Archive for the ‘Life Insurance’ Category
Tuesday, August 31st, 2010
No one likes to think about the consequences of death and its affects on those that we leave behind. It is however an indisputable fact that sooner or later we will all shuffle off our mortal coils, often without warning. When that time comes a life insurance policy will ensure the financial security of our loved ones in their grief, and will ultimately give each of us the peace of mind that our mortgage is paid off and our families taken care of when we die.
Life insurance these days is in fact fairly cheap to maintain. Increased competition in the life insurance marketplace, coupled with its ease of purchase over the Internet has bought premiums down to record low levels. You can now obtain a life insurance policy that pays a lump sum of 100,000 upon your death for as little as 5 per month.
How Much Insurance Do I Need?
Those that do decide to take the plunge and sign up for a life insurance policy though often struggle to decide how much insurance they should take out. As life premiums go up in line with increases in the sum insured, the ultimate insurance amount is often dictated by how much the person taking out the life insurance can afford to pay each month.
Then there is the thought of the mortgage. If we are still owing money on the mortgage when we depart this world, many of us would not want to see our loved ones struggle to meet the mortgage repayments each month. The amount of insurance taken out therefore should at least cover the cost of our mortgage, or what is left on the mortgage as it would be if a reducing term life product is purchased.
Protect Your Mortgage
In fact, many mortgage lenders these days insist that life cover is taken out to protect the mortgage repayments in the event of the owner’s death. On joint mortgage applications, a joint life policy is strongly recommended by lenders, and in some instances mortgage lenders will include a basic life policy in with their mortgage products that reduces in line with the outstanding amount to pay. However, life cover issued direct by mortgage lenders may not always be the cheapest insurance policy available. It therefore pays to shop around for life cover on the Internet as you may be able to save 15 or 20 on your insurance premiums each month.
Deciding on the amount of insurance coverage
So, how is it best to decide on the amount of insurance coverage? It varies for each family individual, but in general you should take out a life policy not only to cover the cost of your mortgage but also to provide your family and dependants with a lump sum after you’ve gone. What lump sum you decide upon will depend on many factors, but it should at least cover the cost of your monthly household expenses minus the mortgage payments.
Tags: Consequences, Financial Security, Grief, Indisputable Fact, Instances, Life Insurance Marketplace, Life Insurance Policy, Lump Sum, Mortal Coils, Mortgage Applications, Mortgage Lenders, Mortgage Products, Mortgage Repayments, Owing Money, Peace Of Mind, Plunge, Premiums, Struggle, Term Life, Ultimate Insurance
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Tuesday, August 24th, 2010
When you are ready to purchase a life insurance policy, you are advised to make a life insurance comparison. You should ensure that you are getting the best possible life insurance at the best possible rates. There are different types of life insurance policies available in market with different rates so you are recommended to spend a little time and gather valuable information of the various companies to get the best deal.
During a life insurance comparison, first you have to justify the type of life insurance policy you would like to prefer, whether it is a low cost term life insurance or a universal life insurance. There is a huge difference between these two life insurance policies. Term life insurance is meant only for a short span of time. In case you remain alive after that period, then the term life insurance policy needs to be renewed or you will need to purchase a new one. Whole life insurance or universal life insurance on the other hand lasts for your whole life.
There are lots of whole life insurance companies available online, and it is not difficult to compare the benefits of different online life insurance companies, their quotes etc. If you are in search of a term life insurance then you are advised to request for a minimum of three online term life insurance quotes to compare premiums and settlements offered by each of them.
When you are comparing life insurance policies, the most important aspect is to make a comparison of monthly premiums that you have to pay. The premium should be as low as possible and in case of universal life insurance, the premium depends upon the market conditions.
Only comparisons of premiums are not enough, you should also compare whole life insurance rates with term life insurance rates. The best method for comparison is free life insurance quote. If you are not confident it is advisable to seek help of a reliable insurance agent to get you the right policy.
Tags: Cost Term Life Insurance, Free Life Insurance, Free Life Insurance Quote, Insurance Agent, Insurance Quotes, Life Insurance Companies, Life Insurance Comparison, Life Insurance Policies, Life Insurance Policy, Life Insurance Quote, Life Insurance Rates, Low Cost Term Life Insurance, Precious Advice, Reliable Insurance, Term Life Insurance, Term Life Insurance Policy, Term Life Insurance Rates, Types Of Life Insurance Policies, Universal Life Insurance, Whole Life Insurance
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Tuesday, August 17th, 2010
When it comes to buying life insurance the most important comparison is between term insurance and whole life. Here is an explanation of each.
A term life insurance plan provides life insurance – plain and simple. A whole life insurance plan provides life insurance but also accrues value, which you can cash out or borrow against. It generally takes about three years to see any value and then it’s not a lot of money. Term life insurance, in comparison to whole life, is considerably less costly for this reason. Some will refer to term life insurance as renting insurance rather than buying it. The reason for that attitude is that, much like auto insurance, you pay the premium each month or quarter or year to hedge against the bet that you might have an accident (in the case of term life insurance the accident is death). If you don’t have that accident, in the case of auto insurance, or if you don’t die in the case of life insurance, you don’t get the money.
We all die, of course, so it might seem that term life insurance is a good bet and the best bet in comparison to whole life. You would, you surmise, always get your money back. The catch here is that term life insurance will end at a certain point – and that point may well be before you are deceased. Term life insurance plans are only good until a certain predetermined age – many are 70 years of age, others up to 80. For those of us who really need this coverage until the day we die these aren’t good plans in comparison to whole life which will be in force until the day we die.
Term life insurance is a good buy in comparison to whole life, however, if all you are trying to do is set money aside to prevent your young family from becoming destitute in the event of your unexpected death. Once you reach the age of 70, the likelihood is that your children will be comfortably on their own and not dependent on your money or income to survive. Of course, if this is your only life insurance and it goes away before you die then your family or someone else must bear the cost of burying you. That is where whole life insurance is a favorable comparison to term life. Whole life will stay in place as long as you do, and will be there when it comes time to pay for your burial.
It may be, then, that in doing a comparison between term life insurance and whole life insurance, the results indicate a need for both. Many professionals suggest that you buy an amount of term life insurance that would keep your family bills paid for a predetermined time in the event of your untimely death, choosing a term that covers them only until they are old enough to take care of their bills on their own. These same professionals suggest as well that you also buy a whole life insurance policy for an amount of 7000-12,000, merely to assure that your family will have money to bury you.
In other words, if you are 40 and your children are 6, 8 and 10, you’re going to need about 15 years of term life insurance – until your youngest is through four years of college. You might decide, with three children and a spouse that you’ll need several hundred thousand pounds of coverage. A Whole life policy of 10,000, however, would be plenty to provide a decent funeral and burial.
Tags: Attitude, Auto Insurance, Best Bet, Buying Life Insurance, Insurance, Insurance Life, Life Insurance Comparison, Life Insurance Plan, Life Insurance Plans, Likelihood, Money, Renting, Term Insurance, Term Life Insurance, Unexpected Death, Whole Life Insurance
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Tuesday, August 10th, 2010
As you moved past your twenties, and into the rest of your life, you probably started realizing that you were not invincible. Although few want to admit it, there will come a time when you die. When you have a family, you need to ensure they will be taken care of financially when this occurs. Life insurance companies can help you make arrangements while you are alive for what happens after your life. The truth is that no one likes to think about life insurance, but it is a very necessary part of life. Being responsible means making sure your affairs are in order at all times, which is basically what life insurance helps you do. When choosing a life insurance company, be sure to think about these qualities you want in a great company.
Reputation
One of the most important things you need to consider when choosing between life insurance companies is reputation. You should only work with companies that have outstanding reputations. There are far too many scams in the world to fall for, so be sure to stick with companies that look and feel legitimate. This does not mean you should always go with the largest company out there, just be sure that the insurance company you choose to work with is professional and will be around when you need them to be.
Competitive Prices
Just like auto insurance, you need to shop around for life insurance rates. Depending on your age, different companies will be able to offer you different prices. You may pay more on one policy, but get better benefits. Look at three to five quotes from life insurance companies before you make a commitment. Once you sign up with one company, you probably will never want to change because you may lose some benefits you have earned. So, making the right decision the first time is important. Remember to use your instinct and only work with those who are professional and legitimate.
Tags: Auto Insurance, Company Reputation, Different Companies, Important Things, Instinct, Insurance, Insurance Shop, Life Insurance Companies, Life Insurance Company, Life Insurance Rates, Quotes Life, Reputations, Rest Of Your Life, Right Decision, Scams, Shop Insurance, Truth
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Tuesday, August 3rd, 2010
Insurance is all about the evaluation of risk and it is something that life insurance companies know a lot about. Every time life insurance companies receive an application for a life insurance policy, the companies decide how much of a risk that applicant poses to their business. This is to say that the insurance companies make an educated estimation of how long the applicant is likely to live versus how many insurance premium payments they are likely to make before death occurs.
If they believe that the applicant will live long and will therefore make a substantial number of insurance premium payments during hisher life, then life insurance companies see the applicant as low risk to their business. However, if life insurance companies believe that an applicant could die soon, and therefore make relatively few insurance premium payments while they are alive, that candidate will be seen as a higher risk by the insurance companies.
How life insurance premiums are calculated
When calculating life insurance premiums two factors are considered by life insurance companies. The first factor involves an evaluation of the general likelihood of death occurring at a particular age, and involves the scaling of applicants against normal life expectancy. This sets the ‘average’ risk level that different age ranges attract; needless to say that the closer you are to your average life expectancy then the higher the risk level that you’ll be measured against.
The second factor is based on whether the applicant is above or below their average risk level for their age. Someone who has an unhealthy lifestyle, suffers from pre-existing health conditions and is in a stressful job is likely to be classified as ‘above average’. On the flip side, someone who goes to the gym regularly, does not smoke and eats a balanced diet is likely to be seen as ‘below average’. Naturally, those who are below average risk will see keener insurance premiums on their life insurance policy for their age than people who are classified as ‘above average’.
Cheaper life insurance?
While there is often little we can do about pre-existing health conditions, there are ways in which to tip the scales in our favour of cheaper life insurance. This we can do by altering our lifestyle and striking a better work-life balance in a stress-free environment. Changing lifestyle habits though can be more effective for some than it can for others.
For instance, a person in their 20s living out an unhealthy existence is likely to be seen as less of an insurance threat for their age to life companies than someone in their 50s with the same unhealthy lifestyle. This is because the body of a 20-year-old will respond more efficiently to improvements in lifestyle than will the body of a 50-year-old. In essence therefore, there are different degrees of being above average and below average, making the calculation of life insurance premiums for each individual definitely a job for the experts at the life companies!
Tags: Age Ranges, Average Life Expectancy, Balanced Diet, Business Insurance, Estimation, Flip Side, Health Conditions, Insurance Application, Insurance Life, Insurance Premium, Life Insurance Companies, Life Insurance Policy, Life Insurance Premiums, Likelihood, Risk Insurance, Risk Level, Stressful Job, Substantial Number, Time Life, Unhealthy Lifestyle
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Tuesday, July 27th, 2010
In general, may people understand that having life insurance in any form is a necessity. The policy of life insurance is an excellent method of providing protection for your family members in the event of your death. While many people understand that is important to have life insurance they may not understand that there are many different types of policies available in the world today.
One type of life insurance policy is called Whole Life Insurance, this type of life insurance is effective provided you continue to make the monthly payments upon the premium. This is a very popular type of life insurance because it allows you to build a cash value on the policy and is on a basis that is tax-deferred. The way this works is that a portion of the premium you are paying is put into an account of savings that the policy invests into. All interest that is earned upon the policy is put into the savings and helps to build the cash value. Once the cash value reaches a higher level, you could be required to pay the premium after age or you could be allowed to borrow against that cash value.
Another attractive benefit of having a whole life insurance policy is that your premium will always remain the same. At no time will the amount change at all, therefore as long as you continue to pay the premium each month, you will remain at the same amount for the entire time. If you choose to take a loan out on the cash value you have earned, the only difference you will have to pay is paying back that loan. One downside to this policy is the fact that you will have no control whatsoever over how the company chooses to invest the pounds you pay on your premium.
Another type of life insurance is the term life insurance policy. This policy is selected for a specified amount of time. If you should happen to pass away during the term of this specified time, then your family would then receive payment in the form of a lump sum as the contract specifies. Typically, the premiums upon this type of policy is far cheaper than other types and it does not allow you to build any type of cash value. With this type of life insurance, your premium can change or increase on a yearly basis and it generally does increase each year. It is the more expensive type of insurance that is available however it will provided your family with complete protection in the event of your death.
Tags: Amount Of Time, Attractive Benefit, Downside, Family Members, Insurance, Life Insurance Basics, Life Insurance Policy, Lump Sum, Many Different Types, Premiums, Term Insurance, Term Life Insurance, Term Life Insurance Policy, Whole Life Insurance
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Tuesday, July 20th, 2010
At last you can buy life insurance and get tax relief. The breakthrough results from changes in the Gordon Browns’ latest Budget speech but the tax relief is only available on a new special sort of life insurance policy. You can’t get tax relief on your existing life insurance policies.
These new policies exploit a loophole in the new Finance Bill and should result in savings of between 5% and 15% for standard taxpayers and around 30% for higher taxpayers.
But there are strings attached! You can’t add extras on to your life policy such as critical illness cover and the insured sum must be a fixed sum. Neither can you have a joint policy. Basically, it has to be a bog standard, level term, single beneficiary, life insurance policy.
Then there are more restrictions, but quite honestly, these are unlikely to pose a problem to anyone unless they’re very wealthy! You can’t have one of these special life policies if the annual contributions you pay into your pension plus the life insurance premiums, exceed 215,000 per year. Furthermore, if the value of your pension fund plus the payout on your life policy exceeds 1,500,000, the current limit set by the Chancellor, then the excess will be taxed at 55%. Conventional life insurance policies are excluded from this calculation.
Tax relief on the premiums is automatically collected by the life insurance company so you pay a premium which is already reduced by standard rate tax relief. If you’re a higher rate taxpayer, you’ll have to claim the extra tax through your self-assessment tax return. However, once you’ve told your taxman about your premiums, they should automatically continue to give you the tax relief through your tax code.
So why are the savings less than the value of the tax relief? Well, the reason is that the life companies have to administer the tax relief and there are certain operational restrictions imposed by the Inland Revenue on the insurance company. This means that the basic cost of these policies is a little more than conventional life insurance but after the tax relief you should save.
As with all these loopholes, you must be aware that the Chancellor could remove the tax relief. Having said that, it is rare for a future tax change to be applied retrospectively so you are likely to be safe. Your income could also change and move you into a lower tax bracket. This would reduce your savings.
This new type of life policy is now available from most of the big UK insurers and specialist life insurance brokers. However, you won’t be able to get an online quotation you’ll have to speak on the phone to a Life Insurance Adviser.
And just to confuse matters these policies are known under a range of names: Pension Term Insurance, Life Insurance with Tax Relief, Life Protection with Tax Relief but they all mean the same thing.
Oh yes, let me confirm one miss-understanding. No, you don’t have to buy a pension at the same time!
Tags: Beneficiary, Breakthrough Results, Budget Speech, Conventional Life, Critical Illness Cover, Finance Bill, Inland Revenue, Life Insurance Company, Life Insurance Policies, Life Insurance Policy, Life Insurance Premiums, Life Policies, Loophole, New Finance, Pension Fund, Self Assessment Tax, Self Assessment Tax Return, Sort Of Life, Tax Relief, Taxman
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Tuesday, July 13th, 2010
Term insurance provides coverage for a pre-specified period. For example, term insurance is designed to protect a mortgage or provide income for your family in case of your death. You pay the term insurance premium each month and as long as you pay the premium your policy will stay in force. Once the contract reaches maturity (usually in 10 years) you need to renew your policy at a higher price. If you die while you’re paying the premium your estate gets a large sum of money.
In contrast, permanent or whole life insurance remains in force until you die. You pay the premium on a monthly basis for a pre-specified term, which can range between 10 to 20 years. A portion of your monthly payment pays the insurance and the life insurance company that provided the insurance invests the remainder. Eventually you don’t pay any premiums but your estate still receives a large payment upon death.
Whole life polices have been criticized because their investment returns are low. Thus you were often advised to buy life insurance protection with a term policy and invest the difference between term and whole life payments in a separate investment vehicle, such as mutual funds, stocks, or bonds. Once you have built up a large pool of assets you don’t need the insurance because the assets will provide security and stability in the event of an unexpected death.
However, there is a new, more flexible product called universal life insurance. While the life insurance company controls the savings in a whole life policy, the savings in a universal life plan are owned and controlled by the policyholder. Insurance companies offer a large variety of investment options for this savings component, including mutual funds. Thus, you have the ability to meet your life insurance needs and increase your return on investment.
The major advantage of a universal life policy is tax-advantaged growth. When you pay the policy premium, a portion of the premium pays for the insurance and a portion is invested. However, when you are ready to withdraw the money from your investment, your cost basis ( the portion not subject to tax) is higher with a universal life policy. The cost base for a universal policy is equal to the sum of all your premiums – the amount of money you have invested plus the money you have used to buy life insurance. This is very useful because increasing your cost base will ensure you pay less tax once you sell your investments within the universal life policy.
Universal life insurance provides a powerful combination of life insurance and tax-advantaged investment opportunities. Investors should realize that universal life insurance premiums work twice as hard as other premiums. They should also know that choosing the right product is an important element in the overall success of this strategy. Finally, the benefits of this strategy are magnified if you are in a higher tax bracket.
Tags: Flexible Product, Insurance Companies, Insurance Premium, Investment Options, Investment Returns, Investment Vehicle, Life Insurance Company, Life Insurance Protection, Maturity, Mutual Funds, Polices, Policyholder, Premiums, Return On Investment, Sum Of Money, Term Insurance, Unexpected Death, Universal Life Insurance, Universal Life Policy, Whole Life Insurance
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Tuesday, June 22nd, 2010
Who needs it?
Life Insurance cover provides either a lump sum or an income on the untimely death of an individual. Therefore, anyone who’s death would create a financial loss to another has a need for life insurance cover. This couldshould include the following: -
Parties to a Mortgage or indeed a loan (mortgage life insurance cover)
Anyone with dependents (whilst a parent may not work, surely there would be a financial loss if anything were to happen whilst there are young children to be cared for)
Key Individuals. Where a business would suffer financial loss on the death of an essential employee.
In essence any situation where monetary loss would be incurred could possibly have a need for life insurance cover.
630,000 people in the UK will die this year* *source:National Statistics, Winter 2002
Types of Cover
Term Life Insurance
Term life insurance is as it suggests taken out for a specified number of years at outset. With this type of policy you are merely paying for the cover provided based on your age, health and the term. Therefore, it is important to obtain the most competitive term life insurance quote for the cover provided. It is possible to take out term life insurance that will pay level lump sums, decreasing lump sums (mortgage life insurance cover) or regular payments (income).
Whole of Life
As the name suggests, potentially, this type of policy will provide cover through an individuals life time. However, when obtaining a whole of life insurance quote, as well as level of premium there are other aspects to be considered, such as investment performance, effect of charges, financial strength of the company.
Which one?
There are good arguments for both type of policy. We would suggest that the following could make up the main considerations: –
Cost – Whole of Life insurance, as a rule of thumb is usually the more expensive type of product.
Period that cover is required – If cover is required for a specific period i.e. a Mortgage then Term cover could be more appropriate
Future Plans – If, for instance a family is planned, then whole of life can offer the flexibility to increase cover for this or other like events.
Note
Critical Illness(CI) now provides an equally important benefit and we would strongly recommend that you view the CI Factsheet.
Conclusion
This artice is meant merely as a rough guide to the needs and options surrounding Life Assurance. It is by no means a comprehensive outline to anyones particular requirements. It would be, therefore, wise to use this as a guide and seek more comprehensive advice, via a professional Independent Financial Adviser. All advisers are Regulated and Authorised by the Financial Services Authority (FSA) and are now required to explain their status to you (either independent and fee charging, independent but paid by commission only, or tied)
Tags: Age Health, Dependents, Financial Strength, Insurance Term Life, Investment Performance, Life Insurance Quote, Life Time, Loan Mortgage, Lump Sum, Lump Sums, Monetary Loss, Mortgage Insurance, Mortgage Life Insurance, National Statistics, Rule Of Thumb, Term Life Insurance, Term Life Insurance Quote, Untimely Death, Whole Of Life Insurance, Winter 2002
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Life Insurance and Life Assurance are not the same!
Tuesday, June 29th, 2010The average man in the street assumes that Life Insurance and Life Assurance are names for the same form of insurance. How wrong they are! But don’t hang your head in shame, many financial commentators get it wrong too! Life Insurance and Life Assurance perform different financial roles and are poles apart in cost – so it helps to surf for the correct product.
Life Insurance provides you with insurance cover for a specific period of time (known as the policys term). Then, if you were to die whilst the policy is in force, the insurance company pays out a tax-free sum. If you survive to the end of the term, the policy is finished and has no residual value whatsoever. It only has a value if there is a claim in that context its just like your car insurance!
Life Assurance is different. It is a hybrid mix of investment and insurance. A Life Assurance policy pays out a sum equal to the higher of either a guaranteed minimum underwritten by the policy’s insurance provisions or its investment valuation. The value of the investment element is then a reliant on the Insurance Companys investment performance and length of time you have been paying the premiums.
Each year the insurance company adds an annual bonus to the guaranteed value of your life assurance policy and there is normally an extra terminal bonus at the end. Therefore, as the years go by your life assurance policy increases in value as the investment bonuses accumulate. The value of these bonuses are then determined by the insurance companys investment performance. Once investment value has been assigned to the policy, you can cash it in with the insurance company. However, most people get a far better price for their life assurance policy by selling it to a specialist investment broker rather than cashing it in with the insurance company.
If you were to die during a Life Assurance policys term, the policy pays out the higher of either the guaranteed minimum sum or the accumulated value of the annual investment bonuses. However, if you are still living when the policy terminates, you usually get a bigger payout. This is because with most insurance companies, an additional terminal bonus is awarded.
There is a also a specialised form of life assurance called “Whole of Life”. These policies remain in force for as long as you live and as such, have no preset term.
There is also a practical difference for the internet user. Whereas you can buy life insurance online, the Financial Services Authority view life assurance as fundamentally an investment product. As such they believe it is best suited to being sold by a Financial Adviser with advice based on the Advisors full understanding of your personal details. Therefore, you will be unable to buy life assurance online. However, you can use the internet to find a suitable financial adviser with whom you can meet and discuss your requirements.
What are Life Insurance polices and Life Assurance policies used for?
Life Insurance is usually a focal point of the family’s financial protection. It is ideally suited to ensure that known debts such as a mortgage, are repaid in full in the event of the policyholders death.
When it comes to providing a lump sum for general use in the event that the policyholder were to die whilst the policy was in force, either life insurance or life assurance can be used. The differences are that with life insurance the size of payout would be preset whereas with life assurance it would depend on the guaranteed minimum and the insurance company’s investment performance. But remember, at the end of the policy’s term life insurance is worthless, whereas life assurance should payout a sizeable investment sum. In this context Life Assurance seems far more worthwhile but in practice more people elect for life insurance. Why? It’s a matter of cost. Life Insurance is considerably cheaper than Life Assurance. Furthermore, in recent years, investment returns on Life Assurance policies have fallen significantly and many insurance companies have placed penalties for cashing in policies early. This has adversely affected the resale value of Life Assurance policies.
Finally, if you want a product to provide a lump sum on your death whenever that is with a minimum payout guaranteed, you’ll probably elect for Whole of Life insurance. It’s really a form of lifetime investment with the benefit of a guaranteed minimum. They’re particularly useful for Inheritance Tax Planning.
Tags: Average Man, Car Insurance, Commentators, Hybrid Mix, Insurance Company, Insurance Companys, Insurance Life, Insurance Provisions, Investment Broker, Investment Performance, Investment Valuation, Investment Value, Length Of Time, Life Assurance Policy, Life Insurance, Man In The Street, Minimum Sum, Residual Value, Specialist Investment, Terminal Bonus
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