A little bit about life insurance

Term life insurance is the original form of life insurance and is considered to be pure insurance protection because it builds no cash value. This is in contrast to permanent life insurance such as whole life, universal life and variable universal life which do build a cash value.

Term life insurance provides coverage for a limited period of time. After that period, the policy can be dropped or the insured can pay annually increasing premiums to continue the coverage. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is often the most inexpensive way to purchase a substantial amount of coverage at the lowest possible premium. The premium can be fixed for a period of up to 30 years.

Because term insurance is a pure death benefit, its primary use is to provide for covering financial responsibilities of the insured. Such responsibilities may include, but are not limited to, mortgages, consumer debt, dependent care and college education for dependents, and funeral costs.

term and investing the difference is a concept involving term life insurance and investment strategies that provide individuals an alternative to permanent life insurance. Generally speaking, term insurance premiums are considerably less expensive in the short term than permanent life insurance for an individual for the same benefit amount. Permanent programs are more expensive because they typically combine some form of cash accumulation with the insurance program as a single package. Consumers making use of the "buy term invest the difference" concept, separate their investments from their insurance by setting aside money every month equal to the premium that a permanent plan would require, then use a portion of this money for the term premium and place the rest in a tax-deferred investment vehicle.

A NON-tobacco using 40-year-old male, in good health, can purchase $250,000 of term insurance for a 30 year term at about $35 per month, while a 30-year-old male in the same category can buy the coverage for about $23 per month. Yet, according to LIMRA International, 44 percent of American households either don't own life insurance and believe they should, or own life insurance and think they need more coverage.

Term life insurance is the most affordable way to protect you and your family from a premature death.

Alan Jenkins is an insurance professional with Montgomery Agency Inc. For more informaiton, visit www.montgomeryagency.us.

Investors find insurance policies ‘safe'

After gold, life insurance policies are the second most “safe” investment avenues to investors in the country in the present financial condition, according to a recent survey by AC Nielson and Max New York Life.

Out of 1,000 respondents (unit-linked policy and other life insurance policyholders of various insurers) surveyed across six centres in the country between October 20 and 31, 59 per cent of ULIP holders said gold was a “safe bet” for investment, while 53 per cent said they considered life insurance products to be safe.

The same outlook was shared by other traditional insurance policyholders with 58 per cent and 56 per cent voting for gold and life insurance policies, respectively. Fixed deposits, mutual funds, National Savings Certificates and Public Provident Funds were the other safe investment areas, in order of preference.

Are you too risky for insurance?

While 49 per cent of the policyholders said they are holding on to their previous investments, 33 per cent of respondents said they are investing in life insurance and 22 per cent said they are investing in other safer options now.

Ten per cent of respondents said they have decreased investments in equity while an equal number said they withdrew savings from banks. Three per cent of respondents said they increased equity investment in recent times.

Across centres, around 90 per cent of the respondents claimed to have been affected by the financial crisis in some form or the other.

Almost 50 per cent of the respondents believed that it would take not more than six months for the financial crisis to end.

Stay current on insurance needs

Scott Flake

You probably don’t spend a lot of time pondering insurance.

And yet, you should think about it. By taking the steps necessary to meet all your key insurance needs, you can help protect your income, your family and your long-term financial goals.

In creating a comprehensive insurance strategy, you need to keep one key point in mind: your protection needs will evolve over time.

Consequently, at different stages of life, you’ll need to evaluate your insurance coverage to make sure it’s appropriate and sufficient.

When should you first start thinking about insurance? Do you even need to worry about it if you’re first starting out in your career, you’re single and you have no dependents?

Actually, you might have more to protect than you thought.

Do you own a house? Do you have a student loan? A car loan? A balance on your credit cards?

If you have any or all of these expenses, then you could face serious problems if something happened to your income. And the fact is that, at every stage of your working life, you are much more likely to become disabled than you are to die.

If a serious injury or lengthy illness prevents you from working, how will you make your house, car and other payments?

Disability insurance can help. If your employer offers disability coverage as a low-cost benefit, take it.

However, you may have to supplement this coverage with an individual policy.

Now, let’s fast-forward a few years in your life cycle. If you get married and have children, you should absolutely consider life insurance.

The amount of insurance you require should be based on several factors: your income, your spouse’s income, the size of your mortgage, how many children you have and anticipated college costs.

During your early working years, you may be able to get by with relatively inexpensive term insurance.

As you move into your middle years, though, you might want to explore some type of permanent life insurance.

Once you approach retirement age, you’ll also want to consider long-term care insurance.

A year’s stay in a nursing home can cost $50,000 — and in some major metropolitan areas, it can cost twice that much, according to the Health Insurance Association of America.

Medicare may only pay a fraction of these costs, so if you want to maintain your financial independence and avoid burdening your family, you might want to purchase a long-term care insurance policy.

Finally, during your retirement years, you could use life insurance as an estate-planning tool.

An attorney experienced in estate planning can advise you on the potential uses of life insurance in trusts or other arrangements.

As you can see, meeting your insurance needs is a dynamic process.

That’s why you may want to periodically review your insurance situation with an investment professional who has the tools and experience to recommend the right moves to make — at the right time in your life.

Scott Flake is a licensed financial adviser with Edward Jones. He hosts a weekly informal investment discussion at 10 a.m. on Tuesdays at 411 S. Beeline Highway, Suite B. For more information, call him at (928) 468-1470.

Eleven Reasons Why You Need More Life Insurance

Jane Baker
As you reach different stages in your life, the need for insurance will change. Here’s how to make sure you always have enough protection.

Do you have enough life insurance? The chances are, you probably don’t. After all there’s a major shortfall in the amount of cover we need and the amount we’ve
actually got. In fact, the gap between the two literally runs to trillions (£2.3 trillion to be precise!*).

Even if you think you’ve got enough life insurance now, you’ll probably need more later on. Remember if you don’t update your policy as key events happen in your life, you risk being seriously under-insured.

Here are eleven key times in your life when you need to thinking about buying life cover:

You buy your first home with a partner
I think many of you are pretty switched on to the need to buy life cover when you first take out a mortgage. If you’re buying a home with someone else you need enough protection in place to make sure he or she won’t be saddled with the entire mortgage debt if the worst happens to you.

You have other debts – and dependents
So you’ve got your mortgage covered, but what about other debts such as personal loans and credit card balances? Make sure you take out enough insurance to cover these too, because these debts may have to be paid out of your estate. You don’t want to leave your debts behind for your family to deal with.

You get married or enter into a civil partnership
Not only are you sharing each other lives, but you’re probably sharing your finances now too. You and your partner are bound to rely on some of each other’s salary to pay your living expenses. That means you'll each need enough life insurance to cover the cost of your contributions to the home.

You start a family
Bringing up a child can cost a small fortune and it can be a pretty big drain on both parents’ income. If one income is lost, you’ll need enough protection in place so the surviving partner can continue to support the family financially.

You become a stay-at-home parent
You might think there’s no need to buy life insurance for a parent who has given up work to bring up a child. But you would be wrong. When you set up a policy, think about covering the costs of childcare and running the home in the absence of the stay-at-home parent. These expenses can run far higher than you might expect, so having extra protection to cover them can be really valuable.

You have more children
Quite simply remember to keep stepping up the amount of protection you have as your family grows.

You move to a bigger house
Bigger homes normally mean bigger mortgages, so make a point of increasing your life cover when you move to a larger property.

Your salary increases
You’ve just had a big pay rise. Congratulations! This could be your ticket to a larger home in a more affluent area or private education for your children. In other words, if you’re starting to enjoy a more affluent lifestyle, think about upgrading your life insurance policy to help your family support it if you’re no longer around.

You change your job
If you’re lucky your employer may offer death in service benefits. This could provide a valuable cash lump sum of say, three or four times your salary. Although that sounds pretty generous, death in service may not be enough to cover all your protection needs on its own.

Don’t forget death in service benefits can’t be adapted to suit your changing circumstances.

And most importantly, you’ll lose the cover when you leave your job, unless it’s available in your new position.

You reach retirement
Once you stop working the time has come to start thinking about your inheritance tax (IHT) liability. If the value of your estate is likely to exceed £312,000 (based on current rates) your family will face an IHT bill. But you can buy a life insurance policy specifically to cover these costs. IHT planning can be very complex so make sure you seek some expert help from an adviser who specialises in this area.

You rely on someone else to support you
If someone else supports you financially or provides care for you, think about taking out a life policy to insure their life. Suppose one of your children looks after you when you become older. If the worst was to happen to them, where would this leave you?

You can, in theory, insure anyone else** – as long as there is an ‘insurable interest'. In other words, you must have a genuine reason for insuring their life, and there’s evidence their death would have a negative impact on you financially.

But don’t be over-insured
Although life changes can bring greater protection needs, they won’t necessarily all apply to you. Let’s say there’s no-one in your life who depends on you financially. In that case you probably won’t need life cover at all.

Use the table in this article to help you work out how much life cover you should have overall.

Remember you can easily cancel policies you don’t need later on. For example, once you’re completely debt-free and your children have flown the nest, your protection needs should reduce. So don’t pay for something you don’t really need.

* Swiss Re Term & Health Watch Report 2008