Category Archives: Personal Finance

Life Insurance Myths Debunked

As a general rule, every type of insurance can be confusing, especially when a layperson listens to life insurance myths and attempts to read the content of an actual policy. Not because they don’t understand the concept of insurance, because most people do; but because policy information is typically written by lawyers who use a lot of legal terms, in fact, the insurance policy typically has a glossary to help the policyholder understand the meaning of “insurance terms.”

What may be even more confusing is the misinformation about life insurance and the myths that evolve as a result of consumers and people in the industry attempting to simplify something that is not simple. Not because it’s difficult to understand, but because insurance applies to different people differently. The following is a list of myths regarding life insurance and how they are debunked.

Single People Don’t Need to Buy Life Insurance

Regretfully, you cannot bury your cousin Sid in the backyard like you buried your Collie. When someone dies, there is a cost to burying or cremating their body. If you decide not to purchase life insurance, in many cases your friends or relatives will have to pool their resources to pay for your disposal. Not because it’s the law, but because it’s the right thing to do. Also, if a friend or relative has co-signed or otherwise guaranteed a debt for you, when you die they become liable. By having insurance in place, your final expenses and funeral or cremation costs can be paid by your life insurance, rather than a friend or relative.

I Have Plenty of Life Insurance through My Employer

For most employees, an employer-sponsored life insurance policy is only good while you are employed with the company. In most cases, if you choose to leave or retire, or you are let go, your life insurance will be cancelled, and then you will be forced to purchase coverage on your own. If you are not healthy or have gotten older, your cost of insurance will be substantially higher if you can get a policy at all. Typically, employer-sponsored life insurance is a multiple of your compensation, and that is generally not enough to take care of a family after you’re gone.

cashI Have Enough Cash on Hand to Leave to My Family

This is doubtful. Yes, you may have enough cash to pay for a funeral or cremation, but what about income replacement, mortgage payments, college tuition, and debts? Most people who have a mortgage and a family to support earn about $100,000 a year and still live paycheck to paycheck. It’s likely your family will need about $750,000 to pay off the mortgage and other debt, send the kids to a state college, and replace your income for even a few years. And even if you have a lot of cash now, what makes you think you won’t have to spend all or some of it in the future? Sometimes, bad things happen to good people, so it’s better not to take the chance.

life insurance mythsAlways Buy Term and Invest the Rest

This may not be the best advice, and you are not likely to hear this from a licensed insurance agent or financial planner. Typically, over the long run, term insurance can end up costing more than permanent insurance, especially if you live to be 90 or older. Permanent insurance is permanent, and term insurance is temporary. Believe it or not, people do lose investment value when the market takes a turn for the worse. Also, permanent insurance can be paid up, which is never the case for term. Term insurance is great for young adults who’ve accumulated a lot of debt, but for many people, permanent insurance will be the better option when they are seniors.

You Only Need to Insure the Breadwinners in a Household

No one wants to think about it, but sometimes children die. When they do, and you are grieving, the last thing you want to be concerned with is how you are going to pay for a funeral. Adding the children to a breadwinner’s life insurance policy is inexpensive and very easy to do. Most life insurers will allow you to purchase a CTR (child term rider) that covers all the children in the household and any that may be added by adoption or birth in the future.

My Church will take Care of My Burialchurch life insurance myths

In some cases, this may be true. Many congregations are certainly willing to band together and take care of funeral expenses for a long-time member but why would you want to leave the burden on the church when you can easily and affordably take care of it beforehand? It’s naïve to believe you can join a church and then expect the members to take care of a $10,000 funeral a year later. Actually, it’s quite selfish.

I’ve got a Chronic Illness and Won’t Get Approved

Unfortunately, this myth prevents many people from attempting to buy life insurance. They don’t want to complete an application, pay the down payment, undergo a medical exam, and then find out that they are uninsurable because of a chronic illness. However, there are many insurance companies that offer “guaranteed issue” insurance policies. These are policies where the application does not have medical questions, and the insurer doesn’t require a medical exam. There are a few drawbacks and rightly so since the insurance company is accepting an unknown risk.

The cost of insurance is higher than a standard life insurance policy.

The company usually puts a lower cap on coverage, usually about $25,000.

There is a two or three year waiting period before the company will pay the death benefit if you die of natural causes. They will pay the full benefit from day one if you die from accidental causes.

On the upside, guaranteed issue policies are whole life insurance and guaranteed to pay as long as the periodic premium is paid (only for accidental death during the waiting period), the premium will remain the same throughout the life of the policy, and the insurer cannot cancel as long as the periodic premium is paid. Since they are whole life policies, they could build cash value over time that the policyholder can access it through a policy loan (for any reason).

 

Article source: http://www.lifeinsure.com/life-insurance-myths-debunked/

Like to Drive Fast? It Could Be Costing You in More Ways Than You Think

The amount of money that you pay every month for your life insurance policy is based on a number of different factors. You might be surprised to know that your driving record is one of them. Insurance companies are always assessing the risks involved in taking on a new policyholder. They need to make sure that they receive a decent return on their investment. This means combing through a policyholder’s medical history, lifestyle and their driving record in order to assess the risk. If you think that you’re paying too much for life insurance, your history on the road might have something to do with it. Learn more about how your driving record can affect life insurance premiums.

Assessing the Overall Risk

Insurance companies are accustomed to doing research on their customers prior to issuing a policy. This is their way of calculating how much money people should pay for life insurance. If a young, healthy person purchases life insurance, they will pay less than someone with a serious heart condition who’s in their late 50s. This is because the insurance company can expect to receive premiums from the healthy customer for a much longer period of time.

The same is true of a person’s driving record. If someone has a history of automobile accidents, driving without a seatbelt, speeding, or driving under the influence of drugs or alcohol, the insurance company is taking on more risk by issuing a policy to that person. In the company’s eyes, this person might not be around for very long to pay their life insurance premiums. On the other hand, a customer with a clean driving record represents less of a risk, and therefore, will pay less for life insurance.

It Pays to Slow Down and Buckle Up

If you’re considering purchasing life insurance, you can lower your premiums by leading a healthy lifestyle and by staying safe on the road. In addition to lowering your premiums for life insurance, being a responsible driver will also help you save on your automobile insurance premiums. A minor traffic violation or a high-speed cruise can lead to some unnecessary costs down the road. Paying more for life insurance is just another reason to play it safe behind the wheel.

Curious how much a life insurance policy will cost you? Compare rates from top-rated life insurance companies using our life insurance quote tool now.

Article source: http://www.lifeinsure.com/driving-record-life-insurance-rates/

Here’s Why Your FICO Credit Score Could Be Going Up Soon

In a move that is likely to boost many people’s credit scores, all three major U.S. personal credit monitoring firms are going to remove tax liens and civil judgments from credit reports.

Equifax (EFX, +0.54%), Experian (EXPGY, +0.56%) and TransUnion are set to introduce the changes around July, but there is a catch, according to the Wall Street Journal. Tax liens and judgments will only be erased if they don’t contain all of the following information: a name, an address, and either a date of birth or a social security number. Nonetheless, many liens and judgments don’t contain all three pieces of required data, reports the Journal—so this change to how FICO scores are compiled could mean that many people will be regarded as more creditworthy based on their credit reports.

Having a credit report with less black marks and better scores not only means a higher chance of getting a loan, but also a higher likelihood of success in everything between renting a home and landing a job.

The latest omission of negative information from the compilation of FICO scores comes in response to regulatory concerns, according to the Journal. Since 2015, the three credit-reporting firms have reached settlements with more than 30 states over practices including handling of errors. Since then, some information unrelated to loans, like gym memberships and traffic tickets, have been struck off credit reports.

A report from the Consumer Financial Protection Bureau earlier this month suggested that credit reporting agencies should improve the accuracy of their reports and update their records more often.

The Journal reports that, in 2011 alone, 8 million complaints about wrong information in credit reports were received by the three major credit-reporting firms, according to the CFPB.

FICO, the entity that created the credit score system, estimates that customers who do get a better credit score will only experience slight improvement—an average bump of under 20 points for around 11 million people.

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