Category Archives: Personal Finance

The Top 10 Reasons People don’t have Life Insurance




Top ten reasons for not buying life insurance

One thing I had to learn early in my career as a life insurance broker was that not everybody I spoke to was going to purchase a policy from me. The list of reasons people don’t get a policy is a long one, so I have narrowed it down into the top 10 (not necessarily in order of popularity):

  1. They think they don’t need it.  This is a big one, even after eliminating those in #2.  I recently spoke to a father of 5 young children who rejected my offer because he “just didn’t see a need for life insurance.”  I asked him how his wife would be able to support his 5 kids if he passed away and they no longer could depend on his income.  The bottom line is anybody who has a spouse (or significant other) and/or children that depend on his/her income should have life insurance.  There are other personal and business reasons for buying life insurance, but this one seems to be the biggest reason.
  2. They really don’t need it.  People who don’t have families dependent on their incomes usually don’t have a need for life insurance (unless they want to take advantage of the living benefits of a permanent policy, such as whole life or universal life insurance).    If there are no other needs, such as business continuation, estate protection or paying for final expenses, then they shouldn’t purchase a policy.  Any life insurance agent or broker worth his/her salt will not sell a policy to someone who doesn’t have a clear need for it.
  3. They think they can’t afford it.   Either they overestimate the cost of a policy or don’t consider that, with a minor shift in one’s budget, affording a policy is not an issue.  In the overestimating category, the 2014 Insurance Barometer Study done by LIMRA and LifeHappens.org, (see yesterday’s post) says it all – While 2 of 3 consumers say life insurance is too expensive to purchase, people tend to overestimate the cost.  In fact, a quarter of the respondents thought the price for a $250,000 term policy (that would cost $15o per year) would cost at least $1,000 annually.  In the budget-shifting category, let’s double the premium of the policy mentioned in the last paragraph to $300  annually, which would  purchase a $650,000 20 year term policy for a healthy, 30 year old male.  If this gentlemen has a family and tells me he can’t afford a policy, my first question is, “how much do you spend at Starbucks (or other coffee emporium) every morning?”  If the answer is $3  or higher, I show them that if they cut back on the daily java drinks, they can easily afford that policy.  If they don’t indulge in a daily caffeine treat, I can usually find other places to find $25 dollars a month to financially protect their families.
  4. They really can’t afford it.  Yes, sadly it’s true – there are people who can’t afford to purchase even the smallest policy (no matter how hard I try to find it in the budget).   I have seen these numbers grow since the Great Recession began.  Hopefully, these numbers will see a reversal in the near future.
  5. They procrastinate.  Okay, I know that some people would rather do anything than confront the subject of one’s mortality but, if you fall into the Need it category, you just need to bite the bullet and get it done.  Because it’s so easy to procrastinate doing something so lacking in excitement and sex appeal, a big part of my job is nudging my prospective clients and applicants along in the process until they have a policy in hand.
  6. They forgot to pay the premium and let the policy lapse.  This one baffles me.  Why would you go through the application and medical exam process and lose the policy (and all the money you spent on it to date) just because you forgot to pay the premium?  Setting up a checking account debit with the insurance company  is a foolproof way to ensure your premiums are paid.
  7. They’d rather have root canal then speak to a life insurance agent.   I’ve been to one  too many insurance company conventions and meetings and I can’t say I disagree with with this one.  However, all kidding aside, I’ve met some really great people in the business as well, and most I’ve met care a lot about doing the right thing for their clients.  In most cases, life insurance agents/brokers like to help people (albeit sometimes too aggressively, I confess).  You can shop for your agent/broker to find one you’re compatible with.  Start with one of the many online independent agents.
  8. They want to buy it but they are extremely confused about the subject.  There is a lot of information out there about the subject and a lot of opinions (e.g. the right type of policy to buy, how much coverage is needed, etc.), so it’s easy to get overwhelmed with information.  This is a great example of too much analysis leading to paralysis.  As a result, many folks start out to purchase a policy and wind up throwing their hands up and quitting the search.  My suggestion is to find an advisor you trust and seek his/her advice.
  9. They applied but didn’t take the policy because they didn’t agree with the health class assigned by the insurance company.  I wish I could say I made this one up, but  a lot of people get really upset when the insurance company puts them in a lower health class than they think they deserve.  Unfortunately, it begins with unrealistic expectations created by a quote they received.  Not everyone is in the best health class, and it’s extremely important to get the most accurate quotes up front so you don’t get disappointed when the policy is issued.
  10. They just aren’t interested in securing the financial future of their families.  Thankfully, I don’t hear this one a lot, but I have to include it on the list because I do run into people with this viewpoint from time to time.  One charming “gentleman” said to me, “I’ll be dead, so I won’t have to worry about it, will I?”  That’s one objection I won’t even try to overcome because, frankly, I don’t want to spend more time than I have to with someone like that, let alone try to sell him a policy.


About 

In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs. As a national broker, I am licensed to write life and disability insurance in all 50 states and the District of Columbia.

    Find more about me on:

  • googleplus

Article source: http://www.lifeinsure.com/top-10-reasons-people-dont-life-insurance/

What if My Beneficiaries are Minors?




Because we write a lot of life insurance for families with young children, this question comes up frequently.  As you have purchased life insurance to protect your family’s financial future, it is important to ensure that your minor children are properly covered financially in the event of your death.

If you die when children are minors and you haven’t many any arrangements, as outlined below, there’s a good chance your kids won’t receive their portion of your policy’s death benefit.  This is because:

  • Most state laws require that a guardian be appointed to administer the proceeds payable to a minor.
  • If a guardian isn’t in place at the time of your death, your next of kin will have to undergo the time and expense of appointing a guardian to receive and administer the proceeds.
  • Once a court appoints a property guardian of the minor’s estate, that guardian will control the money for the minor’s benefit until he/she reaches the age of majority, depending on the state.
  • If you are caring for a special needs child or adult, inherited funds from you or anyone else may put their government support in jeopardy.  This could disrupt any care and support programs they depend upon for their daily care.

So, how do you ensure that your minor children will benefit from the proceeds of your life insurance policy in the event of your death?   You need to arrange legal means for the proceeds of the policy to be managed and supervised by a competent adult because, if you don’t, the court will appoint a property guardian for the children. That process will run up attorneys’ fees, court proceedings, and court supervision of life insurance benefits — costs and hassles that definitely won’t help your children. There are several ways to prevent this:

  • Instead of naming your minor children as beneficiaries of your policy, name a trusted adult beneficiary who will use the money for the children’s benefit. If you trust that this adult will always be able to fulfill this duty, even years down the line, this might be the easiest option.
  • You can name your children as beneficiaries and also name an adult custodian under your state’s Uniform Transfers to Minors Act (UTMA). Most insurance companies permit this and have forms for it.  If you name more than one child as  beneficiary, you’ll need to specify the percentage each receives.
  • If you have a living trust, you can name the trustee as the beneficiary of the life insurance policy. In the trust document, name the minor children as beneficiaries of any proceeds the trust receives from the insurance policy. Also, establish within the trust a method to impose adult management over the proceeds, which can be either a UTMA custodianship or a child’s trust. You’ll need to submit a copy of your living trust to the insurance company.

UTMA Custodianship vs. Child’s Trust

There are several key differences between leaving life insurance benefits to your children under the UTMA and through a child’s trust:

  • Age when proceeds are released. In most states, a UTMA custodian must turn the proceeds over to the child at an age specified by law — 18 or 21 in most states, up to 25 in just a few. In contrast, with a child’s trust, you can specify any age at which your child receives the proceeds.
  • Reporting requirements. A trustee for a child’s trust must file yearly income tax returns for the trust. A UTMA custodian need not file tax returns, although the minor must file a yearly return reporting money actually received.
  • Tax rates. Trust income tax rates are higher than individual tax rates. Annual income above a certain amount in a child’s trust is taxed at the higher trust tax rates. In contrast, all of the property subject to the UTMA is taxed at the child’s individual tax rate.
  • Ease of fulfilling property management duties. Because the UTMA is built into state law, financial institutions know about it and are comfortable with it. This should make it easy for the custodian to manage the insurance proceeds on behalf of the child.

Generally speaking, a UTMA custodianship is the most attractive option, unless the amount of insurance is very large and the child will need a property manager past the age of 21. The UTMA custodianship is simpler to set up and manage — and often cheaper (from a tax standpoint) — than a child’s trust. A UTMA custodianship is particularly sensible for proceeds below $100,000. Amounts of this size are often expended fairly rapidly for the child’s education and living needs, and are simply not large enough to tie up beyond the age of 21. If larger amounts are involved and you do not believe the child will be able to responsibly handle the money at the UTMA age limit, a child’s trust is a better bet.

Source:  Should I Name Minors as Policy Beneficiaries, New York Life
Source:  Using Life Insurance to Provide for your Chilren, Nolo Press

 


About 

In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs. As a national broker, I am licensed to write life and disability insurance in all 50 states and the District of Columbia.

    Find more about me on:

  • googleplus

Article source: http://www.lifeinsure.com/beneficiaries-minors/

Highlights of the 2014 Insurance Barometer Study




Once a year, LifeHappens.org and LIMRA conduct a study of the state of the insurance industry and publish their findings.  These are some of the key findings of this year’s study, pertaining to life insurance:

  • One in four Americans say they need more life insurance, but only 10 percent are very likely to purchase a policy within the next year.  Most note that it’s too expensive; however, they often overestimate the cost, typically younger consumers who typically pay less.
  • While 80 percent of adults believe that most people need life insurance, only 1 in 5 people are very likely to recommend it.  This is unfortunate, as half of Americans believe they would feel the impact from the loss of the primary wage earner within six months.
  • Over a third of Americans are concerned with leaving dependents in a difficult financial situation should they pass away prematurely, and over a third are concerned with leaving others to pay for their funeral expenses.
  • Three quarters of the survey respondents feel they have a good understanding of life insurance, however;
  • While 2 of 3 consumers say life insurance is too expensive to purchase, people tend to overestimate the cost.  In fact, a quarter of the respondents thought the price for a $250,000 term policy (that would cost $15o per year) would cost at least $1,000 annually.
  • Twenty percent with coverage don’t know if they have a permanent or term policy, so they may not know that they have something that builds cash value or that their coverage could come to an end.
  • About half of consumers aren’t aware that permanent life insurance can accumulate cash value that can be borrowed or that term is appropriate for temporary coverage.

The study is fairly comprehensive, so I will have to cover additional highlights in later posts.

Methodology

LIMRA employed an online panel to survey consumers on insurance and financial topics in January, 2014.  Responses were received from 2,047 individuals.  The data were weighted by age, gender, education, race, religion and income to be representative of the general population.  A propensity score adjustment was added to correct for biases inherent in Internet panels. The margin of error is +/- 3 percentage points.

Life Happens is a nonprofit organization dedicated to helping Americans take personal financial responsibility through the ownership of life insurance and related products, including disability and long-term care insurance.

LIMRA is a worldwide research, consulting, and professional development organization that helps more than 850 insurance and financial services companies in 73 countries increase their marketing and distribution effectiveness.


About 

In my 20+ years as an independent life and disability insurance broker, I have personally assisted thousands of clients with their life and disability insurance needs. As a national broker, I am licensed to write life and disability insurance in all 50 states and the District of Columbia.

    Find more about me on:

  • googleplus

Article source: http://www.lifeinsure.com/highlights-2014-insurance-barometer-study/

Bunk Beds