The article above should already shed light on the financial health of an insurance carrier. Those who buy Term Life policy and those who surrender universal life policy early help pay for those who fully fund their policy and carry them to maturity. Those who maximize death benefit on a policy will more likely lapse or surrender the policy compare to those who minimize death benefit and maximize cash grow.
The Index Universal Life product has flexible premium and normally there is smaller premium that is required to keep the policy active and when the client can afford to pay more then more cash will go to the investment portion to grow the cash value. There is a grace period of time that the policy would still be active after the client missed the monthly payment and if the client can catch up with the payment then the policy would continue as written. I believe there is a non-payment gap of 2-3 years that the client could get back to the same policy if the client can retroactively make up all the rear payment. Life insurance has evolved quite a bit and death benefit is just one components of the total package. To me, Term Insurance is just a waste of money for the client and a good revue for the carrier. A well structure universal life policy should cost the client nothing over the long run, let alone there could be substantial cast value to supplement retirement income. Most people think of life insurance as a cost item so they chose Term Life to minimize premium; however, those who understand life policy well would prefer Index Universal Life for the cash value, accelerate benefit, and death benefit. One critical and big advantage for a client is to buy the policy as early as possible when one is still young and healthy. Build a larger cash value early on to take advantage of compound interest over a long period of time. S&P500 average 7-8% annual gain over the last 30 years so this mean your cash double every 9-10 years. Put the same money in the bank saving account with 2% interest and it would take 36 years to double. One good thing about Index Universal Life poliy is that it has a 0-1.5% floor protection on the indices down side and 10-14% cap on the indices upside so when the stock market crashed you don't lose money as compare to a 401K account.
The life insurance agent makes money on the commission of the sale but when the policy holder die then they get the life insurance check for beneficiaries. So I don't think there is any kind of need to beware before purchasing insurance. Yes there are also very rare chances where adviser can't make this better for you.
Dean, you may be referring to a term on UL chassis product. Can function like a term life policy if you want to keep it basic, but can be a UL policy and allow you cash value components and the ability for your policy to pay for itself over the years. Term life insurance quotes are likely to rise over the years; if you want the coverage now, it makes sense to buy sooner rather than later.
Many policies lapse because people are human and they might miss a payment or two, or they encounter a tough economic downturn like we have right now and have to make the hard choice of feeding their families vs. sustaining a bet that they might die and leave their families without a breadwinner. It really is a tough stretch we are in right now. But the word should get out, particularly for families raising children, that they should do everything they can to put some type of safety net in place just in case. The results if they fail to do this could be disastrous. http://www.lifeinsurancecom...
I'm interested in cryonics (have no philosophical objections), but I can't afford it as a cash payment. I am disabled and uninsurable. And I live alone, which means I could be dead for days before anyone noticed.
Realize that life insurers pay out 1.5 billion dollars every day!
Cyronics maybe one of the strangest, but most applicable examples for buying permanent insurance. If you plan on being preserved after death, you have a need for a big lump sum when you die that doesn't lessen over time, like a mortgage or raising kids would.
Other reasons for Whole Life are to insure business partner or loan, bequeath a charity, pay estate taxes, or leave a legacy to heirs.But that is not most people. the typical profile of a Term Life insurance owner is someone who is a family breadwinner and has minimal savings. It is critical protection and too many people don't have it.Choose term for covering specific needs that will disappear with time, such as: Income replacement, Financial security for dependents, Mortgage protection, College funding, Final/burial expensesUse a free online quote engine to compare term rates from hundreds of top-rated companies to see how affordable it is. (I'd recommend QualityTermLife's site because they don't ask for your phone or email to get quotes.)
Generally speaking: Isn't ANY insurance policy a lot like sports gambling?
Yes, you might theoretically understand the odds better than those trained, experienced and well equipped actuaries (unlikely though that is...), but then again, there probably wouldn't be any insurance companies if they didn't usually make money on their clients.
Alright, there still might be some benefits to getting a policy as an investment (not because insurers are so great at investing, but because there might be some guarantee by the government to keep the companies hopelessly inflated payout promises if needed), or because compensating a LOSS has inherently a greater utility than making some gain (as in "normal" gambling).
But still, wouldn't it make a lot more sense to just save your money, invest it when stocks are low, and then sell those when needed?
The numbers are still weird. Ok, so if 85% of term life policies never pay out, then 15% do pay out. But the annual death rate by age is generally well below 1%, is it not? So does this imply that too many term policies are paying out? If so, why? Inertia in people just carrying term to death (even as term renewals cost more each time)?
And if people are letting term lapse for rational reasons like no longer needing coverage for dependents (as I understand term policies were designed for, temporary coverage), then why do permanent whole policies have even *lower* payout rates? If 88% never pay out, then just 12% pay out - so a term policy is more likely to have the subject die than a whole life? Why are they surrendering whole even more often than term?
Maybe the paper explains all this since some of the bullet points touch on these questions, but it's paywalled...
Most life insurance policies are investment vehicles as well as insurance policies, so your statement that "most people who buy life insurance never actually get paid when they die" doesn't bother / surprise me. In one sense the earnings of the insurance carriers represents the well-being that, for instance, a Term life insurance holder may receive for knowing that her family is well taken care of in the event of her death during the term (e.g. while the kids are not yet in college). Note that of course I'm pretty biased.
See Comment by John B. That is also my plan. I'm thinking that somebody who suggests that life insurance isn't a good idea because most people don't cash in is kind of missing the point of "insurance."
I shopped around for 20-year term insurance when my wife got pregnant, but what I ended up with is kind of an odd policy. Assuming I've understood it correctly, I could actually pay according to an increasing schedule, but early overpayments effectively accrue 3% interest; the salesman simply presented me with the fixed monthly payment that, made for 20 years, would lead me to build up an excess balance that would then exhaust itself in the 240th month. I'm just going along with that. Because of this, though, I'm pretty sure that if I quit making payments, the policy wouldn't actually lapse until the excess had run down; there's no benefit to them from my potential lapse on this policy.
The article above should already shed light on the financial health of an insurance carrier. Those who buy Term Life policy and those who surrender universal life policy early help pay for those who fully fund their policy and carry them to maturity. Those who maximize death benefit on a policy will more likely lapse or surrender the policy compare to those who minimize death benefit and maximize cash grow.
The Index Universal Life product has flexible premium and normally there is smaller premium that is required to keep the policy active and when the client can afford to pay more then more cash will go to the investment portion to grow the cash value. There is a grace period of time that the policy would still be active after the client missed the monthly payment and if the client can catch up with the payment then the policy would continue as written. I believe there is a non-payment gap of 2-3 years that the client could get back to the same policy if the client can retroactively make up all the rear payment. Life insurance has evolved quite a bit and death benefit is just one components of the total package. To me, Term Insurance is just a waste of money for the client and a good revue for the carrier. A well structure universal life policy should cost the client nothing over the long run, let alone there could be substantial cast value to supplement retirement income. Most people think of life insurance as a cost item so they chose Term Life to minimize premium; however, those who understand life policy well would prefer Index Universal Life for the cash value, accelerate benefit, and death benefit. One critical and big advantage for a client is to buy the policy as early as possible when one is still young and healthy. Build a larger cash value early on to take advantage of compound interest over a long period of time. S&P500 average 7-8% annual gain over the last 30 years so this mean your cash double every 9-10 years. Put the same money in the bank saving account with 2% interest and it would take 36 years to double. One good thing about Index Universal Life poliy is that it has a 0-1.5% floor protection on the indices down side and 10-14% cap on the indices upside so when the stock market crashed you don't lose money as compare to a 401K account.
The life insurance agent makes money on the commission of the sale but when the policy holder die then they get the life insurance check for beneficiaries. So I don't think there is any kind of need to beware before purchasing insurance. Yes there are also very rare chances where adviser can't make this better for you.
Dean, you may be referring to a term on UL chassis product. Can function like a term life policy if you want to keep it basic, but can be a UL policy and allow you cash value components and the ability for your policy to pay for itself over the years. Term life insurance quotes are likely to rise over the years; if you want the coverage now, it makes sense to buy sooner rather than later.
Sounds like you could do well by buying and holding a life insurance policy until death (if you think you will do so).
Many policies lapse because people are human and they might miss a payment or two, or they encounter a tough economic downturn like we have right now and have to make the hard choice of feeding their families vs. sustaining a bet that they might die and leave their families without a breadwinner. It really is a tough stretch we are in right now. But the word should get out, particularly for families raising children, that they should do everything they can to put some type of safety net in place just in case. The results if they fail to do this could be disastrous. http://www.lifeinsurancecom...
I'm interested in cryonics (have no philosophical objections), but I can't afford it as a cash payment. I am disabled and uninsurable. And I live alone, which means I could be dead for days before anyone noticed.
Is there any way cryonics is practical for me?
Realize that life insurers pay out 1.5 billion dollars every day!
Cyronics maybe one of the strangest, but most applicable examples for buying permanent insurance. If you plan on being preserved after death, you have a need for a big lump sum when you die that doesn't lessen over time, like a mortgage or raising kids would.
Other reasons for Whole Life are to insure business partner or loan, bequeath a charity, pay estate taxes, or leave a legacy to heirs.But that is not most people. the typical profile of a Term Life insurance owner is someone who is a family breadwinner and has minimal savings. It is critical protection and too many people don't have it.Choose term for covering specific needs that will disappear with time, such as: Income replacement, Financial security for dependents, Mortgage protection, College funding, Final/burial expensesUse a free online quote engine to compare term rates from hundreds of top-rated companies to see how affordable it is. (I'd recommend QualityTermLife's site because they don't ask for your phone or email to get quotes.)
Imply and ye shall receive. http://dl.dropbox.com/u/293...
Generally speaking: Isn't ANY insurance policy a lot like sports gambling?
Yes, you might theoretically understand the odds better than those trained, experienced and well equipped actuaries (unlikely though that is...), but then again, there probably wouldn't be any insurance companies if they didn't usually make money on their clients.
Alright, there still might be some benefits to getting a policy as an investment (not because insurers are so great at investing, but because there might be some guarantee by the government to keep the companies hopelessly inflated payout promises if needed), or because compensating a LOSS has inherently a greater utility than making some gain (as in "normal" gambling).
But still, wouldn't it make a lot more sense to just save your money, invest it when stocks are low, and then sell those when needed?
The numbers are still weird. Ok, so if 85% of term life policies never pay out, then 15% do pay out. But the annual death rate by age is generally well below 1%, is it not? So does this imply that too many term policies are paying out? If so, why? Inertia in people just carrying term to death (even as term renewals cost more each time)?
And if people are letting term lapse for rational reasons like no longer needing coverage for dependents (as I understand term policies were designed for, temporary coverage), then why do permanent whole policies have even *lower* payout rates? If 88% never pay out, then just 12% pay out - so a term policy is more likely to have the subject die than a whole life? Why are they surrendering whole even more often than term?
Maybe the paper explains all this since some of the bullet points touch on these questions, but it's paywalled...
Most life insurance policies are investment vehicles as well as insurance policies, so your statement that "most people who buy life insurance never actually get paid when they die" doesn't bother / surprise me. In one sense the earnings of the insurance carriers represents the well-being that, for instance, a Term life insurance holder may receive for knowing that her family is well taken care of in the event of her death during the term (e.g. while the kids are not yet in college). Note that of course I'm pretty biased.
See Comment by John B. That is also my plan. I'm thinking that somebody who suggests that life insurance isn't a good idea because most people don't cash in is kind of missing the point of "insurance."
I shopped around for 20-year term insurance when my wife got pregnant, but what I ended up with is kind of an odd policy. Assuming I've understood it correctly, I could actually pay according to an increasing schedule, but early overpayments effectively accrue 3% interest; the salesman simply presented me with the fixed monthly payment that, made for 20 years, would lead me to build up an excess balance that would then exhaust itself in the 240th month. I'm just going along with that. Because of this, though, I'm pretty sure that if I quit making payments, the policy wouldn't actually lapse until the excess had run down; there's no benefit to them from my potential lapse on this policy.
If your children are grown and you have saved for retirement, it's reasonable to no longer see a need for life insurance.
I used term because I needed it during the time I had minor children and not much saved.
This is a feature, not a bug.
"I paid for all this homeowner's insurance, and my house didn't burn down! I'm outraged!"