to request funds from your policy for some long term care needs.

I need to be careful here, because all the insurance carriers warn that this is not to be confused with “long term care insurance”, and should not be presented that way.  So I will merely present these additional benefits available on some policies, and you can judge for yourself.

By far the most popular life insurance policy with a long term care rider is the Lincoln Moneyguard, but too few people can afford it, since it requires a one-time lump sum premium.  So let’s spend our time here discussing affordable alternatives.

An Affordable Alternative – North American Company’s Chronic Illness Accelerated Benefit Rider

What I’m about to talk about can be paid monthly, quarterly, annually, just like any other life insurance policy, so people can actually afford to add this feature to their policies.  Many companies have some form of this benefit available, but I will feature the two companies who I believe have the best riders.

The first is North American Company, who offers the Chronic Illness Accelerated Benefit rider.  This rider advances a portion (up to 24%) of the death benefit while the insured is still living, if he or she becomes chronically ill.  This is defined as the permanent loss of ability to perform at least two activities of daily living (ADL’s), such as bathing oneself, feeding oneself, dressing, etc., or has a severe cognitive impairment.

What’s interesting is the money is simply accelerated from the death benefit proceeds.  No additional money is paid out of the policy, which is why it’s not long term care insurance.  You just get a portion of the death benefit, and your death benefit is reduced by that amount.

Example of Chronic Illness Accelerated Benefit Rider in Action

Let’s say your husband purchased a $500,000 North American policy with this rider a couple years ago, and since, has developed Alzheimer’s, and can no longer feed himself or bathe himself.  Perhaps you need to hire a caregiver to help your husband.  In this this case, the policy owner could file a claim for between 5% to 24% of the death benefit, after a 90 day elimination period.

So if you decided to file a claim for 10%, you would get just a bit less than $50,000.  The policy’s death benefit would be reduced by $50,000 leaving a $450,000 death benefit.  You get a bit less than $50,000, because you are receiving benefits prior to death, and a discount is applied to the accelerated amount.  You would need to see an illustration for a real-life example.

What I like about North American’s rider is that you don’t have to be confined to a nursing home to exercise it (in most states).  You can use the funds for in-home care, or even if you are taking care of your own spouse, and have not hired any help at all, you can still qualify for the benefit as long as the two activities of daily living can’t be done.

It’s available on all permanent products up to age 75 at policy issue.  A couple states (CA and KY) don’t allow the chronic illness rider and in MN, you must be confined to a nursing home to file a claim.

Different from Long Term Care Insurance

One big difference between the chronic illness rider and LTC insurance is that you see in the definition, that the insured must have a permanent inability to perform the two ADL’s to qualify (a letter from an attending physician will usually suffice to prove this).

If you owned long term care insurance, this definition would probably be different, and you could more easily file a claim with LTC insurance.  For example, say you were in an accident and broke your back, causing you to be laid up for a year.  With LTC insurance, once your elimination period passes, you could probably file a claim to cover the cost of care needed for most of that year.

However, you wouldn’t be able to with a chronic illness rider, since this is not a chronic illness, and if you were expected to fully recover, you would not fall under the definition of “permanently unable to perform at least 2 of 6 ADL’s”.

Accelerated Benefits for Terminal Illness

The other component of the rider is it also pays out up to 75% of the death benefit, while the insured is living, if he or she is diagnosed with a terminal illness.  (max $250K payout).

Just about every company has a Terminal illness rider or accelerated death benefit rider, whatever you want to call it… but very few of these cover anything more than terminal illness.  And even if they do cover some sort of long term care needs, it may only be used if you’re confined to a nursing home, such as the example below, whereas North American allows you to use it for in-home care.

A couple other carriers offering some sort of long term care benefits with their policies are Lincoln National and Met Life, but I’ll save my last words for the other rider I like, which is offered by Prudential.

Prudential’s Living Needs Benefit Rider

This post is getting a bit long, so I’ll just give you a couple quick bullet points about Prudential’s Living Needs Benefit rider:

1. It can be added to ANY of their policies, including term (not just permanent policies.)
2. Also can be added at no cost.
3. Must have been confined to a nursing home for 6 months and expected to be permanently confined to a nursing home (can’t be used for in-home care)
4. 100% of the contract can be accelerated.  Like North American, an actuarial reduction is applied, but still the policy owner can expect to receive 90-95% of the death benefit in most cases.

For more information about life insurance policies that include free long term care benefits, give us a call at 877-443-9467, or you can get started with an instant quote using our form to the right.  Just look for quotes from the carriers above, and remember, only Prudential allows you to add the benefit to a term policy.

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Death Benefit Income Rider

Stick with me for a minute, and I’ll show you a way to “rig” your life insurance policy so you can pay less money for the same amount of coverage.

Recently, I was quoting a 50 year old gentleman a $1,000,000, 20 year term policy through Banner Life Insurance for $2297 per year.  My client admitted it was a fair price, but was on a tight budget, and asked if anything could be done to lower the premium.

In his case, something could be done.  He had explained to me the reason he wanted $1 Million of coverage was he wanted enough to replace his income ($50,000 per year) for his wife for a period of 20 years.

Solution – “Fixed” Death Benefit Payments

You might be surprised to learn there are a handful of companies who allow you designate a fixed payment for a fixed number of years as the policy’s death benefit, rather than a lump sum benefit.  The quotes look like this:

And it saved him over $600 per year.  I quoted him Protective’s 20 year term policy for $1694 per year.  Rather than paying a lump sum upon his death, his wife will receive $50,000 per year for 20 years.  So in the end, she still gets the same benefit, $1 million, but at a heavily reduced cost.

Which Companies Offer this Benefit?

It’s called an Income Protection Option or Death Benefit Income Rider.  Transamerica and Protective both have some form of this “modified” death benefit option, as well as a handful of other companies.

This differs from the typical death benefit selection in that usually, the beneficiary who completes a death claim elects how he or she would like to receive the death benefit, whether as a lump sum, or annuity payments for X number of years.

But in the case of Protective’s fixed payment death benefit, the terms of the payment are decided by the policyowner upon issue of the policy, which is irrevocable.  The beneficiary has no say.

This type of fixed payout could be perfect for many scenarios.

1. Income Replacement – If I want my spouse to have $100,000 per year of income for 30 years to replace the income I would have earned, it will cost be substantially less to pay for a policy with this exact payout than for a $3 million policy.
2. Alimony or Child Support – Many divorce decrees mandate a spouse to provide a certain dollar amount to an ex-spouse for X number of years.  Life insurance is often used to provide a guarantee on these agreements.  Why not get life insurance that provides the exact amount needed for the exact time frame, rather than paying your ex-spouse a lump sum?
3. Irresponsible Beneficiaries – Perhaps those who will benefit from your life insurance policy are young, or you don’t trust them to prudently manage a large sum of cash.  Pay them annually for a set period of years.

Transamerica’s benefit is a bit different than Protective’s.  Transamerica actually forces you to take a minimum death benefit as a lump sum of $10,000.  Then the annuity payments begin for fixed period of years, and then there’s even the option for a back end lump sum to be paid out.  Protective has the front end lump sum option, but not the balloon payment at the end, and the other difference is Protective allows the initial lump sum to be zero.

I was quoting $500,000 for $970 per year.  Instead, he got a quote from Protective for $300 cheaper per year, which would also pay out a $500K death benefit, but not lump sum.  Instead it pays it out over a 25 year period.

Lowest Cost Life Insurance with “Modified” Death Benefit

If you structure the death benefit with the fixed payment plan, no other term policy can touch the price.  Feel free to challenge me on this.  Bring me a quote from any low price term provider such as Ohio National, Banner Life, or even an agency such as Select Quote, and I will almost certainly beat the quote, and beat it handily.

One issue to take special note of, however, is that a portion of these fixed payments may be taxable, since the payments the beneficiary receive include an assumption of supposed annuity interest. (This is not tax advice.  Speak to your tax advisor.)

For a quote comparison, call us at 877-443-9467.  If you found this article helpful, please share it on Facebook, Twitter, or Google Plus 1.  Thank you.

Most men, as they approach middle age, will find themselves dealing with prostate issues.  Enlarged prostate, BPH, and prostate cancer are all very common conditions which make life insurance more challenging, but certainly NOT impossible.

Before continuing reading about prostate issues, you might benefit by reading how we handle all of our high risk insurance cases, then finish this article.

Life Insurance with Prostate Cancer

If you have been told you cannot obtain life insurance, don’t despair.  We can help!  Some carriers will not consider an offer in the midst of treatment, and others steer clear of prostate issues.  However, a number of well-known life insurance carriers will be happy to offer coverage, depending on the details of each individual case.

The prostate cancer survival rate is actually excellent.  I’ve read as high as 98% 10 year survival rate and 91% 15 year survival rate, so it’s certainly possible to insure.

Before an accurate quote can be made, there are a number of specifics required.

1. What was the date of your diagnosis?
2. What was your pre-treatment PSA level?
3. What treatment did you select?
   1. Radiation Seed Implant
   2. Cyber Knife
   3. Prostatectomy
   4. What was the Stage and Grade of your cancer?
   5. What was your Gleason Score?
   6. What was your post-treatment PSA level?

A wait-time after treatment is not usually required, but the details of your case, as listed above, are the factors insurance companies use to determine a rating.  Our cases usually come in at a Standard or Standard Plus rating, depending on the specifics of the case.

If the cancer was caught early, and your post-treatment PSA is below 1.0, these are the people with the best odds of securing affordable coverage.

Life Insurance with Enlarged Prostate or Benign Prostatic Hyperplasia (BPH)

This is far less of an issue than prostate cancer, and in a best case scenario, you can still qualify for the top, preferred rate classes with enlarged prostate or BPH.  This may be true even if your PSA is elevated.

The key to being approved at the top rates with an enlarged prostate is a good diagnosis from your urologist, after having the digital rectal exam (DRE) or preferably, a prostate biopsy.  This way, prostate cancer is ruled out, and the insurance carrier knows for sure your psa is elevated due to a large prostate, rather than cancer.

Types of Life Insurance Available

All types are available to you if you can qualify medically, including 10, 20, 30 year term, as well as universal life and whole life.  No exclusions.

Call us for a Life Insurance Quote

If you need life insurance, either to replace a term policy coming due, or if you are searching for the first time, don’t delay!  As we age, life insurance pricing will only go up…so now is the time to act…and your chances for a good rating will not be ruined by a prostate condition if you call an agency who knows how to handle your case properly.  Call us at 877-443-9467 for a no obligation quote.