Saturday, 20 September 2008

Is It Possible To Buy Affordable Life Insurance After A Heart Attack?

So you've just recovered from a heart attack and you hope to find affordable life insurance. The application for life insurance has a question regarding if you have been treated for heart disease or a heart attack. How do you answer? Do you lie and say no? Or do you say yes, and chance getting denied or stuck paying a higher life insurance premium? Well if you decided to answer honestly and mark yes, you may be in luck.

Depending on how severe your heart attack was, and how severe your heart disease is, you may be able to get affordable life insurance that won't cost an arm and a leg. Also, by not lying, you don't have to worry that you will be caught and have your life insurance premium automatically increased and be forced to pay retroactive fees.

"Though heart disease may signal a red flag for life insurance companies, it doesn't necessarily mean a customer will have to pay more," says Dave Roush, CEO of Insurance.com. "By taking the proper steps to treat heart disease, a customer can quite possibly qualify for a standard life insurance rate," says Roush. "With the advances in medical technology and testing, it is becoming easier and easier to give predictable life expectancy rates for those who are suffering with heart disease."

When to strike
It may seem like a good idea to apply for life insurance the moment you realize you really need it, but financially, it isn't always the smartest move.

Life insurance companies don't look favorably on applications that are submitted right after a heart attack, and the premium for a policy issued after a condition like that, will likely be high. The best thing you can do, for your pocketbook, as well as for yourself, is to wait to apply for life insurance. By waiting a year or two, you are giving your body ample time to heal as well as giving yourself time to adjust to any medications or new-lifestyle changes you may be instructed to do by your doctor. By waiting, you are also showing the life insurance company that your condition has been stabilized and you took the appropriate steps to make your overall health better.

Document your progress
Be sure to document any and all progress that you've made. By having this detailed in your medical files, life insurance providers may be able to issue you a lower premium. Also, when applying for life insurance, if an underwriter sees that you are forthcoming about your heart disease and you have listed all the things you've done to keep it under control, you will be more likely to receive an affordable life insurance plan. By telling a life insurance company exactly what happened and what steps you've taken to correct or better yourself, you are showing them you have nothing to hide, and this can ultimately save you money.

What Do You Know About Life Insurance Settlements?

You may have heard of viatical settlements, where people who are terminally ill can sell their life insurance policy to an investor for a portion of the policy's face value, but did you know that even if you're not terminally ill, you can still sell your policy?

Life insurance settlements or "senior settlements" are contracts allowing a policyholder who is not terminally ill to sell his or her own policy. By selling your life insurance policy, you will not get back the amount that your death benefits would have been worth, but an investor will pay you a portion of the policy's face value. The way it works is that the investor or company that buys your policy will continue to make payments on your life insurance policy, and once you have passed, the investor or company will receive the full amount of your death benefits.

Is this something new?
Actually, no. Life insurance settlements have been around for a while, but many policyholders and consumers don't even know this option exists. That's why the Life Settlement Coalition was formed. The Life Settlement Coalition is meant to educate consumers and insurance companies about life settlements. The Coalition is made up of experienced brokers and life settlement providers whose main goal is to bring to the table the option of a life insurance settlement to life insurance policyholders.

Is it the same as surrendering a policy?
No. When you surrender your life insurance policy for the cash value, all you are doing is selling your policy back to the insurance company. Whether you're interested in either surrendering your policy or getting a life settlement contract, it is important to ask your broker or insurance agent about both options first. You may get a substantially higher amount of money back from a life settlement contract, compared to surrendering your policy. Life insurance experts say that up to 25 percent of life settlement polices cash out higher than the surrender value.

Will Mental Illness Affect Your Life Insurance Cost?

If you're considering getting life insurance, but you're worried that a history of mental illness will hinder your search and you'll be stuck paying high premiums, worry no more. Insurance companies are generally most concerned if your condition will affect your life expectancy and make you a high death risk. If you took Xanax for anxiety or anti-depressants after a tragedy, your life insurance company probably won't view you as a significant risk.

Times of reactive depression-depression that is triggered by a tragedy-won't affect the cost of your life insurance if you can show your insurance agency that you took the steps to get better. By showing them your medical records and being honest about your condition, you'll be more likely to get better rates and premiums. "If you hint at a problem, but don't say whether you are taking care of it or have been treated for it, the life insurance companies won't know what to think," says David Roush, CEO of Insurance.com. "The less they know about your situation, the higher the risk they will see you as," says Roush.

Even when it comes to more serious cases of clinical depression, like manic depression or bi-polar disorder, life insurance companies won't necessarily give you a higher rate. If you are taking care of the problem, and they see that you are in control of the situation, you won't have as hard a time finding affordable life insurance, as you would if you left your disease untreated.

When to apply
If you are diagnosed with a mental illness and are getting treatment, it would be wise to wait a couple months before applying for life insurance. In doing so, you are giving your body adequate time to adjust to your medication and treatment.

What your insurance agent will want to know
Life insurance companies will want to know when you were diagnosed, who your doctor is, what kind of treatment you received and how you are progressing with your treatments.

Suicide red flag
If your medical history shows one or more suicide attempts, a life insurance company will want to see proof that you are receiving full treatment before they will consider issuing you a policy. With a suicidal history, most companies will wait one to two years before issuing you a life insurance policy. It will probably be more expensive the first few years, and may include a "suicide clause" that denies death benefits to be paid out if the insured dies from suicide within the first two years.

If an applicant is hospitalized for suicidal tendencies or for attempting suicide, they are considered a higher risk than a person who has suicidal tendencies, but is able to function in society, goes to work and has been taking medication to treat the illness. Again, by showing your life insurance company that you are taking care of yourself and your condition, they will be more open to consider issuing you a lower-rated premium.

Is Mutual Fund Insurance For You?

When deciding whether or not to purchase insurance for your mutual funds, you should be sure you understand exactly what you're getting. For most policies, the payout will only occur after you die and only if your mutual fund has lost money since the time you purchased insurance coverage. Also, your beneficiaries will only get the difference between the market value of your investment and the amount that was guaranteed by your life insurance policy.

Example
Say you invest $25,000 and your premium ranges from .01 percent to .05 percent of your investment. The company you invested with guarantees that your mutual funds, plus an annual gain of between four and five percent-with a cap-out of up to 200 percent-will be there for your beneficiaries at the time of your death. If in the event the market goes down, having insurance will guarantee that your initial $25,000 investment will increase between four and five percent. When paid out, your heirs will only get the difference of the market value and the amount that was guaranteed-so in the case of your $25,000 investment, it is highly unlikely your beneficiary will get back the full amount.

Most consumers aren't that interested in buying mutual fund insurance because the stock market has sustained an annualized 11 percent return since the Depression ended. It is cheaper than most insurance; however, there is no real need for it. "It's a good safety net for older investors who want to be "risky" and try their hand at the market, but still want to be protected just in case things don't pan out like they had hoped," notes David Roush, CEO of Insurance.com.

Products and cost
Prudential Insurance Co.'s PruTector, Sun America's Asset Protection Plan and American Skandia's AS Goodwill coverage are all basic group term life insurance policies that you can buy in conjunction with a mutual fund from one of the companies. Depending on your age, the cost of mutual fund protection does vary, as do the fees added by certain companies.

Federal vs. State Regulated Insurance: Which Is Better?

In an effort to streamline regulations that govern new coverage plans and update existing products when it comes to insurance, the American Council of Life Insurers (ACLI) is proposing to give insurance companies that do business in more than one state the option of operating under federal insurance regulations. The ACLI, along with other industry groups, insurance representatives and legislation, is working to create a new office in the National Treasury Department called the Office of National Insurers.

This new office would allow insurance companies to decide if they would rather operate under state or federal insurance regulation. It would also oversee consumer protection, regulation of premium rates and sales, as well as marketplace practice. Insurance companies would fund the office, and it is comparable to The Office of the Comptroller of the Currency (for banks) or the Office of Thrift Supervision (for credit unions or institutions for savings).

What areas the Office of National Insurers would cover
If an insurance company opted to operate under federal regulation, they would be required to join the guaranty association for each state they do business with. If the guaranty fund doesn't meet federal insurance requirements for coverage and benefits of a policyholder, a national guaranty association would then be established. "It may be easier for an insurance company to operate under federal regulation rather than state," says David Roush, CEO of Insurance.com. "This way, they won't have to tailor their services to be conducive to that of the state."

If a company prefers to stay regulated by the state, there are a few changes they would have to look at, such as, product regulation, producer licensing and market conduct.

Opposed to the Office of National Insurers
To some insurance companies, the idea of being federally regulated makes no sense, because not every state has the same insurance needs. For instance, Florida residents would be more apt to purchase hurricane insurance instead of earthquake insurance, where as California residents would be more prone to purchase earthquake insurance instead of hurricane insurance. Some state insurance officials argue that if states are going to have a need for more customized homeowners insurance plans, then it would make more sense to let regulation remain at a state level. Property and casualty insurance trade associations are the biggest opponents, because their main focus is to overhaul state regulations-and believe that insurance annuities and products really don't vary that much from state to state.

National Insurance Regulations
The National Association of Insurance Commissioners (NAIC) hopes to establish state task forces to regulate insurance companies. These task forces, acting without help from the federal government, would in effect be the beginning of a "national treatment" plan. Depending on the number of states an insurance company does business with; it will be regulated by up to a total of nine of those states.

The main insurance group that is pushing for federal insurance regulations is life insurance and annuities companies. In being federally regulated, these companies will then be able to be on the same level as banks-since banks can be chartered and regulated at both a state and federal level. Insurance companies and annuities companies feel that banks have an unfair advantage over them, because they can bypass the state-based regulations system - saving them time and money. As it is now, banks and security firms can get new products on the market faster than insurance companies and annuity companies (typically within 30-90 days)-whereas insurers have to wait between six to 18 months.

Federal Estate Tax Repeal: How It Affects You

The federal estate tax (a.k.a. the federal death tax) is a tax that applies to estates worth $1 million or more. Since 2002, the estate tax has gradually been on its way out. Exemption levels are increasing, while the tax rate is decreasing, and by the power of these elements combined, in 2010 the estate tax will be nothing more than a mere memory…for a little while at least. Once the federal estate tax is repealed, any inheritance that a heir sells will be subject to capital gain taxes, and the capital gain won't just be taxed on the value gained after the inheritance (like it currently is), but on value gained since the original purchase. These include property, stocks and bonds, which are currently considered capital assets.

With the new rules, if someone bought a bond for $20, then after you inherited it, its worth rose to $200, and then you sold it for $300-you would be required to pay capital gain taxes on the bond totaling $280. You end up paying taxes on the total amount you gained from the inheritance, minus the original purchase price. With the old rules, you would just pay $100 of capital gain taxes, because while it was in your possession, it grew $100 in worth.

Exemption Clause
To make everything more complicated, there is an exemption clause in the tax legislation regarding the federal estate tax repeal. According to financial experts, this "exemption clause" in the capital gains tax could potentially be offset by an exemption of up to $1.3 million per individual, with an additional $3 million exemption for transfers to a spouse. How do you know what qualifies for this exemption? This exemption would work the same as the $20 bond example above, by changing the base value of asset to the current value at the time of inheritance.

Pros and Cons
One of the pros of the law is that long-term planning may become more stabilized. A con is that with the inheritance status change, record keeping and estate planning are going to be even more difficult. With new exemption clauses and spousal transfer issues, the federal estate tax code will be more complicated than it is now.

Should you brace for a big impact?
As long as your financial plan for the coming years is flexible, there is no reason to fret. It's too early to say whether or not you will be affected by the changes in the law, but if buyer's remorse for purchasing a second to die policy is eating away at you, remember this: having alternate life insurance policies will only help you and give your beneficiaries an added cushion when you pass away.

Keep in mind also that although the federal estate tax will be repealed, there will still be a state estate tax in effect. Depending on when you die, the value of your estate, your financial status and the laws that are in effect at that time, it may be beneficial for you to have a survivorship policy or alternate life insurance policy to aid your family in paying off any remaining estate taxes or debt that are not covered.

A Charitable Donation-Your Life Insurance Policy

If you're a big-hearted person who is always concerned about the welfare of others, you may be considering donating your life insurance to a charitable organization. If you do decide to go through with it, not only will you be helping others, but you will be helping to get yourself a tax-deduction as well.

If using your life insurance policy to make a charitable donation sounds like something you want to do, there are a few things you need to consider before signing your life insurance policy over:

. Be sure the charity you are considering is a non-profit organization that has a 501(c) (3) status
.Talk with someone there to be sure they will accept your life insurance donation (term life policies are the least favorable to charities, because they offer the most headaches and the least amount back when the term expires

Tax deduction
If you are donating to get a tax deduction, be sure to name the charity as both the beneficiary and the owner of the policy. If you name it as one or the other, you will not be able to deduct the donation proceeds from your taxes. The rule of thumb is if you donate a term life insurance policy, you can deduct the premium from your taxes, where as if you donate a whole life insurance policy, you can deduct the cost of the premiums and the cash value from your taxes.

Show of hands: Who wants your policy
Many charities appreciate the thought of a life insurance donation, but they prefer to have use of the donation immediately. Smaller and local charities don't have the resources that larger ones have and will more than likely welcome any contributions they can get, even if they have to wait for the payout. When it comes to larger organizations and universities, a team of money managers is on-hand to decide how to make the most off of your life insurance policy. By investing the money you spend on the policy, charities and organizations may be able to earn far more off the initial donation you give them.

An example of this is when a university accepts a whole life insurance donation ($400,000 death benefit with a $30,000 cash value), but then immediately cancels the policy and collects off it. Instead of letting time go on and allowing the death benefits to grow, university money managers may decide to invest the $30,000 in the stock market to get a quicker return from the donation.

What's Your Worth on the Body-Parts Market

They say there's a price on everything these days, and your body parts are no exception. Worker's compensation, lawsuits and accidental death and dismemberment (AD&D) policies give monetary worth to your body parts, depending on what profession you are in. If you are injured and lose a limb in an accident, your profession (and how famous you are) will factor in on determining how much your limbs are worth on the body-parts market. For example, if a famous guitar player lost a finger or thumb, the part would be worth far more than if a regular Joe Schmoe lost them.

Typically, in the event you lose a body part on the job, worker's compensation will cover the cost of your injury. Each part of your body is assigned a set number of weeks for compensation purposes. The general equation they use when determining the worth of your body part is by taking a percentage of your weekly salary and multiplying it by the number of weeks assigned to the lost part

Accidental death and dismemberment
AD&D, like worker's compensation, has a "schedule" for body parts in relation to compensation. If you claim AD&D because of loss of sight in one eye, you will get 50 percent of your policy because you still have effective vision in your other eye. If you lose sight in both eyes, you will receive a 100 percent payout. Many times, the payout from an AD&D may be 25 percent of the policy-it all depends on what body part you lose use of.

Historically, legs used to be worth far more than arms, but now, they are just about equal. This is because many jobs require keyboarding and assembly skills, and without hands and fingers, the tasks may be nearly impossible. And when it comes to your hands, your thumbs are worth much more than your fingers, mainly because the loss of your thumb inhibits your ability to grasp objects.

How Your Use of Alcohol Affects Life Insurance Costs

The Society of Actuaries says that alcohol abuse may take off anywhere from 10 to 15 years of your life. But did you know it can also raise your life insurance premiums?
When applying for life insurance, you will have to answer questions on the application related to your alcohol use. There is no actual insurance ruling on "problem drinkers" or "alcoholics," but excessive drinking can lead to certain medical conditions which will ultimately affect what insurance rate a life insurance company assigns you. It's very rare that you will be denied coverage based on the answer you give, but it may prompt a further investigation into your life and use of alcohol.

Red flags
When a life insurance company is reviewing your application and records, there are a couple of things they look for that may "red flag " you as a risk:

Liver enzymes.
If you took a blood test, your life insurance company may test a sample for liver enzymes. If levels are elevated, it may mean there is an alcohol-related medical problem. Also, if you're not a drinker, elevated levels may signal there is something seriously wrong with your health. A decision for your life insurance will be postponed until you meet with a doctor and find the reason your liver is not functioning like normal.

Drunk driving conviction.
Even if it was your first time and an isolated incident, if you were cited with a drunk driving conviction, you might get a higher premium because it's a red flag for alcohol abuse. If you get a DWI, your life insurance company will be more prone to search through your record, to see if there is more than just the one cited incident.

Attending physician's statement (APS).
An APS is a statement that your insurance company requests from your doctor or physician regarding your health.

It is used to check for anything that shows alcohol is affecting your health. It may have the same information that you wrote down in your application, but if your doctor has concerns about your drinking, they will be included as well.
Survey saysThe underwriter gets to make the decision on what happens if they notice one or more of the above red flags while reviewing your life insurance application. They can either:
.Issue the policy
.Offer you a more expensive life insurance policy (due to concerns on alcohol abuse or medical conditions)
.Decline your application
.Postpone your application
.Seek out further information from you and your doctor(s) and order a blood test to aid in the informational investigation
.Admission to drinkingIf you received a DWI a couple of years ago, and you take a life insurance medical exam now and it comes back with high enzyme results for your liver, or you admit to drinking heavily, your insurance premium may be highly unaffordable. If, on the other hand, you admit to drinking heavily, but the tests come back that you have normal liver functions and you have no current DWIs on record, you may get standard rates.

Getting lower premiums
Depending on what red flags your tests threw up, there are different things that you can do that will get your premiums lowered:

Flat extra premium.
Recent or multiple drunk driving convictions may lead to a flat extra premium being tacked on to your regular life insurance premium. These fees will typically disappear anywhere from two to five years after your last conviction

Lessen your drinking.
You don't have to quit entirely, but even reducing your drinking to a moderate level can help you get lower premiums. Be sure to document dates and visit your doctor so he/she can monitor your progress as well. You can approach your life insurance company over a period of six months to two years, and show them your proactive approach at bettering your health.

Improve your health.
As stated above, by lessening the amount you drink, getting your liver enzymes in check, and taking better care of your body and health, you should be able to get your life insurance premium lowered. If your insurance company is unwilling to lower your rates, don't be scared to shop around-there will be another underwriter out there who is willing to look at your health improvements and give you a better quote.

How Much Coverage Does Guaranteed Issue Life Insurance Actually Guarantee You?

You see the fliers. You hear the radio spots. You see the commercials. The message is always the same; "Get approved for guaranteed issue life insurance with NO medical exams and NO medical questions!" But how much coverage does guaranteed issue life insurance actually guarantee you? Insurance.com tries to breakdown the idea of guaranteed issue life insurance, to help give you a better understanding of what it is, and what other alternative options are available.
Guaranteed issue life insurance is an insurance policy that will insure whoever applies for it, no questions asked. Sounds too good to be true, right? Well, it kind of is.
Typically, guaranteed issue life insurance is marketed towards senior citizens or those with medical problems. The catch for these kinds of policies is that you generally can't find coverage for over $20,000. Also, the cost of the premium tends to be higher because no medical exam or medical information is required.
When it's all said and done, it's possible that you will wind up paying more in premiums than your beneficiaries will see in death benefits. Definitely not a plus for those paying into the policy! And that is why this issue has drawn attention from State Insurance Regulators and the National Association of Insurance Commissioners (NAIC). To help fight this scam life insurance policy, a working group has been established to see what kinds of action should be taken against the companies selling these policies and what can be done to protect others from getting taken advantage of.
A disclosure is in the works, warning consumers of the possibility of paying more in premiums than the actual face value of the policy is worth. However, the NAIC needs to be cautious of how they step in, because saying too much could be a form of rate regulation, which is something that they are not prepared to do.
How the insurance company protects themselvesA graded benefits clause has been added to guaranteed issue life insurance policies to protect the insurance company from fraud. Graded benefits states that if the policyholder dies within two to three years of buying a guaranteed issue life insurance policy, a refund of the policy's premiums, plus interest, will be paid instead of paying out death benefits. This in effect prevents people on their deathbeds from signing up for a policy, just to gain some extra funds. A company may pay out full death benefits in the event of an accidental death - but remember, the definition of what is accidental is very limited, and this feature is only offered through certain companies.
Insurance companies base your rates on your age and medical information, so if you can buy life insurance after going through a medical exam and answering medical questions, it would be more cost effective to purchase through those means, rather than with guaranteed issue. Not to mention that you will probably pay less and have better coverage.

Estate Tax Reform: Why Millionaire's Aren't Batting An Eye

Since 2002, the estate tax rate has been gradually decreasing, while exemptions levels have been steadily increasing. These elements combined have been paving the way for a complete repeal of the estate tax in 2010. Any inheritance that an heir chooses to sell will then be subject to capital gain taxes. But in 2011, there is a sunset revision, which will put the estate tax back into effect.
Opinions on what will happen vary, some millionaires believe the repeal of the estate tax will leave them paying less, some believe they will end up paying more, while others think the repeal will have no effect on their estate taxes at all. Many "high net worth individuals," meaning those who have more than $1 million in assets not including a home, aren't batting an eye to the estate tax reform. Studies show that many are keeping with their current plans on inheritance, and waiting to see what happens when the reform goes into effect. Also, many are planning to:

.Consult with a financial advisor on estate planning
.Increase or maintain charitable donations
.Leave trust fund where they are
.Leave life insurance policies where they are
.Increase or maintain plans for tax advantaged giving

Not many high net worth individuals plan to terminate trusts, decrease their donations to charities or children, or drop their life insurance plan completely.

Sunday, 14 September 2008

Confused About Buying Life Insurance? Here's A Few Questions And Answers To Clear Up Some Confusion

When it comes time to consider purchasing life insurance, many people get overwhelmed by questions or concerns they have. So to ease the minds of consumers who are ready to buy life insurance, Insurance.com has compiled a list of questions and answers to help make the process as painless as possible.

What's the best age to purchase life insurance?
As a rule of thumb, the younger you are, the lower your life insurance premiums will be. That's because your risk of dying is lower than if you were in your 50's or 60's. It's also a smart idea to buy life insurance when you're younger because you are able to lock in to a lower interest rate.

Am I required to take a medical exam?
For most life insurance policies, yes, you are required to take a medical exam at the time of application. This includes Supplemental Group Life (where you already have group life insurance) and also if you are requesting an amount of coverage that exceeds the standard level of coverage. However, if you are just purchasing a policy from a group health insurance or group life insurance plan, then you are not required to take a medical exam.

What happens with the results of my medical exam?
The status of your health determines how you are categorized and what kind of life insurance rates you will be given by your insurance company. Your height, weight, health and whether or not you use nicotine are all taken into account. If you're curious why you were put into a certain classification, be sure to ask your insurance agent. He or she will give you an overview of what factors determined your insurance classification.

Is more than one policy too much?
Not at all! If you have a permanent life insurance policy, then decide you want to take care of a short-term need, you are more than able to purchase and add on a supplemental term life policy. It should be noted if you purchase more life insurance than you need (or more than your expenses show you need), a medical exam or proof that you do not have an outstanding medical condition may be required by your life insurance agency.

Will having more than one policy cancel the other one out?
Nope. If you have a credit life insurance policy and a whole life insurance policy, and you have paid all the necessary premiums, both policies will pay out according to the initial terms of the policy. So your credit life policy will pay off your credit card balance and your full death benefit will be paid out on your whole life policy.

What happens in the event of delinquent payments?
Most policies give you a grace period of between 30 to 31 days to make a payment on your premium. Depending on your situation or reason for not paying, if you pay within that time frame, you will not be charged added interest; if you don't pay within that set-time frame; your policy will lapse.

What do I do if my policy lapses?
Depending on what type of life insurance policy you have, your policy will either remain open, or end. By having a permanent life insurance policy, you are able to use money you saved up in your cash value to pay the premiums with. That advantage of this is that your policy won't be cancelled, but your cash value does deplete. If you have a term life insurance policy, and don't pay within the grace period, when your policy lapses, your coverage ends.

Is there a limit to the number of beneficiaries I name?
As long as the people you choose to name in your life insurance policy have "insurable interest," you can name them as beneficiaries. Typically, a person just chooses his or her spouse, but it is possible to name more than one person.

Can I buy a life insurance policy on someone else?
As stated above, if you have insurable interest in that person, generally meaning they are a close relative or friend; it is possible to buy a life insurance policy on them. The main stipulation when buying a policy on someone else is that they must know about it. You cannot take out a policy without their knowledge and prior consent.

When it comes to buying life insurance, if you are in doubt or confused, be sure to talk to your life insurance agent. Whether you have one question or 100, it's better to fully understand exactly what you are getting into now, rather than paying for it later. If you are interested in getting a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage to take care of you, and your family.

Better Yourself, Better Your Life Insurance Rates

If you're overweight, have high blood pressure, high cholesterol or a heart condition, you know what the best steps are to take in order to improve your condition. You should be eating healthier, getting plenty of exercise, taking medications as directed and seeing a doctor regularly to monitor your condition. But did you know that by bettering your overall health, you could also be improving your life insurance rates as well?

"When it comes to illnesses, the higher risk you are, the higher your life insurance payments will be," says David Roush, CEO of Insurance.com. "If you pay a higher life insurance rate due to a medical condition, you can possibly lower your premium by trying to improve your overall health. Many insurance companies are very receptive to customers trying to make changes in their life to improve their health, and often this type of behavior is rewarded with a price reduction."

Insurance companies focus on your health when it comes to life insurance. The less risk you represent, the better your rates are going to be. If you initially purchased a life insurance policy when your health wasn't so good, but you took the steps to get yourself up to and above par, you can then request a premium reduction. Just ask your insurance agent what specific requirements there are, and see if you've met them. There's no limit to how many times you can ask your insurance company to review your medical records to see if you meet the requirements for a premium reduction

Many times, insurance companies require proof from a doctor that the improvements that you've made have been maintained for a certain amount of time. More severe health problems, such as cancer or heart disease, warrant a longer improved health period requirement. If you have a condition that will never improve, such as heart-wall damage, you will more than likely never see a rate reduction.

Another step some life insurance companies take is to require you to undergo medical tests ordered by the insurance company. The bright side of the test is that if you are being tested for one thing and the insurance company finds something else wrong with you, your life insurance rate will not be affected by it.

If you are interested in saving money and getting a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage at the most affordable price.

Though group life insurance is a great deal, is it really all the insurance coverage that you need?

In most cases your employer owns the group life insurance policy, and you will either receive it as an employee benefit or you can purchase it through your company's benefits plan voluntarily. If it is a benefit, it typically equates to one full year's salary that is paid out to your beneficiaries at the time of death. Smaller companies may offer a set, face amount payout, depending on your position at the company. Larger companies usually offer better death benefits, like up to three times your salary, in the event of your death. Smaller businesses are more apt to offer smaller plans due to limited funds.

Group life insurance that is offered on a voluntary basis is typically more extensive than if it's given as a benefit. Depending on what kind of policy you have, your spouse and children may be covered as well. The size of your death benefit can vary, and at some places, there is a maximum amount of $1 million that can be collected by the beneficiary at the time of death. Some employers even go as far as to offer a whole life insurance policy, giving employees permanent life insurance coverage, even after they leave or retire. The main difference between individual life insurance rates and group rates is that the premiums in group life insurance rates go up every five years (or so), because the risk of death associated with age increases.

Why group life insurance is so "cheap"
The cost of insuring a group of people, rather than an individual person, is cheaper because the rate is based on the overall risk of the group. The insurer typically assumes that not all people who are insured will remain with the company until they retire, which in turn means a shorter life insurance term. Also, the likelihood of the entire group dying is far less likely than if you base it off of one person.

The cost to insure a $100,000 life insurance policy under a universal life group policy would only be $5 per month, or $70 per year. This is because generally, for a person in good health working a normal job, the cost per $1,000 worth of life insurance coverage is only 5 cents.

No medical exams required
Unless a severe health problem is listed in the questionnaire when applying for group life insurance, no medical exam will be required. In laymen's terms, you will qualify for life insurance, regardless of any outstanding medical conditions, making it a guaranteed issue.

If a health problem is found, a medical exam, including blood and urine specimens, will be required before you can be approved for life insurance. Figures will be listed and compared in table format, comparing the employee population of males to females, smokers to non-smokers, and the nature of the work being done at the company and by the candidate. High-risk jobs, such as construction or carpentry, will likely be more expensive than low-risk jobs, like working in an office or a bank.

Added Bonus
Group life insurance is a great added bonus for you; however, it should not be used instead of individual life insurance. With group life insurance, the coverage offered is not always enough to take care of your beneficiaries, especially if you are the main bread winner in the family. Also, you may lose your group life insurance coverage once you leave your current job, and if you developed a health condition while working there, it may be more difficult to get affordable life insurance rates at the next place you go to.

However, the option to keep your life insurance after your leave or retire may be available, but it will probably cost you ten to 25 percent more in insurance premiums. In the event your employer switches life insurance plans or cancels the one you have, you will no longer be covered.

The downsides of group life insurance coverage

You may lose life insurance coverage if you change jobs
Limited life insurance coverage options and features to select from
Group policies are more standard than individual life insurance plans

If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping find the best life insurance plan for you and your family.

Do You Need More Than Just Group Life Insurance?

Child Beneficiaries And Their Life Insurance Trusts

According to Merriam-Webster's dictionary, a trust is a property interest held by one person for the benefit of another. The trustee (the person who holds the trust for another person) does not have the right to benefit from the trust. They can, however, be held accountable and liable for any lost funds, in the event they don't manage the assets responsibly.

It is a good idea to have a life insurance trust to benefit dependent children when your income is lost due to your death, but more so, it is important that these benefits you set up for your children are used the way you want them to be used. To do this you will want to create trusts for each of your children. Trusts are easy to create, so all you need to do is check with your life insurance company and see what verbiage you will need to include in your life insurance policy and will. You should appoint a guardian, as well as stating the trust in your last will and testament-in the case of a life insurance policy, your death benefits would be transferred to the trust after your death.

It's quite common for young parents to name each other as beneficiary, but if they both die, the money can be put into a trust for the couple's children. The trust agreement needs to be clear as to whom the trustee is and how the money is to be used.

What if I have a special needs child?
If you have a special needs child, and they can neither work nor care for themselves, a special needs trust can be set up in their name using your life insurance funds to pay for their care. Social Security is generally the income they can expect to receive when you die, so it's important to note that by giving the money to them outright, they may be ineligible for the Social Security until the money runs out. With the special needs trust, the trustee can pay for everything except for essentials, such as food, clothing, shelter and medication-which can be covered by Social Security instead.

It is most important to be sure that the terms of your trust are in writing and that you make the life insurance company aware, as well as the allotted trustee, of the arrangements of the trust.

If you are interested in getting a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage for you and your family.

Booming Life Insurance Sales

When tragedy occurs, many people tend to reevaluate their way of thinking and begin to play the "worst-case scenario" game. The terrorist attacks of September 11 were no different. Minds began racing, and people began questioning things like, "what will happen to my family if something happens to me?" Or, "How will my family be affected financially if I die?" And with the increase in questions and uncertainty in the event of a tragedy happening in the future, the sales in life insurance and financial planning boomed.

Proof of this can be seen in the results of MIB Life Index for the fourth quarter of 2001, which showed the highest levels since 2000. The MIB Life Index tracks searches for medical records undertaken by insurers after a consumer applies for life insurance.

LIMRA International, a financial services marketing and research organization, found the same high results when looking at life insurance figures for 2001. After the stories from survivors praising their life insurance companies for all that they had done to help them get back on their feet came out, a new found sense of hope and a "do-gooder" attitude began to erupt throughout life insurance companies and insurance agents. "When people feel great about what they do, and are proud of the accomplishments they have, they tend to work harder and become more enthusiastic," says Dave Roush, CEO of Insurance.com.

One of the strange findings was that most Americans claimed they were less likely to seek out any financial advice or buy life insurance at all. This feeling of uncertainty can be attributed to how the economy was and how things really weren't looking good for the American people. Job stability and the affordability of life insurance was a big concern, as was that of talking to strangers or opening unmarked mail, due to the anthrax threat.

If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage for you and your family in the event of a tragedy.

Battle of the Sexes: Who Pays More For Life Insurance?

In a society where the battle of the sexes runs neck-at-neck for almost all cases, it's a hands-down winner in the race for who plays less for life insurance. The winner is women. But why?

A study by the Society of Actuaries done in February of 2001, concluded that testosterone wreaks havoc behaviorally and biologically on men's bodies, which leads to a higher risk of disease, as well as risk-taking behavior-like unsafe driving and drug and alcohol abuse. This is because testosterone promotes higher blood pressure while it lowers the effectiveness of the immune system. The greatest difference in mortality rates is seen at age 22, when testosterone is at its highest.

Traditionally, it was believed that women lived longer than men because most worked from home. But more recent studies have shown that women who are out in the working force actually live longer than those who are homemakers.

Additional studies have been done in an attempt to study demographic mortality rates of men and women. The conclusion of such studies showed that men typically have a higher rate of dying from cancer, diabetes mellitus, heart disease, strokes, pulmonary disease and infections-hence why men pay more for life insurance. The highest and more prevalent danger now, for both sexes, is cigarette smoking. Smoking takes more than nine years off a normal life expectancy, compared to a life expectancy of a non-smoker.

If risk-taking behaviors and bad habits are assessed early, and steps are taken to correct them, both men and women can expect to extend their life expectancy substantially. The better and healthier you are, the easier it will be to find affordable and adequate life insurance. If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage for you and your budget.

Affordable Life Insurance For Asthma Sufferers

In the United States, asthma continues to be a growing concern not only for asthma sufferers, but for life insurance companies as well. The main concern of insurance companies is that half of all asthma deaths occur in people younger than 65. Though asthma is a very serious and potentially deadly condition, it is still possible for asthma sufferers to find affordable life insurance.

If you have asthma, it would be beneficial to shop around for different life insurance quotes. The severity of the asthma that you have, the persistence of it, and how well you respond to treatments, are all deciding factors for insurance companies when they are considering your policy. The National Institutes of Health have set goals for asthma treatment, and if you accomplish such goals, your premium may go down. The list includes:

Low occurrences of wheezing, cough, shortness of breath and chest tightening
Asthma symptoms not affecting your sleep
Asthma not causing a disturbance in your work or school schedule
Full participation in physical activities
Hospital stays or visits to the emergency room that are not asthma triggered/related
Asthma medication taking effect without causing adverse side effects

If you're an asthmatic and you apply for life insurance, your life insurance company will want to know the results of your pulmonary function tests (given by your doctor) and what your "peak flow meter" reading is (typically a self-test done at home). The tests will show how good you are breathing, which helps insurance companies see how much of a risk you truly are.

Within the past three years, if you haven't suffered from any "exacerbating asthmatic episodes," where you were required to go to the doctor, emergency room, or take off of school or work, your application will appear more favorable. As a result you could potentially qualify for a standard or preferred life insurance policy. As long as you maintain a healthy and active lifestyle, your insurance rates should be affordable. However, if medication isn't working for you, that's when you may see an increase in your insurance rates.

Asthma attacks and higher rates
The plan laid out by the National Institutes of Health is ultimately what a person with asthma who is looking to buy life insurance needs to strive for. If the last series of asthma attacks were so severe that you needed medical treatment, then you will have to wait longer to get the better rates. The longer it's been since a severe attack, the easier it is for you to get a more affordable policy. Also, life insurance companies tend to look down and become leery of policyholders who have frequent, though less severe, attacks. In the eyes of the life insurance company, this could mean that the medication is failing and a new treatment may be needed.

A smoker and an asthmatic?
Asthmatics who are smokers may have one of the most expensive policies. Not only will the policyholder be charged with smoker rates (up to three times the amount of non-smoker), but also, they will be charged a surcharge on their life insurance policy because they are an asthmatic. Regardless if you smoke or not, it is still important to visit your doctor at least twice a year to have your asthma monitored. This will not only be beneficial to your health, but it will also show the life insurance company that you are taking care of your condition.

A list of the medications you are on should also be given to your insurance company-Even though they may use the amount and kinds of medication you are on as an indicator of how severe your asthma is, a list should be given to your insurance agency. If you are taking a lot, it may seem that by giving them this information, your rates will automatically skyrocket, but remember, their main concern is how well you respond to the treatment. If you recently switched medication, it would be a good idea to hold off on applying for life insurance for a year or two, just so you can establish a history with the medication and show that you are meeting your goals.

Accidental Death and Dismemberment Insurance

Accidental Death and Dismemberment Insurance (AD&D), it sounds simple enough, right? But is it really necessary? That's the decision you need to make.

Generally, AD&D insurance is a rider on a basic life or health insurance policy. It's name states exactly what it covers; accidental death and dismemberment insurance, but there are limitations of the coverage. These limitations may be a deciding factor for many on whether or not to add it to their existing life or health insurance policy.

The first thing to consider is whether or not AD&D insurance is a good deal for you. What is the likelihood you will have to make a claim? If you have health and life insurance already, you should be covered in the event something happens to you and you are forced to make a claim. Also, it may be wiser and more cost-effective to just put the money you'd be paying towards the premium into a standard life insurance policy or other form of insurance. Dave Roush, CEO of Insurance.com, warns consumers that "AD&D is a very, very limited form of insurance. When it comes to insurance, you want to be covered and protected in all instances, not just certain ones."

What does AD&D cover?
In the event of a fatal accident or an accident that results in you losing your eyesight or a limb, AD&D will pay out. However, there are stipulations to the coverage. To receive benefits in the event of an accident, your injuries or death must occur within a time frame of three months from the accident date. Only if your death or injuries can be proved as being a direct result of the accident, will you be able to collect off your AD&D coverage.

If you are in surgery and die, have a mental or physical illness, bacterial infection, hernia, or you have a drug overdose that results in your death, you will not be covered by AD&D. "It is important to read the fine print when applying for this kind of policy, because it may just seem like you are getting better and more adequate coverage, when in reality, you're really not," reports Roush.

Dismemberment coverage gets a little trickier. If you lose one member (a hand, foot, limb, or sight in one eye), the insurance company will pay 50 percent of the full benefit. If you lose two members, you will receive the whole benefit.

Where to get AD&D
AD&D policies are generally underwritten by major insurers and can be purchased through credit card offers or credit unions. Some major life or health insurance companies may include AD&D in their group health or life insurance plans. Again, there are limitations for some companies in that the insured must earn at least 10 percent of the principal amount, and in the event of a covered accident, they can collect no more than 10 times their annual salary.

How much is accident protection worth to you?
Accidental death and dismemberment insurance is a good supplement to a life insurance policy. Depending on the amount of coverage needed, AD&D insurance premiums average out at around $60 per year. Even with the low cost of Accidental death and dismemberment, many would prefer to use the money they could be paying for the policy and put it towards more health or life insurance coverage. Also, if your job isn't high-risk, like construction work for instance, buying AD&D doesn't seem to make a lot of sense.

An accidental death policy (minus dismemberment coverage) is another route consumers can go down if they are considering extra coverage. If, for example, you had a $100,000 life insurance policy and you added an accidental death rider, and you were killed in an accident, your beneficiary would get $100,000 from your life insurance and $100,000 from you accidental death insurance. If you're killed on a "public conveyance," the accidental death benefit doubles, so your beneficiary would receive $200,000.

Do you really need it?
Risky or extreme hobbies, such as skydiving, bungee jumping, or extreme sports may not be covered by AD&D, because you are routinely engaging in dangerous activities. If you're working in a high-risk job, such as construction, the AD&D policy may be a good idea-though with high-risk jobs come higher premiums regardless. It is inexpensive accident coverage, and it won't hurt to have the extra coverage, but realize you could be putting the money towards a different kind of insurance policy that is more conducive and beneficial to your lifestyle.

What Benefits Are Offered To Terminally Ill Policyholders

Accelerated death benefits are benefits offered to terminally ill policyholders who are in need of money. Either a lump sum payment, or monthly payments deducted from the policy's face value, may be offered by the life insurance company to the policyholder. They began in 1988 as a way of helping terminally ill AIDS patients collect part of their life insurance proceeds. Over time, it has expanded to illnesses that are terminal, chronic and catastrophic (amongst a few others).

What can trigger an accelerated death benefit?

Terminal illness, chronic illness, or a physical condition is diagnosed where death is likely to occur within a set time
Medical conditions, such as catastrophic illnesses or dread diseases, that will result in death, unless very extensive care and extraordinary medical treatment are given
Long-term care in a nursing home, nursing facility, or at home, where the person is unable to perform daily activities, such as eating, drinking, dressing, bathing, toileting or continence
Permanent nursing home confinement

Most life insurance companies will begin payment of accelerated death benefits if the policyholder's life expectancy is under one year. Depending on your life insurance company, accelerated death benefits can only be engaged if you have a catastrophic or dread disease, such as a heart-attack, stroke, coronary artery bypass surgery, kidney failure, or life-threatening cancer. Only a select few insurance companies will begin a payout of your accelerated death benefits if you have a major organ transplant, AIDS, loss of eyesight or a limb, or paraplegia. The income from accelerated death benefits is not subject to being taxed federally, and in some states, not even subject to state income taxes.

To be given the option of accelerating your death benefits, some companies do charge you a higher insurance premium, while others only charge if you do engage the option. Depending on the life insurance company and how their policy for accelerated death benefits is setup, the monetary advances may either be charged as a lien against the policy (where interest is charged on the advanced amount), or the loss from the policy being cashed in is taken from the amount advanced to you.

Limitations of accelerated death benefits
Depending on which insurance company you have, the amount of the accelerated death benefit you choose to engage in may be limited. To do this, restrictions will be made either on the percentage of the death benefit, or the total amount you receive. The typical form of payout is lump-sum distribution, but if your state restricts this, you will be offered monthly payments.

In most cases, an accelerated death benefit rider can be added at any time, but depending on which life insurance agency you go through, you may only have the ability to sign up for it upon purchasing your policy. If you're unsure whether your life insurance policy, be it group or individual, has an accelerated death benefit policy, be sure to contact your life insurance agent or life insurance company.

If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage for you and your family.

Viatical and Life Insurance Settlement Contracts: Will They Work For You?

Viatical and life insurance settlement contracts allow a person to sell their life insurance to a third party in exchange for a reduced amount of its face value. The amount you get back is dependent on your health, age, death benefits and the number of years your life insurance policy is in force.

In 1989, viatical businesses began as a way to give terminally ill AIDS patients early access to their life insurance. As time has gone by, life insurance policyholders with cancer, heart disease, and other life threatening illnesses have been opened up to the same privileges.

There are many legitimate viatical and life insurance settlement companies, but there are also many scams out there as well. It should be noted that some viatical companies target people with conditions such as high blood pressure, in an attempt to cash in on their hefty death benefits. It's important to be cautious when selling your life insurance policy, and be sure to do your research before you commit to selling it.

Make sure you know what you're doing

Ask questions and do not commit to anything unless you fully understand the terms and conditions.
Weigh the pros and cons.
Speak with a financial advisor who takes into consideration your financial circumstances, age, objectives and other circumstances.
Consider other investment choices as alternatives.
Check into what (if any) tax consequences there are when buying a viatical settlement. Are you able to use 401(k), IRA, Keogh, or other qualified retirement plans when making the purchase?

If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class insurance providers - helping find the best life insurance policy for you and your family.

The Creation of a Viatical Settlement Database: Will It Prevent Fraud or Compromise Your Privacy?

A national viatical settlement database is being created that will help track suspicious or fraudulent behavior in viatical-related transactions. But will it really help to prevent fraud? Or will it compromise your privacy and impede on your personal-financial life choices?

The Life Settlement Institute (LSI) is a nonprofit association made up of six, privately held viatical settlement companies. Its claim is that the database will help to prevent fraud by following-up on policy-sellers or buyers who are believed to be engaging in fraudulent activities, as well as professionals and brokers whose conduct is questionable. Critics, however, are leery to accept this all as fact, and believe that it will be possible for the information that is contained in the Viatical Settlement Database to be used for other purposes.

An infringement on privacy is a major concern, as well as personal information being sold to other companies and being used to attempt to sell other insurance policies and loans.

What is a viatical settlement
A viatical settlement, also known as a life settlement, is when a life insurance policy is sold to a third party for a percentage of the death benefit. The third party then becomes the beneficiary or new owner of the policy. Once the insured person dies, the beneficiary will collect the entire death benefit. The buyer must, however, pay all the future premiums until the insured dies.

Viatical settlement database opponents
In order to facilitate treatment, the Federal Health Insurance Portability and Accountability Act (HIPAA), requires a patient's consent to release medical records to "key players" (a requirement that the Bush Administration is currently trying to do away with). The main concern of skeptics to the database is that the term "key players" will change in meaning. It will go from just being your doctor and health plan provider, to including more groups, such as your insurer, bank, pharmacy, employer, medical data warehouses, and so on. If a company signs up for access to the Viatical Settlement Database, they may be able to divulge information about your medical history and past claims, in turn charging you higher premiums on your life insurance policy or denying you products.

If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find you the best life insurance coverage for you and your budget.

Murder Provision Added To Teacher's Life Insurance Policies

The current condition and safety of teachers at our schools is deteriorating at a rapid pace. Who would have thought that being a teacher could carry so many threats and be such a high-risk job? Well in this day and age, it is more than anyone would have thought it to be. After a high-profile school violence case in Florida ended in a teacher being shot, the National Education Association (NEA) added a provision to its life insurance policy to protect its members. A murder provision plan was added to the list of benefits, which covers the NEA member if they are killed in the classroom, on a school-sanctioned trip, at a sporting event, field trip or during a school related activity. The current "on the job," accidental death benefit is $50,000, that benefit has tripled with the addition of the new murder insurance plan to the current life insurance policy offered to teachers.

The NEA is the nation's largest professional employee organization. Since 1982, it has offered free life insurance to its members, representing teachers, administrators, higher education faculty support personnel, retired educators, and students who are in school preparing to be teachers.

If you are interested in receiving a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers - helping you find the best life insurance coverage for you and your budget.

Saturday, 13 September 2008

How an insurance class action settlement is taxed

Getting a monetary settlement from an insurance company as a result of a class action lawsuit isn't necessarily pennies from heaven. The money carries tax consequences that you'll need to address when you prepare your annual income tax return.

If you have any questions on how to treat your particular settlement proceeds, it's best to ask your tax consultant or accountant. But here are some general guidelines on what to do when it's time for your annual report to Uncle Sam.

Ordinarily, any income you receive is taxable. (In the insurance world, an exception to this is the proceeds of a life insurance policy to which you're a beneficiary.)

Policyholders eligible for compensation in a class action lawsuit may be offered several options. For instance, previous class action settlements have included choices of a refund of premiums (with interest) or "basic claim relief" (flat sums). There could be taxable money involved in each choice.

If you opt for a return of premium with interest, the premium is not subject to taxes, but the interest would be. For other settlement options, distributions from a life insurance policy are not taxable until you've received more money than you paid in premiums. Any amount above that is taxed at the ordinary income rate.

You'll need a Form 1099

If you receive insurance lawsuit settlement money, you'll need an Internal Revenue Service (IRS) Form 1099 from the insurer that shows the amount of money you received and from whom. There are several types of 1099 forms that report on earned gross income (money from which taxes have not been deducted).

The insurance company might send a Form 1099-MISC, which applies to miscellaneous income. A 1099-MISC shows the total amount you received, so look for an accompanying letter from the insurer that breaks down how much of your settlement is a return of your premium and how much is interest or other settlement benefits. If that happens and you don't get a letter that breaks out the amounts, you can either figure out yourself what premiums you've paid into the policy or call your insurance company and have them do it for you. Bring this information to your tax preparer.

On the other hand, the insurance company may send you a Form 1099-INT, which lists the interest payment on your premium that you received. This interest amount is probably subject to income taxes, and you should bring that form to your tax preparer.

It is up to the insurance company which Form 1099 they will use. For your purposes, it's important that the amount you are awarded is broken down either in a letter from the insurance company or through Form 1099. Be sure you don't pay taxes on your returned premium because you probably paid that premium with your after-tax dollars. No one wants to pay taxes on that money twice.

The basics of term life insurance

Should you "buy term and invest the rest" or fuel your life insurance with "the power of cash value"?

Term life insurance is often touted for its "pure insurance protection," which includes none of the cash value features inherent in whole life policies. Term life insurance covers you for a specific period of time — usually 10, 15, 20 or 30 years. You can also buy term insurance that covers you until you reach a certain age, usually 65 or 70. Term insurance policies expire at a set time and if you don't die within the term there is no pay-out of the policy. If you do die within the term, your beneficiaries receive the money tax-free.

Generally, you purchase term life insurance to protect your loved ones from debts or provide for short-term obligations. For example, if you and your spouse own a home and you were to die tomorrow, your spouse would have to pay the mortgage on his or her own. If you had a term life insurance policy, your spouse could receive enough money from the policy's death benefit to pay off the mortgage.

Term insurance doesn't just cover specific debts, however. If you have children, term insurance can protect your family's finances, providing money for college and living expenses if you die before your children are fully grown.

Medical exam is usually required

When you apply for term life coverage, the insurance company will probably require a medical exam before issuing a policy. The examination is basic, covering your height, weight, medical history and blood and urine testing. With the blood and urine tests, the insurer looks for specific medical problems. Positive results could affect your premium, or even your ability to buy a policy.

Smokers will pay more for life insurance, although cigar smokers might get less expensive premiums than those using cigarettes. If you smoke marijuana, but not cigarettes, you still must admit to being a smoker on the policy application. Insurers don't generally differentiate between different types of smoke inhalation. (Marijuana users must also disclose their drug use.)

Different flavors of term

As you age, the likelihood you will die sooner increases. That's why older individuals pay more for life insurance. You can lock in low premiums by buying for a "level term" policy. That means for a specific time period, say 20 years, your premium rate stays the same. Many term policies give you the option to renew your coverage at the end of the term without undergoing another medical exam, although your premiums will rise for the next term — often substantially.

A less popular policy is "annual renewable term." This gives you coverage for one year with the option of renewing it each year for a specified duration, such as 20 years. With this policy, your rates will go up every year you renew and are calculated based on the probability of your dying within the next year.

If you’d like to have term life insurance in place to provide for beneficiaries yet you’re confident you’ll outlive the policy, you could consider "return of premium" term life insurance. Under this type of policy, if no death benefit has been paid by the end of your insurance term, you receive all your premiums back. It pays to shop around for a policy like this, but on the low end you can expect to pay 50 percent morein premiums than comparable traditional term life insurance.

If you have trouble finding life insurance because of illness or a troubled medical history, you can turn to guaranteed issue life insurance coverage, sometimes called "quick issue" or "simplified issue" insurance. Guaranteed issue policies require no medical exam, but you pay a higher premium in exchange for the guaranteed coverage. That's because the insurance company takes on more risk in insuring people without knowing their medical condition. Guaranteed issue policies can require waiting periods before coverage kicks in. They might be the only option for some people. A life insurance broker can search the marketplace for a guaranteed issue policy that meets your needs.

How long a term?

Figuring out which term you should buy — 10 years, 20 years, 30 years or some other number — requires a major review of your debts, financial needs, dependents' needs — and when all those might change. Jack Dolan of the American Council of Life Insurers suggests you ask yourself, "When will my dependents reach financial independence?" Also look at major debts, such as mortgages or other loans, and when those are due to be paid off.

Guenther Ruch of the Wisconsin Insurance Commissioner's office says it's a good idea to review your life insurance needs carefully, both when you buy the policy and on a regular basis throughout your life. "You may not have the coverage you need. You may have more than you need," Ruch says.

Ruch has the following recommendations for anyone buying life insurance, or anyone who already has coverage:

Schedule a routine "check-up" with your insurance providers at least once a year.
Shop around when you're in the market for a new policy. Rates vary considerably among insurers.
Remember, an insurance policy is a legal document. Read it carefully and make sure you understand it.

"Perhaps you want to leave assets for your heirs, or for charity, or you need the death benefit for business-planning purposes. These are all areas where life insurance can play a role, but it's really designed for financial protection," Dolan says.

Life insurance trusts for child beneficiaries

It's great to have life insurance to benefit dependent children when your income is lost because of your death, but it's an even better idea to make sure your insurance benefits are used the way you intend.

Setting up a trust for a child beneficiary can ensure that your wishes are carried out. In fact, naming a child as a beneficiary on your life insurance policy without a trust could be downright problematic: A life insurance company will not pay a benefit to someone under age 18 and instead will hold the money (with interest) or pay it to a court-appointed guardian.

A trust is a legal arrangement that gives ownership of assets to one person for the benefit of another. The trustee, or person who officially holds the property for the beneficiary, does not have the right to personally benefit from the trust assets. The trustee must manage the assets responsibly and can be held personally liable for any lost funds.

It may take very little effort on your part to create a trust. For example, in some cases you can simply write, "John Smith, trustee for Susie Jones," on the beneficiary line of a policy. You should check with your life insurance company to see what wording it requires, and also name a guardian and describe the trust in your last will and testament. Once the trust agreement is set up, you can transfer funds or property to it. In the case of life insurance, the death benefit from your policy is transferred to the trust after your death.

The trust agreement should make clear who the trustee is and give the trustee instructions on how to use the money.

A common way for young parents to handle life insurance is to name each other as the beneficiary, but if both die, the money can be put into a trust for the benefit of the couple's children.

Consider special needs children

If your children have special needs and cannot work or care for themselves, your death could leave them to depend on Social Security income. You can set up a trust to ensure that your life insurance funds are used for the children's care. If you give the money to the child outright, he or she could be ineligible for Social Security benefits until the money runs out. With a special needs trust, you can have a trustee pay for everything but essentials such as food, clothing, shelter and medication, which can be covered with Social Security benefits.

Always make sure that the terms of your trust are in writing and that the insurance company is aware of your arrangements. Better yet, consult a lawyer well versed in trusts and estates.

How life insurance companies view you: Underwriting categories

When you’re applying for a life insurance policy, your premiums will be set in part by your “risk class,” which is defined by an insurer’s “underwriting guidelines.” (Your age and the length of policy term you want are other pricing factors.) These classes are determined by your current health and your family health history. “Family” here means your immediate family of mother, father and siblings. For example, an illness suffered by your aunt won’t impact your life insurance premiums.

Also, illnesses suffered by family members after age 60 shouldn’t affect your premiums.

Some life insurers are more “aggressive” in determining your risk class, and may put you in a more preferred class (meaning lower premiums) than another company would. For example, someone with a history of high blood pressure who’s on medication for it might land in a “preferred class” with one life insurer and a “standard class” with another. Shopping around multiple companies will really pay off, no matter what your health status.

Generally life insurance companies use these classes:

Super Preferred No Nicotine (sometimes called Preferred Plus)
Preferred No Nicotine

Preferred Nicotine
Standard No Nicotine
Standard Nicotine
Substandard

Who am I?

Predicting which class you probably fall into is important for receiving accurate life insurance quotes, especially when you’re shopping online. It may be tempting to select the “super preferred” class for yourself in order to see the lowest rates, but don’t set yourself up for disappointment if you don’t receive that rating. While every life insurance company has its own checklist for requirements for the above classes, here are some predictors:

Super Preferred No Nicotine

It’s possible to be in good health and still not qualify for Super Preferred. This category carries very stringent health qualifications and is reserved for folks who are expected to live the longest.

Here is the ideal candidate for the Super Preferred No Nicotine class:

You are the ideal weight for your height, with a Body Mass Index of roughly 25 or less.
You have an excellent health history with no serious or chronic illnesses or ailments.
Your immediate family has no history of cardiovascular disease or internal cancer before the age of 60.
You’ve never smoked, or if you have you’ve quit for at least five years.
You don't participate in high-risk recreational or occupational activities such as hang gliding, rock climbing, motorized racing, off-shore drilling, mining, etc.
Your recent financial standing is excellent with no bankruptcy in the last few years.
You have a healthy LDL cholesterol level (about 220 or less) and LDL/HDL ratio (about 5.0 or less).
You have good average blood pressure readings of about 140/85 or less.
You have a very clean driving record with no more than one or two moving violations in the last three years and no DUIs or reckless-driving convictions in the last 5+ years.
You’ve never required treatment for drug or alcohol abuse.

If you can’t meet the above requirements, don’t worry. Most folks can’t, and there are still plenty of good life insurance rates out there.

While life insurers each produce their own lists of “allowable” conditions, one typical life insurer that we looked at allows these conditions in the other classes:

Preferred No Nicotine

Elevated blood pressure of about 145/90 or less

LDL Cholesterol of 260 and LDL/HDL ratio of 5.5

Select No Nicotine

Elevated blood pressure of about 150/92 or less

LDL Cholesterol of 270 and LDL/HDL ratio of 6.5

Standard

Asthma

Depression

Elevated blood pressure of about 150/95 or less

LDL Cholesterol of 300 and LDL/HDL ratio of 7.9

Knowing that these factors affect your rates will reduce surprises in your life insurance shopping experience. Also, a good insurance agent will know which companies have better pricing for certain medical conditions, such as high blood pressure. If you still fall into a lower category than you anticipated, you can buy a policy and then ask the life insurance company to re-examine your rate if your health has improved for a few years.

Should you buy universal life insurance?

Regardless of your needs, there is a life insurance policy to meet them. In some cases, it's a good idea to have a variety of policies to meet different needs.

To help you decide which policies are best for you, here's a quick overview of the types of life insurance available.

	Term	Whole	Universal	Variable	Variable Universal
Premiums	Low, but increase with age	Level	Flexible	Level	Flexible
Face amount	Renewable into old age	Level; can't be changed	Level; can vary	Level; can't be changed	Level; can vary
Cash value	None	Yes; no ability to choose investments	Yes; no ability to choose investments	Yes; ability to choose investments	Yes; ability to choose investments
Policy loans	No	Yes	Yes	Yes	Yes

What's the most popular? A study by LIMRA, and insurance market research organization, shows these results for market share (in terms of premium sold) in 2006:

Universal life, 40 percent.
Term life, 23 percent.
Whole life, 22 percent.
Variable universal life, 14 percent.
Variable life, 1 percent.

How it works

Universal life is designed to be flexible life insurance. As long as you pay enough in premium to keep the insurance part of the policy in force, you can vary the frequency and amount of your premium payments. As a result, you can vary your death benefit. For instance, you can decrease your coverage to coincide with your declining mortgage. If you want more insurance, you might need a medical exam, even if you had one when you originally bought the insurance. It depends on your age and the amount of coverage you're buying.

Cash value within the policy

You can also put excess money into your universal life policy. The amount is held in a cash-value accumulation fund. You'll usually get a minimum interest guarantee from the insurance company, while the actual performance of the fund is tied to insurance company investments. Because of this risk, your premiums can be lower than those of a whole life policy. You might be able to skip premium payments if there's enough in your fund to cover the premium bill.

Remember any gain in your accumulation fund may be taxed upon withdrawal.

Your level of cash value can also influence either your premium payments or your death benefit. When you buy a universal life policy, if you choose a level death benefit, the insurance company uses your cash value to reduce the amount of risk it takes on your life. This allows the insurance company to reduce the mortality expenses of your policy and reduce your premium payments.

A second option is to have your cash value added to the death benefit of your policy. Your minimum premiums stay steady while your death benefit rises and falls with your cash value.

You are allowed to switch between the two options at any time during the policy, but it might not be easy.

If switching methods significantly increases your death benefit, you might have to take more medical exams and go through the whole medical underwriting process again, says Bill Schreiner, an actuary with the American Council of Life Insurers.

Although a universal life policy can allow you to earn somewhat better rates of return in your cash-value fund than a whole life policy, you can't transfer your cash value between possibly higher-yielding sub-accounts as you can with variable life insurance. You're relying on the insurance company's investment strategies, so be sure to check the company's financial strength before buying.

You can make withdrawals from your cash value under terms defined in your policy. Many universal life policies carry back-end surrender charges that are deducted from the balance in your fund. They start out high in the early policy years, and then slowly decrease until they disappear — possibly around years 15 or 20.

Double-check your policy

Because it's a hybrid insurance product, universal life's flexibility can be misunderstood. That's why it's important to make sure what you bought is what you were quoted. Check your policy for its guaranteed rate of return, fees, and charges, and the minimum premium required. If the policy is not issued correctly, you'll usually have a "free look" during which you can reject the life insurance contract and get your money back.

Universal life can be an economical alternative to traditional whole life, and in some instances it costs less. If you're interested in buying whole life, you might want to look into universal life. As with any insurance product, it's important you understand how a universal life policy works. It's up to you to figure out if you're getting your money's worth

Tuesday, 2 September 2008

Things To Consider Before You Sell Your Life Insurance Policy
Everything has a price and when you need money, selling your life insurance may sound like a good idea—especially if you are extremely sick because you can generally get anywhere from 50 to 80 percent back off the face value. However, although it may sound like a viable option, it’s important to keep in mind why you bought the life insurance policy in the first place!

Things to consider
When a viatical company is interested in buying your life insurance policy and they know you are ill, they will demand access to your medical records. Ultimately, the buyer makes the most money off of your policy the longer you are expected to live. Any and all details about your medical history and condition will be run over with a fine-toothed comb. Don't forget, they will keep track of your progress, many times using little to no discretion, by calling you on the phone, mailing out postcards, or getting in contact with you through a pre-determined means of communication. To sum it up, anyone (creditors included) will have open access to view your transaction.

Below are tips to consider before you sell your life insurance policy:

. Check into alternatives. If you need cash quickly, there may be other ways to get it, without having to sell your life insurance policy to a viatical settlement company. Check with your current life insurance company and see if they offer an accelerated death benefit. You may be charged a fee for acting on it, but at least you will be doing business with a company you know and trust.

. Talk it over with your beneficiaries. It’s a good idea to discuss your thoughts on selling your life insurance with your beneficiaries. If they are depending on your death benefits to pay for the cost of your outstanding medical treatment, they will need to know.

. Consult your accountant, financial planner or attorney. There are many financial aspects you should find out before selling your life insurance policy. Ask if the proceeds will be tax-free and what kind of impact it will have on probate and estate settlements. According to the Health .

. Insurance Portability and Accountability Act, if the insured is terminally ill the settlement is not subject to federal income taxes; but if the insured is mildly ill or healthy, the settlement will be taxed as a capital gain.

. Check on viatical licensing or regulations. Your state insurance department will be able to tell you what laws there are for viatical companies or viatical brokers, such as the requirement for them to be licensed.

. Affects on public assistance. Public assistance is typically based on financial need, so if you go through a viatical life settlement, you may hinder the amount of assistance you get, as well as opening yourself up to creditors—because viatical life settlement proceeds are fair game in the financial world.

. Shop around for viatical companies. Companies differ on the amount of payout they offer for viatical life settlements, so be sure to shop around and compare. The Viatical Association of America recommends getting at least three different offers, so you can compare and see what the best and most beneficial payout will be.

. Escrow accounts. For legitimate viatical companies, getting a request to have an escrow account opened and ready when you accept the settlement is no big deal. But if the company you are going to sell your account to denies your request, it is right to assume that they may be fraudulent—because the denial of the account is a red flag that the money may not be there to cover your offer.

If you are interested in getting a life insurance quote, log on to Insurance.com. Here you will be able to evaluate multiple rates from best-in-class life insurance providers – helping you find the best life insurance coverage for you, your family and your lifestyle.