I am looking for life insurance form my husband. He was turned down by a company because he is pre-hypertensive…meaning they are treating b\p that is a little higher than usual…but NOT hypertensive…he is now being labled with heart disease.That is a joke !!!! Because he is being treated early his chance of developing heart disease or having a stroke is MUCH LESS !!!! Stupid company !!!! However, now I am looking for an insurance that is inexpensive and will pay out on his death only…….I don’t want to use it as an investment or savings…any suggetions about a company or type of insurance I should look for…I do not want a thousand insurance companies calling me either !! Help !!!!!
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What is the difference between term and whole life insurance?
Bright Future Penguin 5:03 am on February 25, 2010
Hi, great question. I read the answer from the person claiming to be a financial advisor. There is some good information there, and also a lot of bias against life insurance agents. I’ll make it simple. I was a life insurance agent for a few years. Yes, there are good and bad life insurance agents. There are also good and bad financial advisors, and good and bad mailmen, and good and bad in every profession. Don’t just assume everyone is out to get you.
There are four major classes of life insurance, from least costly to most:
Term
Universal
Variable
Whole
Each has its place. The financial advisor guy seems to think they don’t. He’s wrong. Each one does. Your situation only merits the least costly one, which is TERM insurance. All three of the other forms are inappropriate and too costly for the situation you described. Don’t worry about what the agent says, or the financial advisor in the message below says, just rely on common sense and know that you should not over pay.
Term insurance works like this:
You buy it. It lasts for a specific length of time you choose when you buy it. If your husband passes away during that time period, the beneficiaries listed in the policy receive money. If he outlives the policy’s duration, you get nothing unless you extend it. It’s almost never worth it to extend it because the cost is ridiculously high.
To get the best deal, find a life insurance BROKER, who can shop many companies for you. Different companies are "friendlier" towards different health concerns than others. When I was in the industry I found Banner Life and West Coast Life to be pretty friendly and to have pretty low premium rates.
You’ll want regular blood pressure readings lower than 132 over 80 when he gets it checked if you are worried about blood pressure. Make sure when he goes to the doctor that they use the large cuff on him. Have him sit in a chair with both feet flat on the floor when they take the reading and wait at least 5-10 minutes after arriving in the examination room before they take it. If he’s not in great shape, you’d be surprised how many points just walking to the exam room can artificially inflate the BP score above a resting BP score. Don’t let them give him the test while sitting on an exam table with his feet dangling in the air.
As to the amount of insurance to buy, well, by going with TERM you can buy more face value of insurance (meaning more money if he passes away) for less cost than with any other form. Don’t short change yourselves. You’ll hear a lot of well intentioned people tell you to go for 5 times the deceased’s annual income. These people are wrong.
The real goal of life insurance on a bread winner is not to make the survivors rich. It’s also not to leave them poor. Ideally it’s to let them continue their lives with no financial crash while already dealing with the loss of a loved one, and have their ongoing financial lives essentially unaffected.
To do that you want an amount of insurance that will do these three things:
Leave the family debt free (including covering funeral costs)
Set up college funds for kids in the household (if that’s a family goal)
Continue the deceased’s income on an ongoing basis.
5 Time income will continue the income for 5 years and then leave a family penniless unless the surviving spouse is a substantial breadwinner. The real truth is that you should total up all debts. Add funeral cost. Project college costs if that is a goal (you can find college cost estimators online all over the place) and add that (that number might shock you). And finally add the biggest amount, the income continuation bit.
To do that you need a lump sum you can stick in some investment vehicle that will spew out income each year equal to the deceased’s income without touching the principle. A good investment advisor can probably find you a 5% return vehicle that is pretty stable. If you can get one, you need TWENTY times the deceased’s salary to continue it on an ongoing basis.
For example, if your spouse’s annual income is $5, and the investment you are using to replace it is a savings account earning 5% interest, you need $100 in the account to have it produce $5 a year for you.
Add that to the other items (debt, funeral, college) and you have your total. THAT is your starting point, and it’s a LOT higher than most people have. Reduce it by whatever amount you can replace with existing savings, existing insurance, social security benefits, etc. You’ll arrive at your final amount of insurance, which is still more than most folks have.
If you cannot afford that amount, get as close to it as you can reasonably afford. Do NOT bankrupt yourself to buy life insurance. Don’t cheat your family out of the benefits they should have either, though.
Contrary to what the other guy said, it’s NOT car insurance. You get a dented fender and discover you didn’t have the right car insurance, you can get the right insurance late
kelsey 5:03 am on February 25, 2010
term pays only when you die. whole life is more of a savings account. you get money when he dies, but there is also money available for pay out later on even if he doesn’t die.
William 5:03 am on February 25, 2010
Yahoo Personal Finance explains this very well.
Finance1o1.blogspot.com ® 5:03 am on February 25, 2010
What is cash value life insurance? It is a term policy to age 100 that contains a savings vehicle in it. Cash value comes in many forms, such as whole life, universal life, variable life, or a mixture of those words together such as variable universal life or universal whole life, etc. The advantages of having cash value life insurance is that you are protected until age 100, you can use the cash value anytime for any use such as paying your premiums, and interest on your cash value is tax-deferred.
The disadvantages of having cash value life insurance is that you are paying lots of premiums for low amount of coverage, no cash value is accumulated during first two years of the policy, rate of return is very low, and if you use any of the cash value, you will owe monthly interest on it. This interest does not go back into the cash value, but rather kept by the insurance company because the money you taken out of the cash value is treated as a loan. In many policies, if you were to die, your beneficiary will receive the face amount and all cash value will be kept by the insurance company. Keep in mind, if you use any of the cash value and you did not pay it back, this amount will be deducted from face amount upon your death.
Another disadvantage of cash value life insurance is that they are riddle with insurance fees. The most noticeable fee is the surrender charge. This is clearly stated in the policy of how much cash value you will get if you surrender the policy. Then there are fees you don’t see such as administrative fees, policy fees, maintenance fees, and all these other operating fees. If your cash value life insurance is a variable policy, that means your cash value is invested in the stock market. Investments too have their own operating fees. If you combine investments and life insurance together, now you have so many different fees that eats away the returns on your investments.
You are probably asking, why would anyone buy this kind of life insurance? First reason is that many people do not understand how this policy works. Second reason is that people don’t buy life insurance, they are sold on it. The agent who sells cash value life insurance does not care about you or your family. All he/she cares about is how much commissions he/she is getting paid and they going to use whatever deceptive sales tactic to make you buy it.
So, what is term insurance? It is the type of insurance that provides a level death benefit for life. Just like car insurance, if you don’t pay your premiums, you will lose coverage. Advantages of having term insurance are: premiums are very low during the term, you have more flexibility to invest your money in a savings vehicle (hence the phrase, "buy term and invest the difference"), and if you were to die during the term, your beneficiary will get the face amount and all your investments. Another advantage is that you can change the amount of coverage without affecting your savings and vice versa. (In cash value life policies, you are stuck with paying into both.)
The disadvantage of term that while premium remain fix for certain amount of period (10, 15, 20, 25, 30, or 35 years), the premium will go up when it is time to renew. Majority of term policies provide renewable term coverage up to age 100. But there are some term policies that stop coverage after the level term expires because the insurance company wants you to convert it to whole life or universal life.
Why would people buy term insurance? First, premiums are very low and remain fix during the term. In the early stages of your adult life, you probably have lots of debt to pay off such as your mortgage, you probably have kids to support, and you probably don’t have much money saved for retirement. So you need lots of insurance coverage to protect the family. As you get older, your kids are all grown up, your mortgage is or almost paid off, and you better have lots of money saved for retirement. As you get older, you probably won’t need life insurance or need as much coverage as you did 20 to 30 years ago.
What happens when the level term expires? When the level term expires, you enter the phase of the contract called "Annual Renewable Term." That means you have the right to renew the term without having to provide proof of insurability. The premiums will go up every year or so (check the policy on how often the premiums goes up after the level term). Depending on your policy, you are usually given several options when the level term expires.
(1) You may convert it to a permanent whole life policy (which I don’t recommend).
(2) You may exchange it to another level term
(3) You may refuse to pay the premiums to cancel the policy
(4) You can change the death benefit
(5) You may renew the term for another 5 years until age 75, which then you may renew every year until the policy expires.