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What is a life insurance policy?

A life insurance policy is a contract between an insurance company and a policy holder (insured) to pay out an agreed amount to the insured’s beneficiaries (usually family) upon the death of the policy holder. The policy holder agrees to pay premiums as calculated by the insurance company.

Life insurance policies are purchased to protect the surviving family members from the loss of income that would occur as a result of the death of a family member.

There are two types of life insurance policies, permanent and term.

Permanent Insurance Policy:

Permanent policies are more expensive and complicated than the term policy. Permanent insurance remains in effect for the policy holder’s lifetime (as long as the premiums are paid as agreed by the policy terms and conditions). In addition to paying out death benefits, it provides investment opportunities. A permanent policy’s value increases over time and the insured may borrow against the accrued value of the policy. This increase in cash value is tax deferred until the money is drawn.

There are three types of Permanent life insurance policies.

Whole: Whole life policies are traditional permanent insurance that accrues cash value over time. Most whole life insurance policies pay dividends to the policy holder.

Universal: Universal life insurance polices are more flexible than the other permanent policies. It allows the policy holder to change the amount of insurance and premiums as financial needs change (subject to insurance company underwriting terms and conditions).

Variable: With variable life Insurance policies, the death benefit and the value of the policy are based upon the performance of a separate investment fund. Most policies guarantee that the death payout will not fall below a certain minimum, however the cash value of the policy is not usually guaranteed. There is more risk involved with Variable policies.

Term Insurance Read more…

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 Read more…

I have always wanted to be rich. I want to live a life filled with luxuries. I want to be the envy of others. In my opinion, wealth is something that could buy a lot of things. Money can bring you happiness. However, I do not deny that there are many things that money cannot buy. In fact, I believe that there are other more important things in life than money.

I am born into a middle class family. My family is neither poor nor rich. We are able to afford basic necessities and some luxuries. Also, I am blessed with parents who care a lot for me. They work hard to provide for me and my brother. My brother and I are able to lead a carefree life. I am thankful for all that I have. However, I do not deny that I want more. I want to be truly rich. I want to be able to afford everything that I want.

Being rich can make my life more comfortable. I will be able to buy a big house with servants. I will be able to afford luxurious cars with chauffeurs. I will be able to dine in expensive restaurants. I will be able to afford a private jet in which I can visit all the beautiful countries. Pretty girls will flock to me. I will be able to enjoy relaxing spas. People will look up to me. I believe that money will make me a happier person. I may sound superficial. But these are things that truly only the rich can afford and I to be the rich. If you were given a billion dollars right now, I am sure that you will be a happier person.

I believe that money can buy many luxuries. However, I feel that health is still the most important. I would rather be healthy than Read more…

While most of us do not like to think of the subject of our own death, the fact of the matter is that death is a part of life and in order to protect our families we need to give some thought to the subject of life insurance. The more you understand about life insurance the better you can prepare not only for your final expenses and protect your family.

First, understand there are different types of life insurance. The type that is best for you will depend on a variety of factors including your current age and health condition. The two major types of life insurance policies that you need to concern yourself with are term life insurance and permanent life insurance.

Term life insurance provides coverage for a specified period of time. This type of coverage will usually be less expensive than permanent life insurance. Policy periods are usually divided up into easy periods such as one, ten or twenty years. In the event you die within that time period, the death benefit will be paid to your beneficiaries. On the other hand, if you should reach the end of the time period and you are still alive your protection will end unless you elect to renew the policy. The option of building up cash value is not available with this type of insurance policy.

Individuals who only need temporary life insurance and those who need a large amount of coverage but who can?t afford to spend a lot benefit from this type of policy the most.

Permanent life insurance is designed to provide coverage for the duration of your life, although in some cases, the policy may be limited up until a specific age. When you reach that age, the cash value of the policy will be paid to you. Because you are building a cash value with permanent life insurance you can also withdraw from the Read more…

The failure to disclose information, especially medical information, is the most common reason why an insurer will reject a claim on a life or critical illness policy. To help underline some issues, we want to tell you a true story – but we’ve concealed the policyholders’ name and a few other aspects to preserve anonymity.

Mrs A was fighting a secondary infection following surgery to remove cancerous lymph nodes in her groin when she received further bad news. Her critical illness insurer was refusing to pay out the ?200,000 she was expecting. To understand why and the issues involved it’s useful to understand how the events unfolded.

? In June 2001, Mrs A visited her GP after discovering a patch of flaky skin on her back. Mrs A thought it was eczema. During a brief consultation, her GP thought that it should be looked and recommended a referral to a dermatologist. But soon afterwards the flaky skin healed and Mrs A cancelled the appointment with the dermatologist. Apparently her GP did not express any major concern and some years later admitted that Mrs AP was in all likelihood unaware of the urgency of the referral.

? Nine weeks later a sales representative from Standard Life made a routine visit to Mrs A at her home. As Mrs A was now alone with a young family, the representative reviewed Mrs A’s life insurance cover and suggested that she should also have a ?200,000 Critical Illness policy. Mrs A thought that sounded a very good idea and willingly agreed there and then.

The sales representative produced the form and went through it, question by question, writing down Mrs A’s answers for her. When it came to the question asking Mrs A to disclose all occasions her GP had recommended referrals for tests or treatments, Mrs A asked the sales representative what Standard was asking for. Mrs A alleges that the representative replied that Standard only needed details of appointments that related to serious conditions. Mrs A did not believe that her referral for what she thought had been eczema, fell into that category – so she did not mention it. She then signed the form honestly believing that she had disclosed everything Standard Life had required.

Standard subsequently accepted her application and issued the ?200,000 Critical Illness Insurance policy.

? Two years later Mrs A was found to have skin cancer. Major surgery rapidly followed to remove the cancer. As her critical illness policy included cover for her cancer, Mrs A then made what she thought was a valid claim.

? Standard Life subsequently rejected her claim on the basis of ?reckless non-disclosure? ? the insurers’ jargon for Mrs A’s failure to disclose her cancelled appointment with the dermatologist.

The Issues

The events that followed showed that Mrs A’s application should have included her referral to the dermatologist. So why didn’t she disclose the information?

It seems that two aspects conspired to create the situation: Standard Life’s sales representative told Mrs A that the question on the application form asking for ?all occasions her GP had referred her for tests or treatments? as only relating to serious conditions. That interpretation was fundamentally wrong. The question asked for ALL OCCASIONS. These questions are worded carefully and ALL means ALL – it is not asking the applicant to make a personal Read more…

One of the UK’s biggest life insurance companies recently pointed out that only 1% of life insurance policies are written in trust. This should not be the case ? and in this article we explain why.

By having your policy ?Written in Trust?, it means that if a claim is made, the beneficiaries named on the policy receive the payout directly. If you’re not in the know, then you could be forgiven for not understanding the significance of this. The life insurance companies, however, should know better.

If the life insurance policy is ?Written in Trust?, the payout in the event of a claim will not be subject to inheritance tax because it never becomes part of your legal estate. The following figures explain how it works.

Mr Smith’s wife died a few years ago, so he wants his two sons to inherit his estate. He owns his home which has a current market value of ?245,000, with ?10,000 still left to pay on the mortgage. He also has stocks and shares amounting to ?52,000, and his car and other belongings add another ?18,000 to his value. Mr Smith has life insurance policy for ?100,000 but he did not have the policy written in trust. We are working on the assumption that it would cost ?5,000 to administer his estate and to obtain probate.

If Mr Smith died tomorrow, he would leave a total of ?400,000 for his sons, however that would be subject to inheritance tax. The value of his estate that goes above ?275,000 would attract a tax charge of 40%, so all in all ?50,000 would be taken away for tax, and each son would inherit ?175,000.

If we do the exact same calculation again, this time assuming that Mr Smith’s life insurance policy was written in trust, then it’s quite a different story. The life insurance company pays out ?50,000 each to his sons, so that ?100,000 policy cannot be included in Mr Smith’s estate. Consequently, the estate is worth ?300,000, so only ?25,000 of that is subject to the 40% tax charge. As a result ? the taxman only gets ?10,000, and the sons get an extra ?20,000 more, all for having the policy written in trust.

All Mr Smith had to do was sign a few forms, and ?40,000 tax was saved!

There is no extra charge for having your policy written in trust, the documentation is standard and the life insurance company will easily process the forms for you. You just need to provide details of your chosen beneficiary(ies), Read more…

Term life insurance shopping is easier than shopping for the equity based permanent plans. It is much easier to compare term life insurance because it is the simplest form of all life insurance policies. Term life insurance consists of a few things that make your shopping relatively easy. Term life insurance means that there is a definite term or period of time that you are insured. The insurance coverage will cease at the end of the term period. The first thing that you must choose is the time period that you need the coverage. A home mortgage policy is the best and easiest example. It is usually a decreasing term policy that declines at approximately the same rate as the home mortgage. It is the perfect policy to protect your home. The amount of insurance and the time period is already in place and that enables you to have a well defined quote comparison.

There are some things to consider when comparing term to term. Most of your insurance carriers will be stock companies. They are owned and operated by the stockholders. Their policies have no dividends. Mutual Insurance companies are technically owned by the policyholders and so a dividend is often returned back to the insured. It is better to compare stock companies Read more…

The cyber world has really helped the consumer when it comes to purchasing term life insurance. Buying term life insurance online has many advantages. Term life insurance is the simplest form of life insurance. There is no cash value to deal with and so comparison shopping becomes less complicated. Term life insurance is purchased with fixed or guaranteed premiums over a certain period of time. Online shopping has therefore been reduced to matching rates and time periods with the various companies. You can clearly identify term life insurance and therefore you can truly compare apples to apples. You must first identify the type of term policy that you want to compare.

Here are the Big Three?

1. Decreasing Term ? this term life insurance policy has a specific time period. It is usually anywhere from 10, 15, 20, 25 and 30 years in length of time. The face amount decreases over that period of time.

2. Annual Renewable Term ? This policy has a level death benefit with an annual increase in rates. This is about as temporary as you can get when it comes to purchasing term life.

3. Level Term ? This policy has a level death benefit Read more…

Everyone wants a painless and easy approach when it comes to purchasing life insurance. That can actually be a reality if you know what to look for when shopping for life insurance. The painless part has every thing to do with the cost. Term life insurance is by far the least expensive of all forms of life insurance. Easy has everything to do with making a life insurance purchase that is simple and time saving. That points to purchasing insurance that requires no medical exam. These are called the non-medical limits by most insurance companies. That?s the good news. The bad news is that the non-medical limits get very restrictive as you get older. Life insurance companies need examinations to underwrite policies as we get older.

If painless and easy is your goal then it behooves you to shop for the largest face amount of life insurance that you can purchase without a physical exam. The medical insurance bureau is used by almost all life insurance companies to investigate the medical background of all of its applicants. The MIB may have medical information on an applicant that may eventually require a medical examination or a rejection of the application. Do not seek a non-medical insurance policy to Read more…

Life insurance is probably the most misunderstood of all insurance purchases. It is by far the most selfless insurance purchase that you will ever make. Life insurance was designed to take care of the people that we love the most. The equity based plans have sometimes unintentionally misguided us away from the original concept of life insurance. Term life insurance is the purest form of that original concept. Term policies are also the most affordable forms of all life insurance. You can actually say low cost and term life insurance in the same sentence with no conflict of interest.

Term life insurance is low cost for a number of reasons. Term policies are temporary. That means that the insurance company is on the hook for a shorter period of time. That reduces the rates and makes the product affordable .Sometimes the benefit decreases and that reduces the premium even more. Term life insurance is perfect for young families because they can purchase large face amounts at very low cost. Term life insurance is an excellent purchase for partnerships in business. Buy and sell agreements funded by term life insurance is an excellent option for new business start ups.

There are Read more…