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Life Insurance- How To Choose An Insurance Agent

This Blog is sponsored by Soundview Financial’s Retirement Savings Guide. Click here to visit Soundview Financial to get access to helpful articles, tips and resources for retirement planning.

As the final post in our introductory series on life insurance, we wanted to provide a brief overview on how to choose an insurance agent. Generally, we find that people get recommendations from friends, family and other sources. Once you have a list of potential insurance agents, here is what you should find out:

Is the insurance agent licensed in your state? All states require insurance agents to be licensed to sell life insurance. In addition, agents who sell variable products such at variable life insurance must be registered with the National Association of Securities Dealers and have additional state licenses.

What insurance company or companies does the agent represent? Ask the agent which companies he or she represents and what types of policies these companies sell. Be sure to read our earlier post :Life Insurance- The Advantage and Disadvantages of Term and Permanent Life Insurance” to get insight on the questions to ask when selecting an insurance company.

Does the insurance agent have any professional designations? Professional designations that life insurance agents may earn include Chartered Life Underwriter (CLU), and Life Underwriter Training Council Fellow (LUTCF). Agents who are also financial planners may have other designations, such as Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), or Member of the Registry of Financial Planning Practitioners.

Is the insurance agent a member of a professional association? The major association for agents is the National Association of Insurance and Financial Advisors (NAIFA). NAIFA’s local associations provide educational seminars and help update agents on trends in the industry.

For more information on life insurance and other retirement planning strategies, please visit Soundview Financial’s Retirement Savings Guide by clicking here.

Life Insurance- The Advantages and Disadvantages of Term and Permanent Life Insurance

For information on getting a free online life insurance quote visit Soundview Financial’s Retirement Savings Guide here

For the third part of our posts on life insurance, we wanted to provide a brief overview of the advantages and disadvantages of term life insurance and permanent life insurance. This post may help you determine which type of insurance best suits you and help you develop a list of questions to ask your insurance broker. Here goes…

Term Life Insurance

Advantages: 1) Initial premiums are generally lower than those for permanent life insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection is often the greatest.

2) It’s good for covering needs that may disappear in time, such as mortgages, car loans or education funding.

Disadvantages: 1) Premiums increase as you grow older.

2) Coverage may terminate at the end of the term or become too expensive to continue.

3) The policy generally doesn’t offer cash value or paid-up insurance.

Permanent Insurance

Advantages: 1) As long as premiums are paid, protection is guaranteed for life.

2) Premium costs can be fixed or flexible to meet personal financial needs.

3) The policy accumulates a cash value against which you can borrow–remember that loans must be paid back with interest or your beneficiaries will receive a reduced death benefit.

4) You can borrow against the policy’s cash value to pay premiums or use the cash value to provide paid-up insurance.

5) The policy’s cash value can be surrendered- in total or in part- for cash or converted into an annuity.

Disadvantages: 1) Required premium levels may make it hard to buy enough protection.

2) It may be more costly than term insurance if you don’t keep the policy long enough.

Once you’re in a position to considering purchasing a life insurance policy, the next question is: How do I choose an insurance company?

About 1,800 companies in the United States sell life insurance. While some consumers prefer to buy policies directly from a company, most people buy life insurance through agents or brokers.

Before purchasing a policy, check the company’s financial condition. You should ask your insurance agent or request information from your state’s insurance department. You should also check with your state’s insurance department to make sure the insurance company is licensed in your state. Also, a number of insurance rating services rate the financial strength of companies. This ratings can be found in large public or business libraries, or can be obtained directly from the rating service. There may be a fee for the information. Your agent should also be able to provide you with this information– after all, he or she is likely recommending a policy from a particular company. The rating services include: A.M. Best, Moody’s Investors Services and Standard & Poor’s Insurance Ratings Services. Here’s the contact information for these ratings services:

A.M. Best

908-439-2200

www.ambest.com

Moody’s Investors Services

212-553-0300

www.moodys.com

Standard & Poor’s Insurance Ratings Service

212-438-2000

www.standardandpoor.com

In a future post, we will discuss how to choose an insurance agent.

For information on getting a free online life insurance quote visit Soundview Financial’s Retirement Savings Guide here

Life Insurance- Types of Permanent Life Insurance

As we discussed in an earlier post and at the Soundview Financial Retirement Savings Guide website, there are two broad types of life insurance: term life insurance and permanent life insurance. In this post, we will discuss the various types of permanent life insurance. Here is a quick summary:

Permanent insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. If you don’t intend to keep the policy for the long term, permanent life insurance may be the wrong type of life insurance for you. Most permanent policies offer a savings or investment component combined with the insurance coverage. This component, in turn, causes premiums to be higher than those of term insurance. The investment may offer a fixed interest rate or may be in the form of money market securities, bonds or stocks. This savings portion of the policy allows the policy owner to build a cash value within the policy which can be borrowed or distributed at some time in the future.

Permanent life insurance are known by a variety of names: whole, ordinary, universal, adjustable and variable life. Most have a feature called “cash value” or “cash surrender value.” This feature, not found in most term insurance policies, provides you with some options.

  • You can cancel or “surrender” the policy — in total or in part — and receive the cash value as a lump sum. If you surrender your policy in the early years, there may be little or no cash value.
  • If you need to stop paying premiums, you can use the cash value to continue your current insurance protection for a specified time or to provide a lesser amount of protection covering you for your lifetime.
  • You can usually borrow from the insurance company, using the cash value in your life insurance as collateral. Unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit

With all types of permanent policies, the cash value of a policy is different from the policy’s face amount. The face amount is the money that will be paid at death or policy maturity. Cash value is the amount available if you surrender a policy before its maturity or your death. The cash value may fluctuate based on the performance of the underlying investment options. Moreover, the cash value may be affected by your insurance company’s financial results or “experience,” which can be influenced by mortality rates, expenses, and investment earnings.

Here is a quick summary of the types of permanent life insurance:

Whole or ordinary life insurance is the most common type of permanent life insurance. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy.

Universal or adjustable life insurance allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. You also can reduce or increase the death benefit more easily than under a traditional whole life policy.

Variable life insurance provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward- stocks, bonds, combinations of both, or account that guarantee interest and principal. The cash value of a variable life policy is not guaranteed and the policyholder bears that risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance. Good investment performance will lead to higher cash values and death benefits. Poor investment performance will result in lower cash values and death benefits.

If you’re interested in receiving a free life insurance quote from multiple companies, please visit our sponsor, 4FreeQuotes by clicking here.

In the future, we will be writing on the advantages and disadvantages of term life insurance and permanent life insurance. In the meantime, for more information on life insurance and other retirement planning strategies, please visit Soundview Financial’s Retirement Savings Guide by clicking here.

Life Insurance- Buying Tips

We have provided in depth articles and tips on life insurance at Soundview Financial’s Retirement Savings Guide. Here are some helpful tips/insights to consider when purchasing life insurance:

Shop Around. Prices vary from company to company, so it pays to shop around. Get at least three price quotes. Don’t shop on price alone. Ask friend and relatives for their recommendations. Please read our earlier post: “Life Insurance: The Advantages and Disadvantages of Term and Permanent Life Insurance” for tips on selecting a life insurance company. If your interested in receiving multiple quotes through one service, please visit our sponsor, 4FreeQuotes, by clicking here.
Buy When You’re Young. While many people don’t believe they need life insurance at a young age, it pays to lock in protection at a young age when your health and prices are still good.

Your “half” birthday could be costly.While some companies raise their prices based on your actual age, most companies increase the price of their policies six months before your birthday. It’s a term called “Age Nearest” in the industry, and that half-year price increase could really add up over a 20-year term policy.

Buy the right amount of coverage. Many agents may try to sell you more coverage than you need. The purpose of life insurance is to “indemnify” (replace financial loss), and what most people should be looking for is income replacement for their beneficiaries. Independent financial planners recommend the following rule of thumb: purchase an amount of coverage equal to 6-10 times your annual gross income.

Check for price breaks. Companies often offer “price breaks” at certain coverage amounts (e.g., $250,000 vs. $225,000). The truth is that many people can actually pay less money for more coverage. Check how little your prices increase when you increase coverage to $250,000, $500,000, or $1,000,000.

The right hobby with the wrong company could cost you. People who participate in high-risk sports or activities (such as hang-gliding, skydiving, mountain climbing, scuba diving, and racing), or even those who like to have an occasional cigar could very well pay more money if they don’t pick the right company. Every company looks at risk factors differently and some are more liberal in certain areas than others. Speak with a licensed insurance expert and make sure they have all the underwriting criteria at their disposal and match you with the right company.

Avoid Multiple Policies. Consider buying one large policy since larger policies often sell for less per thousand dollars of coverage. Avoid getting several different insurance policies.

Check out your payment/billing options. Many life insurance companies offer discounts to consumers who pay their premiums annually, or who pay monthly by electronic funds transfer (EFT).

Review your policy often. Do a review of your life insurance policy a minimum of every three years, if not more often. Rates may be lower, and your circumstances may have changed, necessitating more or less protection. If you are replacing a policy, make sure you allow enough time to get your new policy in place so coverages won’t overlap or lapse.

For more information on life insurance and other retirement planning strategies, please visit Soundview Financial’s Retirement Savings Guide by clicking here.

Life Insurance – The Basics

 This Blog is sponsored by Soundview Financial’s Retirement Savings Guide. Click here to visit Soundview Financial to get access to helpful articles, tips and resources for retirement planning.

We wanted to answer a few basic questions on life insurance. More information, of course, can be found at Soundview Financial’s Retirement Savings Guide website. Here goes…

Why Do You Need Life Insurance? The main purpose of life insurance is to provide cash to your family after you die. The money your dependents will receive (often called, the “death benefit”) is an important financial resource. It can help pay the mortgage, run the household, and ensure that your loved ones are not burdened with debts. The proceeds of life insurance could help your dependents avoid selling assets such as your home to pay bills and taxes. Also, there is no federal income tax on life insurance benefits.

How Much Life Insurance Should You Purchase? While the amount of life insurance one needs is dependent on his or her financial assets and liabilities, one rule of thumb suggested by the American Council of Life Insurance is to buy life insurance equal to five to seven times your annual gross income. Again, remember that this is a general rule of thumb and there is no substitute for evaluating your specific needs.

What Are The Different Types of Life Insurance? There are many different types of life insurance, but they generally fall into two categories: term insurance and permanent insurance.

Term insurance provides protection for a specific period of time. It pays a benefit only if you die during the policy term. Some term insurance policies can be renewed when you reach the end of the term- which can be from 1 to 30 years; however, the premium rates increase at each renewal date.

Permanent insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a very long period of time. If you don’t intend to keep a life insurance policy for the long term, this may be the wrong type of insurance for you.

Permanent life insurance policies are known by a variety of names: whole life insurance, ordinary life insurance, universal life insurance, adjustable life insurance and variable life insurance. Most of these policies have a feature known as “cash value” or “cash surrender value” which is not typically available in term life insurance policies. This feature enables you to cancel or surrender your policy and receive the cash value in a lump sum–the cash value builds over time so if you surrender your policy in the early years there may be little or no cash value. Under certain policies, you also have the option of borrowing against the cash value.

Remember that the cash value of a permanent life insurance policy should not be confused with the policy’s face amount. The face amount is the death benefit that will be paid at death while the cash value is the amount available if you surrender a policy before your death. The cash value increases over time as you continue to pay insurance premiums.

If you’re interested in receiving a life insurance quote from multiple companies with one application, please visit our sponsor, 4FreeQuotes by clicking here.

In future posts, we’ll discuss the various types of permanent life insurance policies and the advantages and disadvantages of term and permanent insurance. In the meantime, please visit Soundview Financial’s Retirement Savings Guide for more information on life insurance and other retirement planning strategies.