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Term Life Insurance - The Simplified Buyer’s Guide
Secrets to Buying Term
Life Insurance
Determining the Right Amount
The Times Income & Rule of 200
When the Need Ends
The "Best" Life Insurance Plan
Finding a Safe Life Insurance Company
Taxation of Term Life Insurance
Your Habits & Health are the Keys
Advantages of a Shopping Service
If you are a "special risk"
Wholesale Insurance Services © Here for all your needs
Secrets to Buying Term Life Insurance
1. Use a life insurance shopping service to find the better buys of low cost term life insurance and to save time.
2. Annual payments save a 5-8% modal charge. Fees vary widely by company and payment method, so check out the differences.
3. Pay premium with the application, if allowed. Protection can start as soon as you are accepted if there are no changes to the original offer.
4 .Employer-offered supplemental life insurance is not always cost effective. Shop it.
5. Decreasing term life insurance, frequently called mortgage insurance, is usually overpriced and offered as a convenience. Some plans only pay the lender.
6. Dump the junk. Accidental death and dread disease such as cancer plans are emotional buys. The lower price means low payoff probability.
7. Quit smoking (if you do). After one to three years, you may save 30, 40, even 50% on your life insurance premiums.
8. Ask for the financial ratings of companies. Make sure the company you select has Superior/Excellent rating in the opinion of an independent insurance company rating service.
9. Big does not mean best. Some of the largest companies have the highest rates.
"Had I but world enough and time..."-Andrew Marvel, "To His Coy
Mistress."
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Determining the Right Amount
Time and uncertainty create the need for life insurance.
Put differently, having the right amount of life insurance eliminates
uncertainty for those left behind. One of the most frequently asked
questions is: “How much life insurance is needed?” The simple answer is:
“enough.” Enough to continue the family lifestyle, enough to pay the
mortgage and bills, enough for education, or enough to preserve a
business.
Think of life insurance as a line of credit or overdraft
protection available on the day it’s needed. At the death of the
insured, funds are available for the beneficiary. Figuring the amount
needed is relatively simple.
"A family budget is a process of checks and balances; the checks wipe out the balances."
-Arthur Langer
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The Times Income & Rule of 200
Financial experts frequently use a rule of thumb for life insurance: a sum equal to five
to ten times your annual income. Younger folks typically need the
higher multiple and reduce the amount as children become self
supporting, mortgages get paid down, and retirement funds grow.
Insurance companies do limit the maximum amount of insurance to a
multiple of earned income (not including investment income). For
example: At age 30 the multiple is as much as twenty times earned income
which reduces to eight times earned at age 60. Extenuating circumstances
such as special obligations or business needs will allow the multiple to
be increased.
The Rule of 200 is a more specific measurement. First,
decide how much dependents will need monthly (eliminate your own
expense). Then, multiply the monthly amount by 200. The result is
the liquid (spendable) fund needed. It assumes a 6% after-tax return.
Example: Dependent needs monthly $3,000; Apply the Rule of 200 - Funds
needed: $600,000 $600,000 x 6% = $36,000/12 mos. = $3,000 per month.
From the fund needed deduct available cash, savings, and mutual
and retirement funds. Real estate is not liquid in the short run and
survivors need somewhere to live. However, given enough time all
assets are liquid at some price, even deep discounts. Term life insurance is
the answer to any shortfall in liquid assets. Obviously, this method
does not include inflation, spending down the fund, working spouses,
payments from social security, and other factors.
Call 1-(800)-963-3365 for a more exact computation call
Wholesale Insurance Services for a financial needs worksheet. We’ll run
our Capitol Needs Program and mail the calculations to you.
"We experience moments absolutely free from worry. These brief respites are called
Pain." -Cullen Hightower
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When the Need Ends
Panic is the emotion some survivors experience when they
start to add up the debts and balance the available fund, especially if
there isn’t enough life insurance. Once you’ve determined how much life
insurance is needed, then you must decide on how long you want the
premiums to be guaranteed. Term life insurance is a type of life insurance.
It can be the least expensive type for a specific time because it is
pure insurance - no added features. The simplest is Annual Renewable
Term Life Insurance, ART, which is characterized by increasing premiums and
typically has premiums guaranteed for only a few initial years. ART is
particularly competitive when the insurance is needed for a very short
period, e.g., less than five years. After 4-5 years, this plan loses its
value as rates increase disproportionately compared to guaranteed level
premium plans. The most frequently selected type of term insurance
today is the guaranteed level premium form offered with 5, 7, 10, 15,
20, 25, and 30 year variations. The length of guarantee is the key - how
long would survivors need life insurance as a substitute for lost
income? The need might be twenty years with young children or until
retirement is funded. In any case, term life insurance is the plan of
choice when the need is (1) for a limited time, less than 20-25 years
and (2) when rate guarantees are desired.
"The trouble with jogging is that by the time you realize you’re not in shape for it,
it’s too far to walk back.” -Franklin P. Jones
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The Best Type of Life Insurance
The best policy is the one in force when it’s needed.
Term life insurance is one type of life insurance. Other types are whole
life, variable life, universal life and survivor life. In these plans,
usually called permanent insurance, the common feature is a cash
accumulation fund or cash value. As noted, term life insurance has its
greatest appeal when (1) the need is short, 20-25 years or less, (2) a
premium guarantee is desired, and (3) availability of life insurance
will not be a major consideration for survivors in later years. It’s
been estimated that about 2% of all life insurance claims are paid from
term insurance policies. Reason indicates that the young don’t keep it
when the need expires, and the old cannot afford it when the premiums
increase too much. Most term life insurance plans, however, have a
conversion feature. This allows an exchange of the term plan to a
permanent plan for continuation beyond the 20-30 year limit of term
plans. Conversion provisions guarantee this exchange. No evidence that
you are in good health is required, but the plan may have limitations on
how long you may exercise the right. Review plan language if this is
important to you. Some term plans avoid premium increase at some future
date if you subject yourself to a new medical examination. This feature,
called re-entry, can be an asset, but there are two very important
considerations.
First, re-entry should not be mandatory to avoid a
substantial increase in premium.
Second, re-entry may not be much of a
value if you are healthy and can re-qualify with another company with
even lower premiums. We will not review forms of permanent life
insurance except to note that cash value plans typically have an initial
premium 3 to 6 times that of a term contract. If insurance to pay estate
taxes or the long term needs of survivors is an issue (more than 20-30
years), only a cash value life insurance plan can endure.
Summary:
1.
Select the amount of life insurance you need.
2. Determine how long insurance is needed.
3. Pick the plan to fit the need.
Call 1-(800) 963-3365,
Wholesale Insurance Services if you need information about permanent, term insurance
or disability income replacement needs.
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Finding a Safe Life Insurance Company
It’s true; there were a number of insurance company
failures in the last ten years. Most were due to mismanagement and
adventuresome investing. While no one can guarantee non-failure, the
majority of insurance companies under media exposure have reduced their
junk bonds and problem mortgages to an acceptable level. Although there
is no foolproof measurement of safety, there is considerable strength in
numbers. Most insurance companies are rated by three independent rating
services: A.M. Best, Standard & Poors, and Weiss Research. The other
services, Duff & Phelps and Moody’s, do not rank all companies. In all
cases, companies should be rated Superior or Excellent by at least one
of the independent rating services. Why would you risk safety when so
many competitive companies meet this standard? Many of the most
recognized names in insurance do not offer competitive guaranteed term
life plans. For example: In a March 1997 survey of 180 companies for a
preferred risk 40 year old male for $250,000, showed 266 ten year
guaranteed level term plans with premiums from a low of $244 to $737. By
May of 1999, the range had drop dramatically to $148 to $953. Want
company financial rating information? Call 1-(800) 963-3365.
Wholesale Insurance Services
recommends only companies with Superior or Excellent ratings from at
least two independent services.
"What the world really needs is more love and less paperwork" -Pearl Bailey
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Taxation of Life Insurance
The taxation rules for term life insurance are relatively
simple. Life insurance payable to a named beneficiary should not have
income tax assessed. If the plan is owned by the beneficiary, it may
also escape estate taxes for the insured person. Typically, life
insurance premiums are not tax- deductible by individuals and/or a
business. Therefore, income taxes do not apply as premium is paid from
after-tax income, i.e., from out-of-pocket income or savings. Estate
taxes are more complicated. Under current law, there should be no
estate tax on life insurance policies owned by an insured which are
payable to a spouse at the death of the insured. However, policies owned
by the insured can be includable in the deceased’s estate, which becomes
an issue if (1) the spouse is not the beneficiary, and (2) if the estate
exceeds a certain amount. In either case, you should seek advice from
an attorney or tax advisor.
"Facts are stubborn things." -A lain Rene Lesage
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Your Habits & Health Are the Key
The least expensive plans, called Preferred Best premium plans, are
available to individuals who have no serious health conditions and have
good genes. This can mean they have grandparents, parents and siblings
who have not had a history of cancer, cardiovascular disease, or
diabetes prior to 60 or 65, depending on the company. Personal habits
such as sky diving, private flying, or a poor driving record will
usually preclude the lowest Preferred Best premiums. Nicotine users,
especially cigarette smokers, pay more for life insurance with most companies. A few companies have better
rates for cigar and pipe smokers when compared to rates for cigarette
smokers and are worth searching out.
"Nothing in fine print is ever good news." -Andy Rooney
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Not Love and Kisses
The National Association of Insurance Commissioners, the NAIC, is advocating that each state adopt Regulation XXX which may
either cause guaranteed level premiums to: (1) increase for 10, 15, 20,
25, and 30 year plans or; (2) have only a five year guarantee with
premiums variable thereafter. The NAIC appears to believe that term life
insurance rates are too low. If you need long-term guaranteed term life
insurance, now is the time to act to lock-up the guarantee.
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Advantages of a Shopping Service
Life insurance by phone, fax, or ecommerce is a
relatively new option for consumers. On a specific day, one insurance
company will offer the lowest premium for the type of plan, the amount
of insurance, and your health condition. A life insurance shopping
service can quickly find that most competitive plan for you with the
least hassle.
Look for a full service agency that offers
1. Only companies rated Superior or Excellent.
2. An extensive library of companies updated monthly.
3. Impartial advice from experienced insurance
specialists.
4. A range of companies to fit your particular need, your
health condition and personal habits.
Watch for these limitations:
A. If only a few companies are available, this may
indicate the lack of distribution capacity.
B. Final Quotes issued before your complete health
history may mean a switch to a higher premium after you finally apply.
C. Pressure tactics to close you on the first call or a
plague of calls thereafter are unacceptable.
"The more original a discovery, the more obvious it seems afterwards." -Arthur Koestler
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If You Are a "Special Risk"
Companies classify applicants as a “special risk” when
their health history, habits or family medical history cause the
insurance company to consider the addition of a surcharge. Cancer
survivors, diabetics and overweight individuals, for example, fall into
the category of ‘special risk.” Habits also can cause an applicant to be
a special risk such as scuba diving. Some companies will surcharge
divers while others will not. Accordingly, a key ingredient to gaining
the better buys is to work with an agency with extensive experience
finding the “right company” for the individual’s special risk
circumstances. Factually, there are less than twenty insurance companies
of some 500 that have expertise in evaluating special risk. So, company
selection is the most important factor in pricing.
Wholesale Insurance Services has had such
extensive experience finding the best special risk buys that other
national companies use our services to shop for their special risk
applicants. Getting a quote is a phone call away to
1-(800) 963-3365.
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Wholesale Insurance Services
is the Choice!
Just discovered us? Actually, this is not new to
direct-to-consumer insurance. In 1977 brokerage firms and insurance
agencies began offering term life insurance shopping service to
financial advisors. Since then, services such as have helped clients
acquire over $1,000,000,000 of the most competitively priced insurance
from the highest quality companies. In the fall of 1995 consumers were
informed via radio how to save money on term life insurance using a full
service agency with an extensive library of companies and policies. You
may have seen advertising in the Wall Street Journal and the Internet.
Our insurance specialists, the folks you speak to when you first call,
say our acceptance has been most gratifying. While life insurance is
essentially a fair-traded product-rates for the same plan are identical
with all agents-our dedication to having the most up-to-date rates means
others seldom beat Wholesale Insurance Services,
best buys. It has been said since 1977, with one-call-insurance, low
cost guaranteed term life plans, and our friendly insurance
professionals, why would you shop further?
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Why Wholesale Insurance Services?
We have Low Guaranteed Premiums
Every month, Wholesale insurance Services research new
plans with the most recent premium reductions. A direct relationship
with several insurance companies’ saves time and expense, which allows
us to offer the most competitive plans. Overhead is kept low by
direct-to-you marketing, computerized shopping, and elimination of
frills. e.g., house visits.
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Life is Unpredictable
That’s why there’s
Wholesale Insurance Services
Service
Term Life Insurance - The Simplified Buyer’s Guide
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