Getting the Lowest Life Insurance Rate

by Daniel Roberts

Age, health and lifestyle determine your life insurance rate. If you are older, have health problems and smoke, you will pay more.

But there are always ways to lower your life insurance.

Find out the rate per $1,000 of coverage, which often drops once you pass a certain level of coverage, and will help you determine how to get the most life insurance for the least money.

Save money on your insurance premiums — quit smoking, start exercising, and lose weight. Many insurance companies charge smokers double the nonsmoker rate for insurance, and similar discounts apply if you lose enough weight to fall into a preferred category.

Avoid riders — paying extra money to cover an event that’s almost guaranteed not to happen doesn’t make sense when you’re trying to cut costs.

Compare the single-payment price to the total cost of the monthly payments and look for hidden costs.

It pays to shop around because premiums can vary widely — save time by going to a website where you can compare multiple insurance companies at once.

Tax Secrets of the Wealthy: Slash your life insurance costs while increasing the benefits

By IRV BLACKMAN
Wednesday, July 30, 2008
Depending on your age, health, your specific goals and the type of assets you own, the trick is successfully performed – every time – by selecting the right strategy or combination of strategies. Following are the five key strategies we use most often when a client buys new insurance. Unless otherwise indicated all policies are what is commonly called “permanent insurance”: have cash surrender value (CSV).

1. Financed insurance. You use cash, marketable securities (stocks and/or bonds) or real estate as collaterals for bank loans. The loans are used to pay your premiums (and interest on prior loans). For example, Joe (age 72) and his wife Mary (69) bought $5 million of second-to-die life insurance. The annual out-of-pocket premiums to be paid are only $16,500. Joe simply pledged $300,000 of his existing $1.6 million stock portfolio as collateral with the bank.

Normally, the premiums would be about $63,000 per year. The bank loans do not have to be repaid until both Joe and Mary have died.

This financed-insurance strategy is the best tax-advantaged opportunity (legally allowed) that I have ever seen or heard of in my 40-plus years as a tax practitioner. It is implemented in combination with an irrevocable life insurance trust (keeps insurance proceeds out of your, and your spouse’s taxable estate). You actually create tax-free wealth – millions of dollars – with minuscule out-of-pocket costs.

You must check it out.

2. Subtrust. If you have funds in a 401(k), profit-sharing plan, IRA or other qualified – plan, you can create a Subtrust. You will not pay any premiums. Instead, the Subtrust will pay all premiums. In effect, you have deducted your insurance premiums, and used the profits earned in the plan to pay your personal premium expense … all tax-free.

The subtrust strategy was covered in detail in last week’s article. In a nutshell: If you are married and have $300,000 or more in your qualified plans, you must check out a subtrust. Easy to do. Creates tax-free wealth in effect, turning the tax dollars you would have lost to the IRS into millions of dollars for your family (tax-free).

3. Family limited partnership (FLIP). You create your FLIP by transferring income producing property you own (for example stocks, bonds or real estate). A tax-free transfer. A FLIP has many estate planning advantages. The income of the FLIP is used to pay the insurance premiums. Your heirs will get the life insurance proceeds free of income and estate tax.

4. Defective trust. Such a trust is defective for income tax purposes (it is treated as if it does not even exist). But the trust is recognized for estate tax purposes, and like a FLIP, has many estate planning advantages. This time the property you own is sold (instead of transferred like a FLIP) to the defective trust. A tax-free sale. The income of the trust pays the policy premiums. And of course, the life insurance proceeds go to your kids or grandkids free of income tax and estate tax.

5. Combinations. The above strategies often are combined with term insurance and an irrevocable life insurance trust. More than one strategy – called a “combination” – may be used for the same client.

The above does not attempt to cover all of the possibilities for slashing your premiums when purchasing new life insurance policies. Nor does the above cover all of the rules and tax traps for those who attempt to use the strategies without professional help.

The purpose of the article is to show you some of the many possibilities for creativity when buying large amounts (say $2 million or more) of life insurance. Yes … I know, life insurance is a boring subject. But if you want to create tax-free wealth for your family, without getting hit with large premium costs, life-insurance (done right) is the best strategy for tax-saving fun.

Thinking of enriching your family, while beating up the IRS … legally? And would like to see how life insurance would work for your family? Or maybe you have existing policies and want to see how easy it is to increase your death benefit without paying more premiums.

Lack of life insurance can leave your family exposed

Many people realize the need for life insurance but keep putting it off until it is too late. You may think that life insurance is confusing, expensive and complicated. You may think you don't know enough to make the right decisions for you and your loved ones. Postponing this decision leaves you and your family exposed financially.

Assumption #1: I'll always be able to buy life insurance.

You could develop a health condition that makes you uninsurable or could make life insurance too costly for you.

Assumption #2: I'll get life insurance later when I'm older or have a family.

Life insurance may be needed at all stages of life. Whether married or single, male or female, with children or without, you may have financial obligations that need to be met. Life insurance provides financial security for you and your loved ones.

Assumption #3: My family and I are covered by the group insurance at work.

To meet the future needs of your family, you need to have 7 to 10 times your annual income. Most group term insurance amounts offered by employers won't meet this need. And, when you don't work for that employer any longer, you usually lose that coverage.

Assumption #4: My husband has life insurance so I don't need it.

Women often live longer than men but not always. There are countless stories of men who had to shoulder the family financial burden along with the emotional burden after their wife passed away.

Assumption #5: My family can cover funeral and burial expenses.

Burying a spouse or loved one is the most stressful time in a family's life. Having life insurance can reduce financial concerns for the family.

Take the time now to review your needs and provide adequately for yourself and your family.

Providing when it's most needed

The death of a family member can be devastating to survivors both emotionally and financially. Life insurance can provide cash to help with your family's immediate and long-term needs.


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Immediate needs include funeral expenses, unpaid medical bills and taxes.
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Long-term needs include care for a disabled child or elderly parent expenses and, in general, the chance for members of your family to continue to live the life to which they are accustomed.

Life insurance is not for the people who die, but for people who live. It's wise to explore options while you are still healthy; health problems can make life insurance expensive or unavailable. Three forms of life insurance are most common today:

Term life insurance. This is temporary life insurance for a specific time period (one, five, 10 or more years). It can provide short-term coverage on a limited budget. Term insurance, however, costs more to buy as you get older.

There are two common types of term life insurance:

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Level term: the amount of protection remains the same during the coverage period.
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Decreasing term: the amount of protection gradually declines during the coverage period.




Whole life insurance. Premiums are generally level with cash value growth throughout the life of the policy.

Cash values can be borrowed (with interest charged) during the insured person's lifetime to help meet temporary or emergency needs.

Funds borrowed reduce the death benefit and cash surrender value.

Universal life insurance. This offers many traditional advantages of whole life insurance (such as protection for life), but also offers flexibility.

Coverage amounts and premium payments are flexible to help meet changing needs during an insured person's lifetime (subject to certain conditions).

When you buy life insurance, you buy a promise of protection against financial loss caused by death. The promise is only as good as the company that stands behind it. In today's marketplace, life insurance buyers should be concerned about:

* The financial strength of the insurer.
* Customer service.

Check Your Insurer's Financial Ratings

Each year insurance companies go out of business. Each year insurers go insolvent. Their clients are severely impacted. Claims go unpaid, cash values are lost, and annuity payments are reduced or cut off. Policies have to be replaced in a rush, resulting in lower coverage and higher premiums. Not a fun time.

Several organizations analyze insurance companies for soundness. The best known is the AM Best Company (www.ambest.com). Standard & Poor’s also rates insurers. I rely on Weiss Ratings (www.weissratings.com) as a tough, unbiased source of information. They never accept fees from insurers. They utilize industry and regulator’s filings in their analysis. They’re tough graders; a B- is still considered good in their system.

A recent review of AM Best Ratings revealed that almost 90% of insurance companies receive a rating of “Very Good” or higher. Only 29% of insurers received a Weiss Rating of “Good” or higher. Weiss has a higher standard. When working with my client’s money I want objective, tough, and accurate ratings.

Yes, Brick Buildings Do Burn

I can't tell you how many times I hear from clients, "oh, this place will never burn."

Thoughts on Insurance Claims

I got a call the other day from a business owner who was going through a bad claim - a fire destroyed his business. He was not a happy guy. Insurance will not pay half of his total costs. He will probably never open his doors again.

The best loss is one that never happens. The second best loss is one that you took action to mitigate. The least best loss is the one where you bought insurance. The worse loss is the one where you don't have enough insurance.

Protect your property. Install alarms, locks, and sturdy doors. Install a sprinkler system and have extinguishers on hand. Implement systems that eliminate the opportunity for an embezzlement against you. Install a video system to record what goes on when you are not around.

Buy insurance from a trusted agent and get an independent review of your insurance coverage. Build plans that can be executed if the worst happens.

Another tip, get my free white paper, The 20 Biggest Business Insurance Mistakes. Great info you can use to manage your insurance better. 40 Pages of insurance help including common insurance terms and info on how to understand your insurance policies. Just updated.

Why Employees Steal

Someone just like this woman might be working in your office right now - GoTo YouTube.com

12,000 Laptops Lost Every Week

More than 12,000 laptop computers are lost each week in American airports.

That's one of the conclusions from a recent Dell-sponsored study, "The Case of Lost Laptops."

The full 17 page report is a wake-up call for travelers. Think of the data lost and the information compromised!

Here is a link to the full report.

Here is a link to a recent note I posted about Lojack for Laptops.

You can keep your best staff by buying them life insurance

Martin Owiny
The traditional life insurance product where one pays a premium to an insurance company to provide life cover in event of a dreaded event such as death or disability is something Ugandans have been putting on the shelf for the past three decades.

However, this week Liberty Life Assurance Uganda Limited led a revived initiative to reintroduce the product to the Ugandan market.
Ugandans have become accustomed to keeping wealth for the next generation in either land, buildings or animals. Due to bad experiences with currency reforms, fears of inflation and tradition many Ugandans prefer such avenues for wealth retention as opposed to a traditional insurance product.

This is changing and we are now seeing a number of corporate organisations coming forward to buy life insurance for their employees’ security, well being and future estates. Individuals are also coming forward.

Life insurance makes sense from a diversification perspective. As the Bible says “A good man leaves an inheritance for his children’s children”.

Therefore, as one sets up land and buildings, bearing in mind that the ultimate beneficiary is actually the next generation, it has also become vital that one considers a diversification strategy and also looks at different alternatives, including life insurance.

Life insurance has been designed to ensure that after a given company has put down a fixed annual premium, in the event of the demise of a staff member, the estate of the staff member receives at least 24 months salary as a soft landing.

Such funds can be utilised to cater for children’s education and day-to-day upkeep. It can also be utilised to acquire land or set up a building or business.

Life insurance has become a motivating factor for employees’ to remain within an institution long term. Further to that, it has also become a bargaining tool for employees who seek to move from one organisation to another.

Therefore a number of Ugandan institutions and individuals now view life insurance as a necessity. The challenge is now to make the product easily available to the average Ugandan who is not employed by a corporate institution.

As a diversification strategy to ensure wealth retention and sustenance for the next generation in event of a dreaded disease, injury or disability the insurance industry needs to be structured for the average Ugandan. The challenge is for the country’s insurance industry to rise to the occasion.

Pension funds are now also looking to life insurance as a necessity for their members. This is good news for Ugandans because it acts as a top-up to one’s pension. Therefore in the event of a dreaded event an individual and/or their estate will receive a top-up on their pension savings.

Liberty Life therefore continues to roll out strategies to ensure that life insurance is a reality in the Ugandan market and is partnering with Stanbic Investments to roll out its Libwealth strategy in Uganda.

At the moment the Ugandan Libwealth strategy ensures that in addition to life insurance improved pension fund management and health insurance also becomes a reality to the average Ugandan worker.

Improved pension fund management will be discussed, debated and encouraged through forums such as the Stanbic Business Club which was also launched this week. The Stanbic Business Club was launched on July 10 by Bernard Katompa, CEO of Liberty Africa.

It seeks to bring together pension fund trustees from over 50 pension schemes in Uganda to interact together on topical issues and exchange ideas towards improved pension fund management in Uganda as we transition into a new dispensation of pension reform.

Such interaction has become increasingly important given that a number of organisations have moved ahead of pending legislation to introduce international best practice in management of their pension schemes.

The forum on July 10, possibly for the first time in Uganda’s history, therefore brought together over 40 pensions fund organisations and leading pension industry players to interact together on a formal and informal basis to exchange ideas towards improving Uganda’s pension industry.

As the Chinese say “a journey of a thousand miles begins with one step”.
It is indeed hoped that the promised introduction of a pension industry regulator by December 2008 will lead to increased activity within the Ugandan economy and stock markets. Much as Uganda still has a long way to go, such a regulator will be in a position to provide insight and direction.

Members of pension funds are calling for improved returns as well as reduced bureaucracy in obtaining their hard earned savings when the time comes.

Regulation should therefore go a long way in ensuring that this improvement becomes a reality for the average Ugandan worker who understands that improved governance is the way to go.

The building blocks of wealth

You can't get ahead unless you slam the brakes on spending. Barbara Drury looks at cost-cutting.

After years of fair economic weather and plain sailing, Australian households have hit a reef. Rising fuel and food prices, higher mortgage repayments and lower investment returns have punched a hole in budgets already weighed down by excessive spending, much of it on credit.

There are only two options if you want to plug a leaky household budget, says Desiree Fraser of Count Wealth Accountants - earn more or spend less. Winning a pay rise or working an extra shift is not always feasible, so trimming spending is often the best option.

But after so many years of economic growth and cheap credit, Fraser believes people have forgotten how to budget. "People say, 'I'm on good money, I shouldn't have to live like this,"' she says. But taking control of your household spending can improve your quality of life, not detract from it.

Amanda Reed, senior policy officer with the Australian Financial Counselling and Credit Reform Association, says before you can save you need to know exactly how much you are spending and what you are spending money on.

As a first step, financial advisers all suggest you carry a notebook around with you and jot down everything you spend for two to four weeks. "From that exercise, you can begin to plug the leaks," Reed says.

The recent focus has been on petrol, food and mortgage repayments. However, most people who keep a daily log find it's the little things that count - your morning coffee and newspaper, a lunchtime sandwich, even phone calls.

Five takeaway coffees a week can add up to $15, or more than $700 a year. Add a bought lunch and the figure rises to more than $3000 a year. Taking a packed lunch to work just two days a week could save nearly $1000. Reed says small changes in habits can make a big difference. Rather than buying bread and milk at the corner store, shop at the supermarket. Preparing food at home rather than buying prepared meals or giving the kids money to buy lunch at school every day will also save cash.

If the kids are putting on pressure to spend, Reed suggests using cash on shopping trips rather than plastic, so they learn that there is a limited amount of cash to buy what is needed and, when it runs out, that's it.

"The problem with plastic is that kids have no idea where the money's coming from - they think you just wave a piece of plastic to get what you want."

What to Do When You Have a Property Insurance Claim

Here we are talking about homeowners' property claims and business property claims.

The property insurance claims process is always a negotiation. Listen more than you talk. Ask questions when you don't understand. Have an expert on your side.

Document everything that happens with your insurance claim. If you speak with someone on the phone about your claim, write down the date and time of your conversation as well as the name of the claim adjuster you spoke with. Take great notes.

Confirm instructions in writing. Email is a great way to document the actions you take in a claim. "Adjuster Smith, Thanks for speaking with me. To confirm today's conversation... You are going to look into a list of contractors who can fix our roof. I am to gather price info on the electronic equipment that was destroyed. As you suggested, I will be holding all receipt for our hotel stay and the meals we eat."

Keep your insurance agent involved in your claim. While the agent doesn't need to be involved in every step, make sure they understand how things are going. Ask for help from your agent if things don't seem to be going well.
Under most policies the insurance company will insist that you attempt to repair or clean property. Modern cleaning techniques are pretty good at removing the smoke smell from clothing and furniture. Work with the adjuster but stand your ground if the cleaning is inadequate. This is another place your agent can help.

Workers Compensation Experience Mod Video

Here's a short video I did on the workers' compensation experience modification worksheet. It covers the makeup of the mod and how the information is organized.

The modification is a ratio of expected losses to actual losses. It is the part of the work comp premium that you determine.

Comments welcome.

Employees Who Steal

Interesting article from the GainesvilleTimes.com website on the psychology of employees who steal.

Fire Extingishers In the News

Here are three news stories where fire extinguishers - and people trained in their use - saved the day!

Residents Displaced by Fairfield Fire

Richmond Post Office Opens on Time After Early Morning Fire

Neighbors help douse Taylors fire

OSHA requires that all businesses have appropriate fire extinguishers on site. Also, employees must be trained in their use.

Be A Smart Insurance Buyer

Buying insurance requires taking time to understand what you need and what your policies cover. Follow the advice I received from an early mentor in my career: "The most important part of the insurance transaction is the relationship between the insurance agent and the client."

Do you feel comfortable with the information and advice your agent gives you? Does your agent know and understand your industry? Is your business appreciated? Do you feel well served when there's a problem? Follow your gut. If you don't have a good relationship with your insurer or agent, the results will be less than acceptable for you.

Your relationship with your agent is similar to that of your accountant and your lawyer. You must have faith that the agent has your best interests in mind. You must be confident that your agent is taking a proactive approach to your account. If you feel uncomfortable with the relationship, consider carefully if he or she is the best agent for you.

Insurance Is Not Gambling

Over the years, countless people have told me that buying insurance is nothing more than gambling. It happened last week at my Rotary meeting.

It is simply not true. Gambling creates risk, while insurance addresses and protects you from existing risk. When you gamble, you can finish in one of three places: a winner, a loser, or break even. You also can choose not to play.

Insurance addresses the risks you already face. You own a building. You must be sure it's still there tomorrow. The next day the building either is there or it's not. Insurance, unlike gambling, does not create risk.

Insurance passes the risk of loss from you to the insurance company. That's why "self-insurance" is a misnomer. You either buy insurance or you don't. If you don't buy insurance you are funding the risk yourself, also known as "retention": you retain the risk.

Insurance Policy Renewal Dates

The most popular renewal date for business insurance programs is January 1. July 1 is also common. The "quarter changes" of April and October are busy times for insurance companies, too.

Don't have your business insurance renew anywhere near these dates. Underwriters and agents are scurrying around trying to handle three or four times their normal workload. Unless you are spending $1,000,000 a year on your insurance, you won't get the attention you deserve. If you currently have one of the above policy dates, consider changing it to a date like February 17 or June 12.

One exception … Rarely do I recommend changing policy dates on workers' compensation policies. The experience modification calculation does not respond well to changing policy periods. A change in policy dates always seems to increase the experience modification factor by .01 or more. That means a higher premium - usually for several years.

Biggest Insurance Mistakes

Three years ago I came out with a white paper, The 20 Biggest Business Insurance Mistakes.

The Wall Street Journal voted it the best insurance white paper by a guy with a mustache and a wife named Kathy.

Time for an update... Let's see what the Wall Street Journal says this time. (wink)

Get it here.

Can You Afford Long-Term-Care Insurance?

Long-term care is likely to be most Americans' greatest expense of all in retirement. A private room in a nursing home costs $76,460 annually on average, or $209 a day, and Medicare typically won't cover it.

Long-term-care insurance can help protect you from some of these unpredictable costs. It can be used to pay for nursing home expenses, adult day care, and in-home help for seniors with chronic conditions or who need extra help recovering from an illness.

But this pricey insurance is prohibitively expensive for many people. AARP estimates that a 65-year-old in good health can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing-home and home care. And Fidelity Investments estimates that a couple, both of whom are 65 in 2008, will need $85,000 to insure against a lifetime of long-term-care expenses.

If you're going to buy long-term-care insurance, here are a few things to consider:

Premiums. Find out what the premium is now and what it will cost in the future. Ask if a pre-existing medical condition could influence premium prices. AARP says you may not want to buy a policy if the cost of premiums will lower your standard of living or force you to give up other things you need right now. The National Program on Women and Aging recommends that, as a rule of thumb, premiums should be less than 20 percent of your disposable income after all other essential bills are paid. So, this type of insurance is primarily appropriate for people with assets between $200,000 and $1.5 million, according to Consumer Reports. Both long-term-care expenses and insurance are so expensive that almost all middle- and low-income households rely on Medicaid for nursing home care after they spend down their assets to a level at which they qualify.

Coverage. You can choose to be covered for different varieties of home healthcare, nursing-home care, or both. Some providers offer lower premiums if you agree to a waiting period of up to 100 days before coverage begins, during which you pay all of your own expenses.

Be sure to ask about the duration of coverage. Long-term-care coverage doesn't always last that long. The average length of stay in a nursing home is 3.7 years for women and 2.7 years for men, according to Joan Bloom, a senior vice president for Fidelity Investments Life Insurance Co. You can choose a benefit period as short as two years or as long as the rest of your life. And you'll want to find out about maximum daily, monthly, or lifetime payouts and whether they are indexed for inflation. If your care costs more than the caps, you will have to pay for it out of your own pocket.

The company. Ask what happens if the insurance company should go out of business before you need long-term-care coverage. And check out its track record for paying out claims. You can examine ratings of companies online at A.M. Best, Moody's, and Standard & Poor's. Consumer Reports recommends that you buy only from insurers that are rated in the top two financial-strength categories by at least two of the ratings services. You can also check up on a company with your state insurance department.

The fine print. Read any contract you sign carefully, and ask questions. Find out how to cancel, what happens if you stop paying the premiums, how many times you can renew, and what needs to happen before you can begin using your benefits. A fee-only financial planner, whom you pay by the hour and who doesn't accept commissions for selling you financial products, can help you decipher the fine-print sales pitch.

Your state. Insurance laws and options vary by state. The nonprofit Family Caregiver Alliance has a Web tool to help consumers peruse long-term-care options in each state. And the National Association of Insurance Commissioners offers consumer tips for buying long-term-care insurance.

Life Insurance 101

Life Insurance can be confusing, let us help you decipher your way through it. This is the first in a several part series where we will introduce you to a few of the key terms in the Life Insurance world.

First of all, life insurers (also known as carriers) offer more than just traditional life insurance. One of today's hot products is Long Term Care (LTC), we will talk about LTC in another article.

They also offer products like Annuities, Critical Illness and Disability Income insurance. You can purchase these products through agents, which typically sell only the carrier's product they are associated with, brokers which sell products from various carriers and on your own through the Internet.
Save up to 70% on term Life Insurance ? Click Here

An introduction to Life Insurance products starts with the two basic categories that life insurance products fall into. These are those with Cash Value and those without Cash Value. An insurance policy with a cash value is a policy that has a value for the insured that they can borrow or withdraw from. Cash value is built up by paying premiums to build up your cash value. Typically, those without cash value are Term Insurance products. Those products with a cash value, typically are investments that last until you die. A Whole life policy and a Universal life policy are examples of policies with a cash value.

In this article, we will concentrate on term life policies. These are the most common types of policies and do not have a cash value. You purchase a term policy for a specific amount of time, usually 10 or 20 years. Since these policies have no cash value, they are generally a very good value. A term policy is the ideal choice for people under 40 years old. For example, a 30 year old with good health can find a policy for less than $300 a YEAR for $500,000 in protection. This should more than cover anyone around that age.

Another form of a term policy is offered to many of to help offset some of our credit risks. For example, have you received an offer that if you pass away, your mortgage will be paid off? This is generally what is known as a decreasing term policy. Mortgage companies market this to their clients that covers the unpaid portion of the debt to them. Before purchasing one of these types of policies (often offered along with car loans, credit cards, etc as well) do your research! You can easily find out how much a policy will cost by clicking one the links on this page.

Happy Independence Day

Enjoy a happy and safe Independence Day.

Most of us have not read the Declaration of Independence since we were in school. Not a bad thing to re-read every year.

Back to insurance and risk management on Monday.

Life insurance – Who needs it?

Here it is, well into summer and I’ve finally tackled the cleaning out of my 2007 files. What a job! As always, I’m absolutely amazed at the amount of money I’ve managed to fritter away!

But as I was weeding out my reams of surplus paper, I was reminded of a life insurance policy I took out almost 20 years ago. At the time, I was employed by a large bank and had a minimum employer-provided policy. But I knew that I wanted to branch out on my own in the near future, and since I had just become the primary supporter for my widowed mother, and I felt I needed a little something extra in case I left this world before she did.

The policy is a Variable Life Appreciation policy, which has long since gone past the point of surrender fees. One of the features I liked when I purchased it was the availability to choose among a variety of funds in which my money was invested. Fortunately, those funds have done very well over the years, and I have a sizeable cash value. But I don’t have any children, and therefore, the main reason for life insurance – to help the family continue on the same path of prosperity – doesn’t exist for me.

Consequently, I have been going through the numbers, trying to decide if my money would be better invested elsewhere. And that prompted the thought that many people buy these insurance policies at an early age, and like me, tend to mostly forget about them, often neglecting to consider them when taking their annual assessment of their financial and investment positions.

But if that’s the case, you may be forgoing the opportunity to determine if, indeed, your money could be invested in a more profitable manner. If you bought a policy when your children were young, and they now have families of their own and don’t necessarily need your insurance policy for survival, then maybe you don’t need to be paying the premiums.

If your spouse has predeceased you, you may want to reduce the face value of your policy – just enough to cover your burial expenses. Or you may want to cancel it, if you don’t need the money for that purpose, and you can free up those dollars for better-returning investments.

And then there are certain types of life insurance that most folks just don’t need. Credit life insurance, which pays off installment and mortgage loans if you die prematurely, is often just not worth the money, as the premiums are very expensive. Unless you are in ill health, and think you are going to pass away before the loan expires, you may want to consider it, since these policies don’t usually require health examinations.

Insuring your child is also another waste of money, unless he is a child prodigy or a famous actor whose income you rely on.

Senior insurance, often advertised on TV and by mail, claims that “You can not be refused.” However, the fine print usually says that no death benefit will be paid if you die within two years. Also, the face amounts of this insurance are pretty minimal and the price charged per dollar amount of coverage is usually much higher than a regular life insurance policy. Consequently, if you are healthy, you have better alternatives.

There are four basic types of life insurance (with scores of variations among them), but the primary types are the following:

Term policies pay a death benefit if you die during the term of policy. While generally less expensive than the other types, the biggest disadvantage is that as you age, your premiums increase, becoming very expensive and often unaffordable over the age of 65. And if you outlive the policy, your heirs receive no death benefit.

The premiums of Cash Value or Whole Life/Permanent are two to three times those of term insurance, but include guaranteed renewable insurance coverage for your lifetime, as well as an investment component that aims to build tax-deferred cash value. Some policies allow you to choose your investments, others don’t. And if the investments don’t fare too well, you may adversely affect the cash value and cause your premiums to escalate.

Variable Life, also called Variable Appreciable Life Insurance (the policy I have), allows you to invest a portion of your premium dollars in equities, bonds, and/or money markets. Then, depending on the performance of your investments, the value of your death benefit and cash value will increase or decrease.

Variable Universal Life combines Variable Life and Universal Life, has more options in terms of investment accounts, and provides flexibility in your premium and death benefits. A minimum death benefit is guaranteed. This policy allows you more control over the cash value, offering the opportunity to build up significant resources, but is also more expensive than the previous policies.

Now that you are aware of what is available in the life insurance industry, it’s time to assess your own needs. One factor you may want to consider is that as a whole, folks are living a lot longer today, and blowing through the bulk of their retirement savings. Therefore, a life insurance policy for the sake of leaving a little something for your heirs may be desirable – if the cost is right.

To help you decide the amount of coverage, there are several websites that offer life insurance calculators. One caveat: there are plenty of other calculators available, but many of the sites are run by the insurance industry, so be aware that they are trying to sell you insurance!

http://moneycentral.msn.com/investor/calcs/n_life/main.asp

http://www.smartmoney.com/insurance/life/index.cfm?story=intro

Now, let’s talk about the state of the industry.

One concern I have with the policies that allow you to choose among the insurance company’s investments, is that they are the insurance company’s chosen range of investments. And recently, we have seen just how badly some of their investments have fared. American International Group (NYSE: AIG, Stock Forum) recently had the worst quarter in its 89-year history, losing $7.81 billion, primarily from investments in complex financial instruments that went downhill. They are not the only insurance company to take a hit. Both MetLife (NYSE: MET, Stock Forum) and Prudential Financial (NYSE: PRU, Stock Forum) reported decreased profits in the fourth quarter, due to investment losses.

Another question in my mind is that as the baby boom generation ages, insurance companies are going to be faced with a lot of payments clustered together. That will, no doubt, lead to higher premiums for folks buying new policies.

Consequently, if I were buying life insurance today, I would ask myself this series of questions that I mentioned in my comprehensive Financially Fit article on life insurance last August:


* Do I need a policy that pays family income benefits, versus a lump sum?

* Do I desire an increasing policy (where your coverage and premiums rise) or a decreasing policy (decreasing coverage and premiums)?

* Do I want a renewable policy?

* Check for exclusions, including alcohol and drug abuse, risky sports, preexisting conditions.

* How flexible is the policy and is there a grace period before coverage is ended?

* Does the policy contain a waiver of premium should I be unable to work?

* Can I set up the policy under a trust agreement?

The point is this I am not a believer or disbeliever in life insurance. Your personal situation should answer that question for you. But, I do encourage you to treat it like any other investment: thoroughly analyze it, keep up on new developments, research the cost and potential returns, and then make the decision whether it is right for you.

But I would also want to know about the financial health and profit track record of the insurance company, the demographics of their policyholders, the track record of their favored investments, and their history of premium increases.

Bottom line, I am of the camp that life insurance is really not an investment. It is insurance first, and maybe additionally has some investment features. Therefore, decide if you need the insurance, and then consider if the extra cost for the policy’s investment features is worth it in terms of long-term return, net of the costs.

ABOUT THE AUTHOR
Nancy Zambell, Contributing Editor

Nancy Zambell is the editor of Financially Fit, a free weekly email newsletter focused on personal finance topics. She has a diversified 23 year career in the financial services and investment newsletter business.

Nancy's columns and insights into personal finance topics can be found online at SmallCapInvestor.com.

SmallCapInvestor.com is an independent investment website providing individual and professional investors with unbiased news, research, and analysis of small-cap stocks. At SmallCapInvestor.com, investors will find updated news throughout the day, coverage of company earnings calls, profiles of undiscovered small-cap stocks, and investing strategies from our team of small-cap experts.

http://www.smallcapinvestor.com

Emergency Communications Tool

The ability to contact employees in an emergency is a vital part of a disaster plan.

Companies have traditionally used "telephone call-trees" as a way of passing information from one employee to another. Technology offers what may be a better solution.

CallFire.com is a company that offers a voice broadcast system. You download your list of phone numbers, record a message and direct the company to send your message either instantly or at a specific time. Your recorded call can direct employees to a specific website or provide information on where to go for additional details of the disaster. This could be used for weather emergencies or other events that showed a business down.

Undoubtedly there are other services that provide a similar function. CallFire.com was the one that came to my attention. Not a bad tool to have at the ready for an emergency.

Health Care Competition Commentary

Here's a commentary I wrote for the Portland (Maine) Press Herald on how competition can fix healthcare.

Comments welcome!

Animals In The Road

Recently, a dog ran across a local highway, causing a multi-car pileup that resulted in many thousands of dollars of damage and several injuries. One man was life-flighted to a nearby hospital. The dog trotted away, oblivious to the calamity he caused.

I was a terrible driving instructor for my kids. I hated it and they hated having me with them. However, I counseled each of them on an issue that does not show up in any driver training guide - never swerve to avoid an animal in the road. If it is safe to slow down, fine. If you can safely stop without causing the guy behind you to collide with you, fine.

If it isn't safe to slow down or to stop, run over the animal. Animal life is important. The death or injury of a pet is terrible. Human life, however, is more important by any rational standard.

It seems that almost weekly there is a story of somebody who swerves to avoid a dog, cat, or squirrel in the road. Lives are lost, property damaged, and people are critically injured. Run over the animal. Nobody's life is worth saving a dog. Hitting a squirrel is far better than being a paraplegic or having thousands of dollars in car repair bills.

I expect to catch some heat on this. I'll take it. I know I'm right.

MEMIC, Me, and Employment Practices Liability Insurance

A VP at Maine Employers Mutual called me the other day. He wanted to use my April blog post on their new employment practices liability insurance coverage. His idea was to send it to agents. I said sure, why not.

I've been critical of Maine's largest workers' compensation insurer over the years for a variety of items, mostly their pricing philosophy. I am an admirer of their management of safety and loss control. As far as I'm concerned, they wrote the book on preventing losses. It's nice to be able to praise their innovation on this issue.

Few employers should be without employment practices liability insurance. MEMIC's approach of adding coverage to the workers' compensation policy is excellent in that it will allow small employers to have the coverage easily. The MEMIC VP reminded me that they can serve larger employers and offer high limits too. Noted.

Here are some other issues to consider:

-How current is your employee handbook?

-It's better to not have a handbook than to have one you don't follow.

-Better yet, update the handbook to match your process.

-Have a labor attorney review your applications and policies regularly.

-Your managers must be trained in your process.

-Documentation is vital on any employee issue - if it isn't in writing, it didn't happen.