“A $90,000 whole life policy with an annual premium of $500. Is that okay?”

Knowing that few people really understand life insurance, I asked her if she really understood what the agent was talking about.

“I thought I did last night,” she replied, “but when I woke up this morning, I wasn’t so sure. That’s why I’m here. You once told me to never buy life insurance unless I talked to you about it. Well, I’m here. Could we chat about it?”

I was glad that Jan was here instead of Mark. I have learned that it is much easier to talk to women about life insurance than men. Women seem to better understand the financial consequences of their spouses’ death, especially if they are mothers. Most men, however, don’t want to face life insurance because they think that they will never die. Women know better.

I was no stranger to the murky world of life insurance. Throughout my 20 years as a CPA, I’d often locked horns with insurance agents and financial planners who wanted to sell garbage life insurance products to my clients. In my role as a CPA, I always believed that it was my job to act as a mother hen and protect my clients from the wolves.

I began by asking Jan a question that zooms to the heart of the matter. “Tell me Jan, why are you buying life insurance? What do you hope to accomplish?”

She answered, “To protect me and the children in case Mark dies.”

That quickly established the fact that Jan knew about the key issue: that life insurance has but one purpose: protection in case disaster strikes.

Then I asked her another question. “Just suppose that you knew for sure that Mark was going to die tomorrow. How much life insurance would you buy on his life —$90,000 or $450,000 — assuming the premiums were identical?”

She looked at me as if I was crazy. “I’d buy the $450,000 policy. Who wouldn’t?”

I then gave Jan a quick education about life insurance, explaining that there are only two kinds of life insurance, term and cash value. The problem is knowing which one of them is the better buy.

Term insurance is pure insurance ( protection) coverage. If you pay the premium and die , the insurance company will pay the face value of the policy to your beneficiary. It is available to age 95 and can be purchased yearly, or on a guaranteed level premium basis for 5,10,15, or 20 years. The product is uncomplicated and very inexpensive. The premiums, however, do increase each time the policy is renewed since the insured has grown older.

Cash value life insurance (sold as whole life, endowment, straight life, permanent life, universal, and a zillion other names) is the second type. It differs significantly from term because there is a savings or investment feature attached–the cash value. About 75% to 80% of every premium dollar goes to this cash value “kitty” and the remainder pays for the actual life insurance protection. These policies typically last to age 100 and the premiums remain level for one’s entire life.

Thus, in one slick package, a cash value life insurance policy claims to accomplish two worthy goals: death protection and family savings. It was my job to convince Jan that cash value insurance fails miserably on both counts and that she must, for her and her children’s sake, buy pure term life insurance and nothing else.

“Jan, there are two reasons why you must not buy that whole life policy or any other cash value product. First and most importantly, cash value life insurance is anywhere from five to ten times more expensive than the equivalent amount of term insurance. It’s like paying $75,000 for a $15,000 automobile just because you went to the wrong dealership.”

To keep their customer’s attention away from the high cost of cash value, agents focus their sales spiel on the investment feature, usually with the aid of reams and reams of incomprehensible computer printouts. This sales tactic has literally duped the American public out of trillions of dollars in the last 150 years, ever since cash value was invented.

“Jan, how much time did the agent spend last night talking about the actual insurance protection versus how much money you’ll earn from the cash value policy?”

She thought a bit before answering. “Well, he spent the whole evening going over a bunch of computer printouts that showed us how rich we’d be in fifty years when we retire, and how much we could borrow from the policy if we ever needed a loan.”

“But what did he say about your protection needs?”

“Come to think about it, hardly anything at all. After we told him that we could afford a $500 yearly premium, he looked in a book and said that he had found a great $90,000 whole life policy that we could afford. But about protection, he really said very little.” I could tell that she was starting to bristle in anger, a sign that I was doing a good job.

I then told Jan that people with children living at home should have, as a rule of thumb, about eight to ten times their yearly gross income in life insurance protection. For Mark and Jan, that translated into at least $475,000. The agent who met with them should have figured that out and done his utmost to assure such adequate protection.

“You see Jan, that agent’s sole emphasis should have been on your financial protection in case Mark dies tomorrow, not about making you a rich lady in 50 years. The agent’s decision to sell you the anemic whole life policy would literally rob you and your kids of $385,000 if Mark dies tomorrow.”

“But Mark is not going to die tomorrow. Don’t say that!”

“Jan, you don’t know that. He could die tomorrow or in a week from any one of a thousand and one different causes. And so could you or I. That’s why you must be fully protected right now. Life insurance is a today need.”

I continued…”Jan, remember when I told you that there were two reasons to avoid cash value life insurance?”

“Yes.”

“You told me Jan that the agent spent most of last night talking about the wonders of the cash value investment. Now I am going to give you the real scoop about that.” This one always puts the final nail in the cash value coffin.

“The cash value,” I continued, “is not like an ordinary investment such as stocks, bonds, or a bank savings account.”

“But the agent said it was just like a bank savings account…”

“It resembles a savings account about as much as a shark resembles a goldfish. Tell me Jan, what do you think happens to the cash value—the promised pot of gold—if Mark dies? Who gets it?” The fun starts…

“That’s easy,” she replied, “I do…it’s our money…our investment…right? Marsh…tell me I am right!”

“Sorry, you are wrong. If Mark dies, the insurance company keeps it. That means that all that extra premium you paid for so many years goes up in smoke.”

“So what do I get if Mark dies?”

“You get the face amount of the policy…but you could have gotten that for a fifth of the premium with a term policy.”

“Marsh…you can’t be serious. In my worst nightmare, I would not expect something like this. Are you sure?”

“Very. But if you want some proof of your own, get the book What’s Wrong With your Life Insurance by Norman Dacey. That’s just one of many books in the library that echoes what I have been yapping about. Don’t think I am the Lone Ranger on this.”

Apparently she got fed up. Her voice rose as she said, “The agent never said word one about any of this! Are you telling me that he bent our ears off last night just to sell us a chump change policy that will leave me seriously underinsured just so he could make a bigger commission…and that they steal my investment to boot if Mark dies?”

“That about hits the nail on the head. And one more thing…when you tell the agent you want a term policy instead, expect another visit from him. Be aware that they are very well trained in changing minds. Plus, you might want to shop around for the best deal. Even among term policies there is a wide variance in price.”

End

Postscript:

It is this author’s hope that anyone in possession of this article pass it onto their relatives, friends, and neighbors. The information in this article can put many thousands of extra dollars in the bank accounts of those who need it most.

Article Source: http://EzineArticles.com/?expert=Marsh_Kaminsky

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I will assume you are still interested in the benefits of a term life insurance policy and how easy it can be to actually find affordable term life insurance. The best place to shop for affordable life insurance policies is on the Internet. The ability to instantly and easily compare hundreds of life insurance offerings from many different companies gives you the ability to truly find the most affordable term life insurance policy with all of the features you’re interested in having.

In fact many insurance companies offer websites that are very user friendly and easy to navigate. Best of all you don’t have to worry about talking to an insurance agent that you feel may be interested in only making a sale instead of best serving your life insurance needs. When using online access to view insurance quotes you can quickly compare polices and insurance quotes to see which insurance company offers the best policy for your needs at an affordable price. In order to speed up the process you should have some information about your current state of health readily available. Information such as your current weight, blood pressure, cholesterol level and previous medical history when available will greatly aid in speeding up the life insurance quote process and allow you to receive a more accurate rate in your free term life insurance quote.

There are a few bits of crucial information that can help you lower your current term life insurance rates. For instance if you just had a health checkup (which you should do annually) and can show that you’ve lost weight or decreased your cholesterol level this will allow you to be offered a cheaper term life insurance quote. Additionally if you were a smoker and decided to kick the habit you could be entitled to a decrease in your current term life insurance rate.

Other methods of achieving a lower out of pocket cost for your term life insurance revolve around your actual insurance company. Some will offer a slight discount provided you have a your insurance payment automatically taken out of your bank account. Even more companies offer a substantial savings for each insurance coverage amount increase. Make sure to compare what the rates are between amounts such as $250,000, $500,000 and higher. One thing to consider is your age. As with most life insurance, term life policies are cheaper the younger you are so if you’re debating on whether or not to purchase an affordable term life insurance policy you may want to do so before your next birthday. Finally if you’ve ever had any type of surgical procedure done to treat a major medical condition you may be able to negotiate for a lower term life rate depending on how long ago your operation to treat the medical condition took place.

Finding affordable term life insurance doesn’t have to be a stressful situation. Especially if you’ve taken the time to familiarize yourself with the many ways to effectively lower your insurance costs. One thing is for sure, its well worth your time and pocketbook to do some comparative shopping online in order to find the best and most affordable term life insurance provider.

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You must decide which for of life insurance is best suited for your needs. Term life, whole life, universal life, permanent life and employer life insurance are among the various types of life insurance you will need to investigate. The internet is one of the best places to search for types and quotes of insurance. Be sure to compare same type insurance when getting quotes as not all insurances are equal.

Term life insurance is death protection for a term of one or more years. Term life insurance is generally the cheapest life insurance available. Whole Life Insurance is the most common type of permanent insurance. Joint term life insurance is a program which covers typically married couples to protect their children in case of death of either or both parents. Whole life insurance is sometimes bought as an investment. The premium for whole life insurance is initially greater than that required for term insurance; however, the premium will not increase like term insurance will and cash value will accrue. Group life insurance is a form of term life that is sold to companies to cover their employees. This type of insurance generally will not cover the needs of a family if the employee dies while working. Universal Life Insurance is a flexible-premium, adjustable benefit life insurance policy that accumulates account value. Decreasing term life insurance is very popular with home owners and mortgage companies mainly to cover the remainder of the mortgage owed.

There are two basic types of life insurance: term and permanent. The premiums for term insurance are usually the lowest among the different types of life insurance, but will increase in cost with the age of the insured. Unlike other types, term life insurance has no cash value, savings or investment elements that procure administrative costs and require higher premiums. Certain types of whole life insurance are touted as vehicles for saving or investing money for retirement, commonly called cash-value policies. Choosing the type and amount of insurance needed is a very personal decision.

Because changes in your life will affect your coverage needs, you should review your life insurance policy often. Empty-nesters, retirees need to reconsider insurance coverage as they age. Remember, the purpose of life insurance is to replace your income should you die. Life insurance is therefore a gift that you give to someone else. Like savings, investments, and homeownership, life insurance is an essential part of financial planning. That’s what life insurance is for, planning for what you can’t predict. Proper life insurance is critical to your loved ones financial well being.

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Permanent Life Insurance

Whole life insurance can be described as permanent life insurance. This suggests that you can keep this policy for as long as you choose, even if it is to age 100. A term life policy simply cannot guarantee that.

Cash Values

Whole life insurance have what is called “guaranteed cash values”. Some people like this idea because they may choose to use these values as a sort of saving to assist with the college costs or even for a supplemental retirement fund.

Whole Life Insurance Dividends

All whole life policies are not the same. Some life insurance companies have a great history of paying dividends to their policy owners on a very regular basis. This does not say that they always will be in a position to pay a dividend. Dividends are not guaranteed. There are some life insurance companies that do not perform very well.

If a life insurance company is generally successful with their investments and do a good job at keeping expenses down they usually can pay a dividend.

There are several options that you can choose from but most people have a tendency to apply their dividends to the purchase of “paid up additions”. These are little single premium whole life insurance policies.

The other available dividend options areas follows. You can leave your dividends to accumulate interest or you can use them to reduce premiums. You can also take them in cash each year.

Why Cash Values And Dividends Are Important

If at some time in the future you should need to put your hands on some emergency cash and that money is available through your cash values plus dividends you may take a percentage of this in the form of a policy loan. Even though you decide how you repay this loan you need to keep in mind that there is interest charged on this loan. In addition the death benefit of your policy is reduced by the amount owed and any unpaid accumulated interest. Another thing to note is that if you have an outstanding loan on your whole life insurance policy the amount of dividend paid will also be affected.

Nonforfeiture Values

Another important consideration when buying whole life insurance policies are nonforfeiture values. These options allow you to protect yourself from loss in the event you are unable to continue premium payments.

Automatic Premium Loans

With most whole life insurance policies if a premium payment is missed the automatic premium loan is timely activated to prevent the policy from going into a state of lapse. In other words, you do not lose your insurance as long as there is sufficient cash value to keep it in force. Interest is charged on this amount just like any other premium loan.

Extended Term Insurance

Instead of using an automatic premium loan to keep your whole life insurance policy in force you may choose to use what is called Extended Term Insurance to keep the policy in force. This is a Term Life Insurance policy for as many years as the cash value of the policy will purchase. If you should die during this period the full face amount of the policy will be paid to your chosen beneficiary. The only disadvantage is that with this option your cash values plus any dividend earned will dissipate over time.

Reduced Paid Up Policy

Another option you have if you are unable to pay the premiums for your policy is to elect to keep a reduced amount of life insurance in force rather than the full amount you initially purchased. This policy, though for a reduced amount, will be fully paid up and you will never pay a premium again. The reduced death benefit will be paid upon the death of the insured.

Cash Surrender Value

You may also surrender your policy for its cash value plus any dividends as another option. If there is any outstanding indebtedness on the policy it will be deducted from the amount you receive.

Waiver Of Premium Rider

When purchasing your whole life insurance policy you have the option of adding the “waiver of premium rider” an a very minimal cost. You may find it beneficial as if you should become disabled the life insurance company will waive your premiums for as long as you are disabled even if it is for the rest of your life. You must, however, be disabled for a minimal period of time, usually six months. Whenever you are able to return to your job you continue payments of your policy. Nothing is owed for the period you didn’t pay.

Accidental Death Benefit

Another valuable rider you can add to your whole life insurance policy is the “accidental death benefit rider”. If you should die in an accident the life insurance company will pay twice the face amount to your beneficiaries. Some life insurance companies allow you to purchase an additional unit of the accidental death benefit rider. In other words, your family would receive three times the face amount of your whole life insurance policy if you died in an accident.

Whole life insurance premiums are higher than term life insurance premiums. If you feel the abovementioned benefits are worth the additional cost this type of life insurance may be for you.

For additional information information on whole life insurance go to:

http://www.lifeinsurancehub.net/whole-life-insurance.html

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Let us take a few minutes to examine why you may need to scrutinize insurance quotes and maybe buy some life insurance. Looking at a few good insurance quotes will help you decide how much you can afford to earmark for insurance.

When you go out to get your insurance quote, make sure that you have taken some time to be prepared. Know which type of insurance, whether it be whole life or term life, that you are looking for. Also know the amount that you want to insure for. Doing this will help make sure that you get the best life insurance quote available.

Agents Can Help – What is Your Financial Situation?

If you happen to get a good insurance agent, they can be the better person to assess your situation. They will need to know what your financial situation is and then will be able to advise you of the best options. If you know what type of insurance you want will help in getting a life insurance rate quote. Just as in anything, you will want to shop around for the best insurance quote that you can find.

You must realize a few things before you start your search for a life insurance quote: You are going to be asked questions online or the agent is going to ask you some questions prior to give you a insurance rate quote:

1. They will inquire about your income?
2. What is your net worth?
3. What are your financial goal?
4. Are you sending the children to college?
5. How is your health?
6. What is your age?
7. Do you have any medical conditions?
8. Your family medical history?
9. Are you a smoker?
10. You may be required to take a medical exam

These are just some of the questions that you may be asked prior to getting the best insurance quote.

As mentioned earlier, you need to familiarize yourself with the different types of insurance coverage, and that is whole life and term insurance. Learn a little about what an annuity is and how it can work into your financial situation. This will help you get an accurate insurance quote.

A few good insurance quotes and subsequent purchase of sufficient insurance would go a long way towards alleviating some problems, such as protecting your family when you are gone. Get insurance quotes and see how that would work for you. New insurance quotes are often needed to reflect your changing circumstances.

And when these changes do occur (eg house move, marriage, etc.) you need to shop around for the best insurance quotes. Don’t hesitate to seek premium quotes from several different companies.

Some of the factors that will quantify the coverage you will require can be the:

• The number of dependents you have
• Your monthly expenses
• Your monthly debts
• Your projected family expenses

There are also various factors that will help you get the best insurance quote, like your employer life insurance coverage (how much do you have). Do you have any credit card life insurance and more.

A key factor in comparing whole and term insurance quotes is the company backing the policy. Getting term insurance quotes online has become common practice with people in search of insurance protection for their families and in many cases for their business.

The web has also driven rates down, with dozens of sites delivering real-time quotes in a matter of clicks. Term insurance may be one of the best deals in town, but it pays to shop around when looking for a term insurance quote.

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Export life insurance is a cool way to shelter your family after you’re deceased. If you know what to look for, you can get great contain age at a detriment you can present.

Why buy life insurance?

Topping the incline of debates to buy life insurance is the monetary shelter ion life insurance agreements. If you’re definite and just initial out, you may not require life insurance. But as you take on more responsibilities and your family grows, your require for life insurance raises. The proceeds from a life insurance strategy can switch the wages gone to your family leading your loss. You might also want to buy life insurance to pay off debts and expenses, allow money to humanity, and contain ending and maintain expenses.

As you continue to read this article, pay special attention to how parts 1 and 2 relate to one another.

Desire duration or notes worth

There are two simple styles of life insurance: duration life insurance, which presents life insurance contain age for a precise episode of time (the duration), and notes worth (enduring) life insurance, which combines a loss help with a notes worth factor. notes worth insurance agreements time shelter ion, while duration insurance may be the most presentable choice if you’re trade life insurance mostly for the monetary shelter ion it agreements, and your require for life insurance is passing (awaiting your children allow the nest, for command). Some duration policies (called “convertible”) will authorize you to talk the duration life insurance strategy for an enduring one at some purpose.

Decide how greatly contain age you’ll require

The total of life insurance shelter ion you should buy depends on how greatly wages your survivors will require, how greatly you own and owe, and the total of other life insurance limitless to you. If you’re married, both you and your partner should judge trade life insurance. One of the easiest habits to guess how greatly life insurance shelter ion you should buy is to use a life insurance requires calculator.

Gather a number between 1 and 30

Idiom life insurance is usually vacant for episodes ranging from 1 to 30 times. Think choosing a duration that matches your require for life insurance shelter ion. For command, if your highest debate for trade life insurance is to shelter your 7-year-old twins waiting they’re out of academy; you’ll want to buy a strategy with duration of at slightest 15 times.

How greatly will it detriment?

How greatly you pay for life insurance will depend on a number of endanger factors, counting your age, your strength, whether you use tobacco, your family strength narration, and the style and total of life insurance you’re trade. Keep in tend that the premium you’re quotation primarily will rise later. For command, when you buy duration life insurance, toll is warranted only awaiting the end of the duration (yearly for yearly renewable duration or at the end of a precise number of times for quantity duration). While most life insurance policies can be renewed at the end of the duration, you’ll pay an elevated premium for contain age.

Store around

When comparing quotations for life insurance, make certain that the insurance contain age you’re comparing is related. And memorize, any strategy that you buy is only as good as the guests that issues it. Find out what rating the guests have customary from main ratings military, such as A. M. Best or regular & modesty’s. These companies evaluate an entertainer’s monetary form and claims-paying ability. The guests generous you a quotation should present you with this information. You can also friend your maintains department of insurance to find out more about an entertainer’s highest.

Suggest an application

Once you’re eager to grip a life insurance strategy, you’ll satiate out a life insurance application that contains questions about your existing and bygone strength narration and lifestyle. You’ll usually be necessary to take a remedial exam, given and salaried for by the insurance guests. The answers you give on your application, along with the outcome from the remedial exam and your bygone strength narration, will help the insurance guests dedurationine whether to agreement you a strategy, and if so, at what detriment.

Learn the idiom

Perhaps a life insurance reduce isn’t as exciting as a best-promotion book, but read it anyhow. Rule provisions, the total of helps, the premium, and other charges you’ll pay will be inclirequire along with other important information such as the beneficiaries you’ve named and the premium warrant episode. Make certain you understand everything in the strategy. Under the laws of your maintain, you may have a “limitless look” episode (typically at slightest 10 time) during which time you can cancel the strategy lacking penalty.

We hope that you have found this article interesting and eye catching to say the least. Its objective is to entertain and inform.

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What appear to be the natural complexities of life insurance prevent many of us from making a wise choice to purchase an appropriate type and amount of life insurance. But when you get down to it, life insurance can be boiled down into answering four relatively straightforward questions. Take one at a time and before long you’ll be checking life insurance off of your “to-do” list.

Question # 1: Do you need life insurance?

It’s completely possible to answer “no” to this question. Think about who will be harmed financially by your untimely demise. If it’s only your stylist, you don’t need life insurance. Don’t worry about Bruce; he’ll find other clients. But if you’ve got children, or have a significant other or parent who depends on your income, life insurance is critical.

It is not only those making an income who need to be insured. Even if you work full-time in the home and receive no salary, there is a tremendous financial cost to the survivors resulting from your early death. As you told your spouse during your last argument, it would cost big bucks to replace the childcare, cleaning, and personal chef responsibilities-in addition to everything else you do.

How would your surviving spouse be able to keep his job and perform all your responsibilities if you were gone? Quite likely, it would be impossible. It is life insurance on the homemaker spouse which would enable the surviving spouse to keep the job he has and afford to hire others to help with the tasks you formerly performed.

Question # 2: How much life insurance do you need?

The basic goal is to satisfy your family’s needs for a specific period of time after you are gone. For example, you might purchase enough insurance so that your husband would not have to work for the rest of the time your children were expected to live in the home. You might further choose to purchase enough to pay for your children’s expected college expenses. If you also purchased enough insurance so that your spouse would never have to work again and could afford to purchase the Yankees, you’ve probably purchased too much insurance. Take advantage of the tools available to assist you to estimate an appropriate amount of insurance to purchase at various web sites, including Total Candor:

Question # 3: What kind of life insurance should you buy?

Although can’t tell you exactly what to do, I can provide you key considerations and inform you what to be most cautious of. With that information, you will probably know what makes the most sense for your situation.

Broadly speaking, there are two types of life insurance: whole life insurance and term life insurance. Whole life insurance is further divided into other types of policies with buzzwords such as universal, variable, and single premium. Whole life insurance features an investment component that salespeople love to talk about. It also pays a much higher sales commission, which is less likely to come up in conversation. While there are, of course, circumstances where whole life insurance policies make sense, most young families with limited budgets need to maximize their protection per dollar spent and a whole life insurance policy is typically not the best way to do so.

On the other hand, term insurance is the purest kind of insurance. You pay premiums for the specific length of time (the term) the policy covers. If you pay your premiums and you die during the term of the policy, your beneficiary receives the life insurance proceeds. If you do not die during the term of the policy, you get nothing. It’s quite simple.

Partly due to this simplicity, it is relatively easy to compare policies among the various companies selling term life insurance. There just aren’t as many numbers (especially when compared to the many variations of whole life insurance policies) to confuse you. Plus, you’ll see you can afford much more protection for the same dollar amount buying a term policy compared to a whole life policy.

Question # 4: Where do I buy life insurance?

Even if your employer offers you a life insurance benefit at work, you owe it to yourself to get a quote for a private policy. Especially if you are young, healthy, and a non-smoker, you’ll likely find that a privately purchased policy will be less expensive than the one offered to you at work.

In addition, life insurance you purchase privately does not depend on your continued employment at your current job. When you go to work for another company or take some time out of the workforce, you can keep your privately purchased life insurance. This advantage is known as portability. Life insurance purchased through your employer is typically not portable, since it is usually not available to you should you leave your job. In most cases, this is true regardless of the reason you leave: quit, layoff, or disability.

I know that talking about death isn’t fun. But failing to put life insurance in place is among the riskiest things you could do to your child. You’d never leave your son alone on a bridge. You’d never look the other way while with your daughter on a boat. Life insurance is much more that just the safety railing or the life raft. Life insurance is you looking after them, just in case, some day, you’re not.

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