Archive for October, 2008

Universal Life Insurance Vs Whole Life Insurance

What are some of the pros and cons of whole life insurance vs. universal life insurance? How does one decide which type of policy to purchase? Read on to learn some of the basics of both types of coverage.

Whole life insurance and universal life insurance are both permanent types of life coverage instruments.

There are four basic parts to both universal and whole life. The mortality cost, which shows what part of your deposit covers the death benefit of the policy. The administration charges which include the premium taxes and costs incurred by the insurance company to manage your policy.

The savings and investment portion is the amount of money you have left to after the mortality costs and administration charges. This money is sometimes called the cash value, fund value, or cash surrender value.

The fourth part of a whole or universal insurance policy is called the return on the savings. This is the interest rate that is credited to the cash value of your policy every year.

A whole life policy is a permanent policy where the premiums are set at a fixed amount and never change until you have paid funded the policy in full. Also, the amount of the death benefit will not increase or decrease over the life of the policy.

One of the drawbacks to a whole life policy is that the insurance company does not have to disclose the mortality cost or the administrative costs to you. The savings or investment portion of a whole life insurance policy is determined by the excess interest, savings in the mortality cost, the operating expenses to maintain the policy, and you are at the mercy of the Board of Directors of the company who decide what they are willing to pay.

You also can’t chose where the money in your cash value account is invested, and the insurance company may not disclose the rate of return to you either.

A universal life insurance policy has flexible premiums, an adjustable death benefit, and the cash value of a universal life insurance policy is interest sensitive, meaning if interest rates increase so will the value of your universal life insurance policy.

In addition, with a universal life insurance policy, the insurance company will disclose both the mortality costs and the administrative costs to you.

The premium levels and the death benefits can be adjusted by you if you choose to do so. With whole life both the premiums and death benefit are set in stone at the time you buy the policy, which could lead to higher returns.

With a universal life policy you can put any excess money into the policy which will increase the cash value of the policy immediately.

In conclusion, if you are more comfortable with a fixed premium and death benefits, then a whole life policy may be your best choice. However, if you want more flexibility and have the time to monitor your policy, then a universal life policy may be your best option.

Whichever type you may choose, always compare life insurance companies, their premiums, rate of return, and customer service. Don’t feel pressured to buy a product that you feel may not meet your needs or wants. Shop around for an agent you can feel comfortable with and who is sensitive to your individual situation and life goals.

How to Get Carrier Approved Life Insurance Premium Financing

Lots of high net worth senior citizens find the need to purchase a high face value life insurance policy to protect their family or for the purpose of estate planning. Individuals who in possession of major assets who does not wish to liquidate their properties and investments to pay expensive life insurance premiums have the opportunity of having their premiums financed through a Carrier Approved Life Insurance Premium Finance Program.

By having a major bank pay the life insurance premiums, the insured frees up his assets to be used more proficiently in other places. With no (or very little) out of pocket expenses, personal guarantees and minimum financial risk a qualifying person can give millions to his family or Alma matter in the form of a death benefit. Using Carrier Approved Life Insurance Premium Finance Program also lowers out of pocket expenses and potential gift taxes.

Lots of senior citizen utilized the option of finance a new life insurance policy as part of their estate planning. Through lending funds to make premium payments, insured may have the capacity to acquire new policy without reducing cash assets or savings while getting their full insurability which includes illiquid assets such as real estate.

Life Insurance Premium Finance Qualification

· 70 years of age or older (Male and Female)

· Above average health condition

· Minimum net worth of $5,000,000

Premium Finance Programs Available

Recourse premium financing is now the most accepted type of carrier approved premium financing program. The main distinction between partial and non-recourse is an additional collateral requirement on top of the policy that must be posted by the insured. On top of the policy, an additional collateral amount of 25% to 100% of the current outstanding loan value in the form of personal guarantee or letter of credit is required by the premium finance company. Carrier approved program that the insurance companies have reviewed the programs and have generally approved the premium finance companies program structure and agree to issue policies under the program. The programs come with a variety of loan terms of 2, 3, 5, 7 and 10 years in addition to a lifetime loans. The rates may vary but are generally variable or fixed and tend to be lower than the non recourse loan offered by some investors and 3rd parties. Partial-recourse programs are usually available to insured’s over the age of 70 with at least a $5,000,000 in net worth.

Reasons for applying to the Carrier approved Premium finance program

- No need to execute high performing investments.

- Maintain cash on hand.

- Maintain current cash flow.

- Part of an estate tax plan.

- Provide a legacy benefit.

- Full utilization of your insurability

The process

Submission of informal application and HIPAA to release medical information. All information is being gathered and submitted to insurance companies who rate the proposed insured for eligibility for coverage. Once proposed insured has been approved by the insurance company, premium finance companies will offer loans to finance the premium and the policy will be issued into an irrevocable life insurance trust, or ILIT. Policy owner will name beneficiaries of the life insurance policy which may be a, children, spouse, business partners or charity.

After that initial loan amount is dispersed to the ILIT which pays the premium on the life insurance policy. As future premium payments to the insurance company are required, Lender Company continues to pay funds according to the premium time table.

Once the loan get to its maturity the borrower may have a number of options including the continuing to finance the premiums by themselves, repaying the loan plus interest and keeping the life insurance policy or selling the policy in the secondary market for life insurance using the life settlement method. If the insured passes away during the finance period the beneficiaries will get all proceeds and will pay back the loan and keep the rest.

An Introduction To Life Insurance Quotes

Most individuals make life decisions with a lot of caution and judicious planning. Getting life insurance is significant decision that leaves no room for imprudence and negligence. If the main aim of life insurance is to secure the future of loved ones, then it has to be carried out with a lot of responsibility.

Given these factors, along with the complicated intricacies, insurance jargons and financial technicalities, making a decision about a certain life insurance policy is often a daunting task for most individuals. In this scenario, seeking out a life insurance quote from the best financial advisors and experts in the industry is the best bet. One thing that has to be remembered is that a policy should not be bought from even the most impressive sales person without researching it adequately and comparing quotes with other policies from different companies.

It is always best to shop around for the best policies. There are many online and offline agencies, as well as individual financial experts, who can be consulted and can aid in giving the best quotes. Being insurance-literate enables a person to have an intelligent and informed discussion with the various insurance agents and company. This leaves no room for being duped or making the wrong decisions.

Some of the factors that appear daunting to most people is how much coverage is require, which insurance policy will suit an individuals budget, whether a lifelong or term policy is appropriate, what are the best alternatives for individuals who have a high mortality risk, what are the penalties for cancellation, and so on. Agencies and companies which offer quotes give information only after a discussion with the client which enables them to find the best options that suit an individuals needs.

These agencies generally ask questions like, how many dependants and children are there in the family, whether one is married or single, what are the expectations from insurance policies (i.e., is it purely for protection or some investment and cash value expectation), and so on. It is always better to compare a lot of specific insurance plans before buying a policy.