Term Life Insurance Laddering Approach

In a blog post in April 2009, I wrote about Layering Term Life Insurance to provide different levels of coverage over a period of time.  Layering or laddering several different term lengths can help address different time horizons associated with different needs for life insurance.
As an example, a 35 year married man with two young children (ages 7 and 13), earning $75,000 annually, has 20 years left on his mortgage (currently $250,000).  He and his wife expect both children to attend college.  Here’s how a laddering plan would work for this client:

• Purchase a 30 year term policy with a $2,250,000 death benefit (Income x 30 years).
• Purchase a 20 year term policy with a $250,000 death benefit to pay off the mortgage (as the mortgage amortizes as he pays it down, extra benefit can go toward supplementing college funds).
• Purchase a 15 year term policy with a death benefit of $150,000 for the younger child’s college expenses.
• Purchase a 10 year term policy with a death benefit of $150,000 for the older child’s college expenses.

Essentially, he would have a $2,800,000 death benefit for the first 10 years, then the benefit would drop as each shorter term policy expired (as the need for each policy was eliminated), leaving him with $2,250,000 of benefit for the final 10 years.
I have done this laddering for several clients over the years, using separate policies.  However Legal & General America, through their Banner and William Penn companies has developed riders you can add to a base policy, rather than doing it though separate policies.  In the above example, one would purchase a 30 year base policy of $2,250,000, then add the following riders:  $250,000 for 20 years, $150,000 for 15 years and $150,000 for 10 years.  As each rider expires, the cost of the rider would disappear as well.
While serving the same purpose as purchasing separate policies, this method could prove to be less costly, as there wouldn’t be separate policy fees that are built into each separate policy’s premiums.  I expect to see other companies following Legal & General’s lead and come up with their versions of these riders.
As our term life insurance quote engine isn’t capable of quoting with these riders, feel free to contact us at 866-691-0100 ext. 105 if you would like to get quotes with these riders.

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Applying for Life Insurance – Do Medical Exams Scare You?

I wish I had a dollar for every prospective life insurance client I spoke with who was nervous about getting their blood drawn.  I have even had a few people decide against purchasing life insurance because they couldn’t confront “the needle.”  Medical exams, including blood tests, are part and parcel of the life insurance application.  It provides valuable data to the underwriter as to what type of risk you present to the life insurance company.  Along with a review of your application and medical records, the underwriter will determine your health class and premiums you pay for the policy.
For those of you who are a bit more than squeamish about getting poked in the arm with a needle, here are some tips for relaxing during your blood draw I found at labtestsonline.org:

• Breathe:  Take three slow breaths, counting to three for each one and breath through your nose.  Breathe out through your mouth, counting to six.  Breathe deeply to your abdomen and not to your chest – you will get deeper breaths.
   
• Relax your muscles:  Focus on individual muscles and “tell” them to relax.

• Focus:  Find an object or point (spot on the wall?) to focus on.

• Count slowly (and silently) to ten:  Breathing while you do this is highly recommended.

• Talk to someone in the room:  This will take your attention away from the “event.”  Sometimes, it helps just to acknowledge your anxiety about the blood draw.

You should also realize that the person giving the exam is trained and is more than used to dealing with our fears and anxieties.  They have “seen it all,” so you shouldn’t be embarrassed about your behavior.  They will usually do what they can to get you to relax.  When all else feels, just grit your teeth and go through what you need to go through because, by applying for life insurance, you are doing a selfless thing for your family.  The fact that you have to endure the needle makes it that much more selfless.   Pat yourself on the back – you deserve it.

If you have been putting off applying for life insurance, you can start by getting your life insurance quotes now.  Just follow the directions above and you should get through the process relatively unscathed.

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Life Insurance Awareness Month – with an Assist from Lamar Odom

As a fan of the Los Angeles Lakers (sorry Celtics fans), I have seen some great players over the years – Jerry West, Wilt Chamberlain, Magic and Kareem, Shaq and Kobe, to name-drop a few.  When he plays his heart out, I can utter the name Lamar Odom in the same breath with the others.  Up until recently, I considered Lamar to be one of the greatest underachievers in the history of the game.  He elevated his game this past year and won the prestigious Sixth Man Award, one he richly deserved.
However, in September of this year, Lamar Odom will be making an assist that will elevate him to an even higher level for me.  He will be the spokesperson for Life Insurance Awareness Month, sponsored by the Life and Health Insurance Foundation for Education (LIFE).   I believe by putting his celebrity to better use than in the TV reality show Kloe & Lamar, Mr. Odom will be promoting the concept of protecting your family with life insurance to a huge sports-watching public.

Lamar has a great story about the value of life insurance to tell – his mother passed away from colon cancer when he was twelve years old.  Because she had life insurance, he was able to continue attending his private Catholic high school, where his mother had enrolled him so he didn’t have to go to the public school in his rough neighborhood.  As a single parent, she knew the value of a good education and, in spite of her modest income, she purchased a life insurance policy to ensure that Lamar would be able to continue his education in the event of her death – which, unfortunately happened much too soon.
When Lamar graduated high school as one of the best basketball players in the country, he probably could have immediately entered the NBA, but to honor his mother (and because he valued his education), he enrolled in college.  Had his mother not purchased her life insurance policy, Lamar might not have been able to attend college.

The Greatest Assist in his Life

Lamar has had some great assists on-court throughout his career from players like Kobe Bryant, Pau Gasol and Derek Fisher, but the greatest assist he has ever received was the one his mother gave him when she purchased her life insurance policy.   That’s why Lamar has agreed to be the spokesperson for Life Insurance Awareness Month.  ”Too many Americans haven’t done the kind of planning that my mom did,” says Lamar.  ”They don’t have life insurance because they don’t think they’ll  ever need it.  I’m sure my mom didn’t think that she’d die at age 35, but that didn’t stop her from doing the responsible thing.”
When Lamar’s mother died, he had no idea how important his mother’s unselfish act was, but he fully realizes it today.  ”Purchasing life insurance was one of the first things I did when I entered the NBA,” he says.  ”As a husband and father of two beautiful children, I want to make sure the people I love will be provided for.”
If you don’t have life insurance, take an assist from Lamar Odom and score – protect your family’s future with a life insurance policy.  To get a free life insurance quote, click the Start Your Instant Quote button now.

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Life Insurance for Stay at Home Moms

“Are you working?” I asked the young mother of two whose husband was purchasing a life insurance policy for himself.  She answered, “no, I’m a stay at home Mom.”  The husband told me they had thought of purchasing a policy for her, but since life insurance is “income replacement,” they would wait until she went back to work before they would consider a policy for her.
I bluntly asked him, “if your wife were to pass away, what would it cost to replace her “services?”  After looking at me with a “I can’t believe you asked that question look”, they started looking at how much it would cost to get a full-time child-care provider, a housekeeper (who cooks), a driver to drive the children to school (when they started) and doctor appointments, etc., etc.  I told them the replacement cost of the average contribution a wife makes at home is worth about $45,000 a year (based on a recent survey done by Penn Mutual Insurance Company).
Was that amount worth protecting for them?  After looking at that number, they decided to purchase a 20 year term life insurance policy with a death benefit of $500,000.  As she was young (27) and healthy, that policy would only cost them about $19 a month.   Where else can you purchase peace of mind for less than $20 a month?
Stay at home moms – if you would like to see life insurance quotes for you, click the Start Your Instant Quote button now.

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Benjamin Franklin

I thought long and hard on President’s day of a relevant topic to post, but I could not think of an adequate tie-in. However, all those thoughts of men in white wigs reminded me that, although never president, one of the founding fathers of the U.S. is also responsible for starting the modern-day insurance system in the U.S.
In 1751, according to PBS.org, Benjamin Franklin and his Union Fire Company met with other Philadelphia fire-fighting companies to discuss the formation of a fire insurance company. Out of those discussions, the Philadelphia Contributionship was formed, which was the first successful fire insurance company in the colonies. About seventy Philadelphians initially subscribed to the contributionship.
In May 1752, the board of directors, of which Franklin was a member, decided to form an insurance company. Members agreed to make equal payments to the contributionship, which would be used to pay for losses any member would sustain through fire to his property.
Mr. Franklin also proposed other forms of insurance, including life insurance and annuities, according to PBS.org. In his Silence Dogood letters, he recommended insurance for widows and orphans, much like a current-day pension. Late in life, he also proposed crop insurance, based on the same type of organization as the Philadelphia Contributionship.

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Primary and Contingent Beneficiaries

One question that comes up fairly regularly in filling out a life insurance application is who should my beneficiaries be and what’s the difference between a primary and contingent (or secondary) beneficiary?
A beneficiary is a person or entity entitled to receive the death benefits paid under a life insurance policy.  A beneficiary can be primary or contingent (or secondary).
If the primary beneficiary is alive when the insured dies, then the primary beneficiary receives the death benefit.  If the policyholder has named a contingent beneficiary, the contingent beneficiary will receive the death benefit only if the primary beneficiary is not alive when the insured dies.  One can name several primary and contingent beneficiaries and assign a percentage of the benefit to each.
If no valid primary or contingent beneficiary is living or exists when the insured dies, the benefits will be paid as follows:

• If the insured is also the policy owner, the benefits will be paid to the insured’s estate.

• If the insured is not the policy owner, the benefits will be paid to the policy owner or, if the policy owner is not alive or does not exist, the benefits will be paid to the policy owner’s estate.

The policy owner maintains the right to choose or change the beneficiary unless the policy owner makes an irrevocable beneficiary designation, such as in an irrevocable life insurance trust.

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Factors to Consider When Purchasing a Life Insurance Policy

Insurance Company Financial Strength

Whether you are purchasing term insurance, return of premium life insurance, whole life, universal life or survivorship life insurance, one of the most important issues to consider is the financial strength of the insurance company that’s providing  the insurance. After all, you want to make sure the company will still be in business when your beneficiaries need to receive the insurance benefit. To check the financial health of an insurance company, you should turn to one or more of the companies that make a business of analyzing companies in the insurance industry. The best known rating services include Standard and Poor’s, A.M. Best, Moody’s and Fitch.  Learn about life insurance company financial ratings, here.
Each of these services grades the insurance companies on financial strength, using letter grades to indicate how secure they consider the company.The actual grades vary by rating company. S&P uses AAA as its highest, for example, and Best uses A++.
Insurance Company Rating Categories indicates the rating service’s opinion of an insurance company’s ability to meet its obligations to policyholders,based on that company’s reported financial performance over several years.
Along with financial health, you want to choose a company that is responsive to its policyholders. That’s why it is a good idea to check with your state’s insurance regulating body to make sure there are no serious complaints against any of the companies you are considering.

Availability of Riders

Another factor that can influence which policy to choose is the availability of riders (rider = extra benefit added to a policy) that you want to purchase. One rider that is important is waiver of premium where if you’re disabled, premium payments are made by the insurance company.
Perhaps you would want a convertible policy, which allows you to switch from term insurance to whole life with no questions asked, another way to guarantee that you can purchase insurance even if your health declines.

Cash Value for Permanent Policies

When deciding among permanent life policies, you should be interested not only in the death benefit, but in the potential growth of the cash value that these kinds of policies offer. Because these policies are more complex than term policies,you may have to dig a little deeper to make your comparison. We can help you with those kinds of policies. Contact Us re: whole life.
For whole life policies, your LifeInsure.com representative will get you a number of competitive illustrations showing how the cash value might grow, based on interest and dividend assumptions.
Contact Us Call LifeInsure.com toll free at 866-691-0100 or Email at any time

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