Joshua Cumrine » Life

Life Insurance 101

josh — Wed, 05 May 2010 15:22:59 +0000

Life insurance is a means for providing financial protection for your family in the event of your death. A life insurance contract is relatively straightforward; you agree to pay a premium at regular intervals, and the insurance company agrees to pay a certain sum of money to your beneficiary upon your death.
There are three parties to a life insurance contract. First, there is the insured. This is the person whose life is being insured under the policy. Next, there is the insurer. The insurer is the insurance company who underwrites the risk. And third, there is the owner. The owner and insured are not necessarily one and the same. Someone can buy a life insurance policy to insure the life of someone else, such as their spouse.
The person who buys the policy is the owner, and the person whose life the policy is based on is the insured. When the owner and the insured are different people, premium payments are the responsibility of the owner.
Every life insurance contract also has a beneficiary. This is the person who receives the proceeds from the policy in the event of the death of the insured, and is assigned by the owner. There are two types. An irrevocable beneficiary can not be changed unless the beneficiary gives his or her permission; if it is revocable, the owner can change it at any time.
The policy is subject to certain terms and conditions. There are usually certain exclusions that apply, depending on the person being insured. But with almost every policy, death as the result of suicide during the first two years of the policy term is excluded from coverage.
Also, during the first two years of the policy, often referred to as the contestable period, the insurance company retains the right to not immediately pay out, even if the death is caused by a condition that is covered in the policy. The company can order an investigation into the death of the insured, to make sure that the death was not deliberate or the result of homicide.
The amount paid to the beneficiary is called the face amount. The maturity date is reached upon either the date when the insured deceases or reaches a certain age. Life insurance is most often used to provide income protection to the spouse of the deceased.
Regardless of the reason for buying the insurance, the owner (if not the same person as the insured), must have an insurable interest. In other words, the owner of the contract must have a reason for wanting to insure the life of that person, otherwise the contract is void.
When the person covered by the policy dies, the insurance company requires proof of death before paying the claim. A notarized death certificate is the most commonly accepted form of proof. The benefit is paid out either as a lump sum or as an annuity that is paid out over time.
Any annuity can be a good way to receive the benefits. It is possible for the beneficiary to set up a lifetime annuity, which would guarantee that person a certain amount of monthly income for the rest of his or her life.
There are two basic types of life insurance, temporary and permanent. Temporary insurance is known as term life. An example of a term policy would be a 20-year term life, which means that the policy will pay a death benefit if the person dies within the next twenty years.
Permanent insurance includes whole life and universal life. Whole life provides for a payout no matter when the person dies, but premiums have to continue to be paid, usually right up until the insured reaches the age of 100. Universal policies are somewhat similar, but they allow for greater premium flexibility. Universal insurance is somewhat complicated; you should consult with an advisor at Joshua Cumrine Financial before buying it.
I hope this information has helped you become acquainted with life insurance. You should sit down with your spouse and talk about buying a policy. Then, call Joshua Cumrine Financial and make an appointment to discuss your objectives. Use the information that was presented here to help you make intelligent choices so your family will be protected in the event that something happens to you.

Six Life Insurance Questions and Answers

josh — Mon, 03 May 2010 22:38:18 +0000

1. How does a life insurance company decide how much a particular policy costs?

The price of a life insurance policy is a life insurance company’s calculation of the amount of cash necessary to gather from each member of the life insurance pool. The price is always dependent on the mortality tables and the calculation of the size of the risk the life insurance company is taking on by being the insurer of your life insurance policy.

2. How does a life insurance company assess their risk in insuring an individual?

When somebody applies for a life insurance policy, the company will inquire about their health status and often require a medical exam. The life insurance company will use information gathered to determine if and how they want to insure the individual.

This determination of “if” and “how” is referred to as “underwriting.” There are not many limits on the type of information underwriters can take into consideration.

3. Do all life insurance companies require a medical examination?

Often companies will require a physical medical examination prior to agreeing to insure an individual. Generally, they have a company doctor that will conduct this examination. This doctor or medical technician may have their own office or may even come to the potential insured party’s home for their convenience. The insurance company should not charge the potential insured party for this exam.

4. What types of questions will the life insurance company ask when applying for a policy?

It is common for life insurance applications to ask the following questions:

Do you regularly use tobacco or tobacco products? Life insurance companies strongly believe that smoking or using tobacco products in any form can make an individual’s life shorter and will charge higher premiums for smokers.

Do you have AIDS, cancer, heart disease, or are you HIV+? Depending on the severity of any health conditions such as these, a life insurance company may sell you a policy at the normal rate or possibly charge you a more expensive price. If the health problem is extremely severe, most life insurance companies will directly reject your application.

Do you have a hazardous career? With more dangerous jobs, companies tend to charge a more expensive price for a life insurance policy. If your job requires an above average amount of risky, life threatening behavior, expect a higher cost for life insurance.

Does your immediate family have a history of fatal diseases or death at a young age not due to an accident? The life insurance company is not barred from questioning you about you and your family’s health history. Diseases that commonly run in the family that are fatal, such as heart disease, Sickle Cell Anemia, or cancer may cause a company to reject your application or charge you a higher rate.

5. What other questions can I expect to be asked?

A life insurance application may ask seemingly unrelated health questions to asses high risk behavior.

Some of these questions may include the following:

In the past seven to ten years have you ever been arrested for driving under the influence? Diagnosed or medically treated for cancer, AIDS, HIV, chronic lung disorder, heart disease, diabetes, stroke, or liver problems? Recommended by a medical professional to cease or reduce drinking alcohol?

Are you currently or have you ever been disabled or forced to retire due to an illness or injury?

Answering “yes” to any one of these inquiries may result in getting a life insurance application denied, it is far better than answering dishonestly and then having a claim refused later down the line. This outcome could result in your beneficiaries getting nothing if you should die.

6. Can life insurance companies use genetic testing to determine whether or not they want to insure someone?

Life insurance companies often use genetic testing to learn as much as possible about their potential clients. By administering a blood test, companies can determine not only what diseases you may currently have, but ones you may get in the future as well. Some states do not permit this kind of testing for health insurance purposes, but generally for life insurance, genetic testing is permitted.

Six Reasons to Buy Whole Life Insurance or Term Life Insurance

josh — Sun, 02 May 2010 14:43:39 +0000

Securing quality term or whole life insurance coverage is important, especially if there are people in your life whose financial stability depends on your income. Many financial experts even consider life insurance to be the foundation of sound financial planning. Find out six reasons why you should purchase whole life or term life insurance to protect your family and loved ones.

1. Income for Dependents
If people in your life depend on your income for financial support, having a whole life or term life insurance policy in place will protect them in the event of your death. Life insurance can replace your income for your dependents so they aren’t left bearing the financial burden of an income lost through death. This applies most often to parents with young children, but is also applicable to couples if the death of one spouse would leave the survivor financially stricken. If your parents, adult children, or siblings are your dependents, life insurance can also provide replacement income to benefit them. And, if your surviving spouse’s government or employer-sponsored benefits will see a reduction after your death, having life insurance to replace your income can definitely be useful.

2. Coverage for Final Expenses
Funeral and burial costs can be expensive, but your life insurance can cover the costs. Carefully planned life insurance will also provide funds to cover mortgages and other expenses. Debts and medical expenses not covered by health insurance can also be covered by your life insurance. Life insurance offers protection to the dependents you leave behind, since it can sometimes be utilized as a cash resource.

3. Create Inheritance
Life insurance can allow you to create an inheritance for your immediate relatives or heirs. Even if you don’t have any other significant assets to pass on to your surviving family or loved ones, you can create an inheritance by naming your heirs as beneficiaries in your life insurance policy.

4. Pay Estate Taxes
Rather than leaving your surviving family to take a smaller inheritance or do away with some assets, have a quality life insurance policy in place so the benefits can pay estate taxes. Life insurance plans provide tax free benefits that can be used to pay estate taxes and death duties.

5. Create Source of Savings
Your life insurance can become a sort of savings plan since some types of insurance can create a cash value that is available for withdrawal upon the owner’s request. Another benefit of this “forced” savings plan is that the interest credited is tax deferred, and if the money is paid as a death claim, the interest can be tax exempt (www.iii.org).

6. Make Charitable Contribution
By naming a charity as a beneficiary of your life insurance, you can make a larger contribution than if you donated the cash equivalent of your policy’s premiums. Donating a term life insurance policy allows you to deduct the cost of the premiums from your taxes. And, if you donate a whole life policy, you can deduct the cash value of the policy and the cost of the whole life insurance premiums. In both cases, after you die, the charity you select gets the insurance policy proceeds.

Plan ahead and ensure that you have a quality life insurance plan in place to protect your family.

General Information About Whole Life Insurance

josh — Fri, 30 Apr 2010 06:43:40 +0000

Would your death leave your spouse or family with financial problems? You could consider purchasing life insurance coverage that will pay out a certain amount in the event of your death to help cover their needs. Here is some general information about whole life insurance.

A Whole Life Insurance Description:

This is a life insurance policy that can cover you for your entire life and not just for a specific period such as term life insurance. Your death benefit and premium will generally remain the same.

A whole life policy also builds cash value. This is a return on the portion of your premiums that the insurance company invests. Your cash value is tax-deferred until you withdraw it. You may also borrow against it.

Who Needs Whole Life Insurance?

If you are in need of life insurance the tax benefits and cash value of a whole life policy can be a bonus. A whole life policy will earn you tax-deferred interest near the market rate and will pay your beneficiaries a death benefit.

You may also consider purchasing a whole life policy if you require more tax-deferred savings than you have available. You can also get the life coverage you need if you can afford to pay the higher premiums.

Cash Value in a Whole Life Policy.

The cash value is what you could get if you cashed in your policy. If you decide to surrender your policy, your cash surrender value can be paid in paid-up insurance or cash.

The earnings on the cash value of a whole life insurance policy can be borrowed against the policy in the form of a policy loan. The death benefit is reduced by the amount of the loan if the loan is not repaid.

Cashing Out A Whole Life Insurance Policy.

Cashing out a whole life insurance policy may be difficult owing to the surrender charge. The surrender charge is a charge which insurers remove out of the cash savings amount you have developed. This charge can be as high as 10% of the payoff value of the life insurance policy. It may stay in force for up to 20 years after you purchased the policy.

Borrowing Against Whole Life Insurance.

You may borrow against the guaranteed cash value of a whole life insurance policy in the form of a policy loan as long as the policy is valid. Just remember that borrowed amounts diminish the death benefit and cash surrender value of your policy.

The Best Whole Life Insurance Benefit.

There may be many different opinions regarding the best whole life insurance benefit. This can also be influenced by personal needs and circumstances.

The following are three possible whole life insurance benefits:

Premiums are normally level and payable for life.

A quantity of the money you pay into your whole life policy collect as a guaranteed cash value.

A part of your life insurance premium may be returned to you as a dividend if real life insurance costs turn out to be less than was believed in setting the premiums.

The Best Whole Life Insurance

josh — Thu, 29 Apr 2010 15:11:46 +0000

Whole life insurance may be a good choice if you have extended future goals. Whole life generally offers level premiums and the accumulation of cash values. The guaranteed cash values may also provide you with money in the future to help with temporary needs.

Do you need life insurance coverage?

You may consider purchasing life insurance:

* If you become a parent.
* If your family does not have a lot of money saved.
* If you are a stay-at-home parent.
* To cover the mortgage or other large shared financial commitments.

The different types of whole life insurance policies you may choose from.

To help you choose the best whole life insurance, you may first need to know more about the different types of whole life policies you can choose from.

Level Premium Whole Life Insurance:

This whole life policy features premium payments that are:

* level.
* are required to be paid as long as the insured is alive.

In the early years the premium is more than enough to pay the current cost of insurance security. The surplus makes up the insufficiency of premiums in later years when the annual premium is not sufficient to pay the yearly cost of insurance. These extra premiums are held and invested by the insurer. This creates the cash value of the policy.

Indeterminate Premium Whole Life Insurance:

This type of whole life policy is similar to an ordinary whole life policy save for it providing adjustable premiums. The company will charge a premium based on its current estimate of expenditure, investment income and mortality. The company will adjust the premium in view of these estimates changing in later years. It will never be adjusted above the maximum guaranteed premium declared in the policy contract.

Single Premium Whole Life Insurance:

Single premium whole life is a limited payment whole life insurance policy with one quite large premium payment payable at issue. The policy is fully paid up and no further premiums are necessary. Owing to the single premium payment the policy will have an immediate cash and loan value. This could be considerable depending on the sum of the single premium payment.

Limited Payment Whole Life Insurance:

This whole life policy gives you life insurance protection but involves only a limited number of premium payments. The premium payments will be higher than with an ordinary whole life policy since the premiums are paid over a shorter timespan. Limited payment plans can provide for the payment of premiums for a set number of years such as 20 payment whole life insurance.

Participating Whole Life Insurance:

This whole life policy pays dividends corresponding to:

* the positive experience of the company.
* results from surplus investment earnings.
* favorable mortality.

The dividends may be:

* paid in cash.
* used to decrease your premium expenses.
* left to build up at a particular rate of interest.
* used to buy paid-up supplementary insurance.

Non-Participating Whole Life Insurance:

A non-participating whole life policy has a level premium and a fixed insured amount during your entire life. However, this policy does not pay out any dividends.

Contact Joshua Cumrine Financial for more information about the best whole life insurance for your personal life insurance needs.

Advantages of Whole and Term Life Insurance

josh — Tue, 27 Apr 2010 06:38:40 +0000

As is obvious from the name, whole life insurance is a permanent life insurance covering the whole life of the policy holder with timely premium payments, as long as the policy holder is alive. Whole life insurance is apt for those who plan on long term goals.

Though term life insurance has gained popularity due to various reasons, whole life insurance cannot be set aside entirely as it has a lot of advantages to its credit. Primarily whole life insurance guarantees the death benefits that never decrease and nonfederal income taxes are charged upon death and lasts an entire lifetime which is a good advantage.

Premiums are generally a little higher than term life insurance and as the age progresses, the annual premium tends to lessen. As against term life insurance which has no cash value, whole life insurance has some money stored as cash value. If the policy is terminated, accumulated guaranteed cash would be paid. It is also feasible to take loans against the whole life insurance policy. The guaranteed cash values can be used for emergencies and temporary needs. The cash value increases as the premiums are paid.

When a policy holder has a participation in whole life insurance, he or she is eligible for earning dividends which would be paid in cash. This cash can be either used to keep within the policy to generate interest or used to minimize the premiums. All the cash that are accumulated or borrowed are on a tax free basis except when it is withdrawn.

Whole life insurance policies can never be struck off by the insurance company. As the whole life insurance policy gets older, the surrender value becomes more or less the amount that has been paid and thus, the cash value along with the dividend far exceeds the premiums that have been paid.

The dividend from a whole life insurance can also be used to purchase paid up additions that are small, fully paid up whole life policies.

Whole life insurance is not only a tool to protect the dependents after the demise of the policy holder; it is also a way of saving for the future and has an emotional attachment to it. Hence, sufficient thought and time have to be spared to get the best quote and option available and decide accordingly, to ensure a secure future and a comfortable present life.