The Most Common Mistakes When Shopping For Life Insurance and How to Avoid Them

If you’re like me( or most people for that matter), it’s not that uncommon for you to say  to yourself “if I only knew then what I know now, I would have done things differently”. Well, this is your opportunity to  avoid some of  most common mistakes people  make buying life  insurance.
life insurance
Here’s your chance to be “in the know”, and avoid the 5 most common mistakes people make buying life insurance.
Follow the rules laid out in this article  and you will be in better shape than 90% of all life insurance consumers.

1. Lying to Agent about Medical /Driving History

While it may seem like an innocent slip of the mind to not mention a prescription, hospitalization, or most often, a smoking habit, the consequences can be significant.
The first consequence is most likely that you won’t get away with it. The insurance carriers can access your medical records, prescription history, and even your driving record.
So lying to the agent only gets you an bad quote that has almost no chance of becoming an offer.
​Being misquoted is just the start of what can go wrong when you are intentionally misleading.
Because different insurance companies have different underwriting rules for each condition (some are willing to make offers where others will not)​, it’s vital for an independent agent to know the true conditions he or she is working with.
​If this sounds like an insurance agent whining about having his time wasted, you are partly right. However, the more serious result is to the applicant seeking coverage. ​
This is because, if an application is sent to a carrier that is a bad fit based on bad information (once the truth comes out) it may get graded substandard or even turned down.
A turn down or declination from one carrier can hurt a future application with another company that likely, would have accepted you.
The info gathered by the first company will be handed over to the to the Medical Information Bureau (MIB), this information (and maybe a note about a deceptive application) will be available to all insurers for 7 years.
Lastly, even if you get away with lying on your application and the company contests the benefit payment in court on the basis of a deceptive application, your heirs  may find themselves in a position of having the benefit reduced to the premium payments you made plus interest. ​
Ultimately , the risks outweigh the potential gains.
Key Takeaways

  • Misleading an agent will only get you a better quote not a better offer.
  • Insurance carriers have access to your medical, prescription and driving history.
  • Carriers may context payment of a benefit due to material fraud on the application.

2. Choosing Permanent Insurance for a Temporary Need.

The fight  between proponents of Term v. Permanent  insurance continues to rage. Unlike most partisans, I think there is a place for both. However, the two kinds of insurance are designed to serve very different situations.
If you are looking to protect against a  a declining obligation (like a home mortgage) term insurance is the appropriate solution. It is also a far less costly answer  for the term it is needed.
Very often, people looking for for life insurance are “sold” cash value insurance at the cost of insuring a real need. While there are several advantages to permanent insurance that make it a useful and appropriate retirement planning tool, it should never compete for  dollars with insurance that covers a need.
When structured to do so,  cash value insurance is designed as a living benefit savings tool with the minimal death benefit necessary to keep it legally designated as insurance. This can be a very useful financial tool, but it is never appropriate as true “insurance”.
Most rules have an exception or two, the exception here is Guaranteed Universal Life (GUL) .  GUL is hybrid permanent insurance that doesn’t gain cash value and is priced between traditional whole life and term insurance. ​
When people use permanent insurance for temporary needs, generally they either cut corners on the benefit amount they need to cover true needs or they overextend themselves, and wind up walking away from the big cash value policy.
Life insurance buyers should should look at these two products separate and not in competition with each other. Cover the insurable need first and then consider if cash value life insurance is an useful arrow in your financial toolbox.
Key Takeaways

  • Pure insurance is meant to insure a need.
  • Non GUL permanent insurance should be structured for cash value not insurance need.
  • Permanent cash value life insurance and term life insurance should not compete with each other for dollars.​

3. Relying on Life Insurance Provided Through Employer

Having affordable life insurance through your employer is a great benefit. However, it should thought of as extra coverage , rather than yourmain life insurance. The reason is simply that at some point you will very likely change jobs.
After changing employers, you may not be offered life insurance at the new employer,and not be able to keep the insurance from the previous employer.
Most  all group life insurance policies offer a conversion to permanent insurance for the individual leaving the employer. However, the terms are usually so expensive  that no one takes up the offer.
So, in the worst case scenario, you leave your job after an economic downturn, are forced to take a position without group life insurance, and then find that your health won’t allow for inexpensive individual underwriting. So, you’d be forced to either pay far more than you had been paying or go without life insurance for your loved ones.
This situation came about often during the Great recession of 2007-2010. It would have have been avoided had folks not looked at their employer sponsored insurance as primary but rather “bonus”.
Many  people in their thirties can get term life insurance that will last until retirement for the cost of a large pizza….and not have tobe concerned that the combination of a job change and age will make replacement unavailable.
Key Takeaways

  • Employer sponsored life insurance should be thought of as “extra” and not primary life insurance.
  • Employer sponsored life insurance does not transfer affordably to departing individuals.
  • Healthy people in their early thirties can get life insurance that last until retirement for the price of a pizza.

4. Not Using an Independent Agent

The use of an independent Agent is an issue that I touch on all the time. While it may be a bit self serving , it is also the unquestionable truth.
Because insurance companies have different risk appetites, the only way to get the most competitive deal is to be able to access to nearly all of them.
If you have a  “captive” agent ( an agent who  works for one company and has a financial reason to send all business to that company) represents a carrier who is severe in rating a health condition you have, you are in a bad spot.
Whereas, an independent agent/broker would send your application to the company who looks most  favorably at your condition, the captive will be forced to send the application to his carrier…and charge you for the service.
While some “captives” have a limited ability to use an outside brokerage, the truth is that the financial imperatives to write business with the “home” carrier often trump this option.
Key Takeaways

  • Because different insurance carriers have different appetites for certain risks, access to more carriers will result in better pricing.
  • So called “captive” agents have a financial incentive to send all applications to their home company.
  • Only independent brokers have the freedom to offer the best deal at all times.

5. Not Taking the Exam Seriously

This is an easy one, but it gets fouled up more than you’d believe.
The paramedical exam that is a routine part of fully underwritten policies iis very straight forward. That is, blood draw, urine sample, weight from a portable scale and Blood Pressure (occasionally EKG). It is most often done in 20 minutes and you are back to your day.
Blood and urine samples provide a  snapshot in time, so you cannot do a lot to improve things in a brief period of time. However, you can do surely hurt them for the “snapshot” taken.
The common culprits are:

  • Working Out
  • Excessive Alcohol
  • Fried Foods
  • Drinking Coffee
  • Lack of Sleep

​While living “clean” will not help much in the short run , avoiding these thing for a couple of days is a good policy.
….And a Bonus Mistake to Avoid
It may seem contradictory that this article  spends a lot of time on the subject of avoiding mistakes and saving money, and then says don’t be too cheap.
If you are confused, I understand. Let me explain.
​While I’m a firm believer in getting the best deal, the best deal may not always be about the absolute lowest cost. The truth is, defining the best deal depends on what you really need and what you get.
Simply put, policies are not all apples to apples comparisons. As mentioned earlier, life insurance companies view different risks differently. ​So unless you know your underrating grade with a particular company the pricing is not precise.
There are other considerations that affect pricing that may entice you to pay slightly more than the absolute lowest price. These include:

  • Financial Ratings of the Carrier ​- Does the Moody’s or AM Best rating of the company matter to you? Are you willing to pay more for a higher rating?
  • No Medical Exam Option- Some companies offer policies with no exam. Is avoiding needles,urine samples, and possible unknown results worth a few dollars a month? ​
  • Riders/Conversion Options- Is the right to get more insurance without re-qualifying later of value to you? How about the right to convert a term policy to a permanent policy at a later date withno exam?

​If these issues are important to you, then the definition of “best deal” changes from simply the least expensive. These are issues that can be addressed by an independent agent with access to multiple carriers.
Key Takeaways

  • The “best deal’ takes more into account than simply cost.
  • It may be worth paying slightly more if there is no exam or there is a strong permanent conversion product.
  • Only independent brokers have the freedom to offer the best deal at all times.

Conclusion

If you follow the advice laid out here you will be in better shape than nearly everyone else in the life insurance market. For help in deciding exactly what you want with regard to amounts, term, exam, rider & conversion options, you will always have the most options with an independent agent.
James Tobin, CFP is the founder of the Life Insurance Help Desk. In addition to providing expertise on life insurance matters, he teaches ESL and is a news junkie. Mr. Tobin reside with his wife in Norwalk, CT

A Detailed Study of Online Life Insurance Quotes

It is an undeniable fact that life insurance has now become extremely important in a person’s life. But unfortunately, many people tend to avoid it despite being fully aware of its importance.
Most people stay away from availing life insurance because they just do not get into the complexities of the policies. They actually just cannot figure out from where to begin in order to avail a life insurance quote.
However, one must not allow these reasons to stand as an obstacle in ensuring a secured future both for that person, as well as his family members. Getting free life insurance quotes is the first and most essential step for availing that insurance policy which is the most suitable one for you.
There are various online insurance companies, whom you can get in touch with via the internet. There, you can access several insurance quotes, and you will not be charged anything for that. What these websites will also do is make a comparison between numerous insurance policies and thereby, helping you to select that one which is the most appropriate and cost saving.

What is term insurance?

Term life insurance is certainly one of the most commonly used types of life insurance quotes available online. A simple definition of this type is that it is a policy which offers death benefits after the death of the policyholder, within a specified policy term.
This policy’s rule is that if a person lives for than the years that have been specified by the policy, the beneficiaries of the person will not be paid any amount by the company. There is no investment feature or cash value associated with this type of policy. It is this property of the policy which makes it very affordable, particularly during the initial years. But the cost of the premium can increase with the age of the policyholder, or when the policy is renewed. Along with that, some people can find it impossible to renew the policies because of change in certain conditions like the person’s health.
Life Insurance Quotes
Types of Term Life Insurance Policies:

Guaranteed Level Term Life Insurance

Guaranteed term level insurance policies are the most common type of term life insurance that people opt for. Working with this kind of policy is pretty simple. You pay yearly premiums that are fixed and do not change with passing years. However, the renewal benefits of such policies are restricted. You can usually withdraw this policy after a certain period of time; say 10, 20, or 30 years as stated in the insurance policy. For longer-term policies, the premiums usually get higher with each year.

Annual Renewable Term Life Insurance

An annual renewable term life insurance, or ART, is a short-term life insurance coverage that can be renewed every year, but for a defined period of time. After the policy is renewed, the premiums go up and keep increasing with each year. The premium increases dramatically after a period of 20 or 30 years.

Return of Premium Term Life Insurance

The return of premium term life insurance is a special kind of insurance policy that refund the life insurance premium once the term period ends. If the insured person is still living, he/she gets the premium amount refunded after term period completion. Such policies are available usually in 15, 20, or 30-year terms. Compared to other term life insurance policies, the return of premium policy might look a bit pricier but is definitely cheaper than a whole life insurance quote.

Decreasing Term Life Insurance

In a decreasing term life insurance policy, there is a yearly fall in the cover level till getting to zero. This type of cover is mainly used for repaying the loans. It is typically designed to pay a lower claim as the policy ages. Death benefits keep decreasing in such kinds of policies. This is because a decreasing term life insurance policy is for individuals who have higher financial responsibilities and burden currently, which may decrease over time such as mortgages.

Modified Term Life Insurance

As the name suggests, a modified term life insurance is only a modification of the standard life insurance plan, with a twist. A modified term life insurance policy uses an alternative payment structure to the standard life insurance plan while offering the same protection. An individual has the flexibility of either paying increasing premiums over time, or modify the same like a decreasing term life insurance plan and pay lower amounts of premiums with time. This kind of life insurance policy is not feasible for everybody as careful planning and consideration of personal and professional life is required.

Final words:

When you’re choosing a term life insurance quote, do so carefully and wisely. But before doing anything, you must understand and be aware of what type of coverage you wish to go with and why. Understanding the kinds of term life insurance policies will help you determine the plan that is best suited for you and why such policies can offer you greater benefits than whole life insurance plans.

Relevant Life Policy: More about its benefits

As an owner of a small business you must have heard about the Relevant Life Policy from most of your acquaintances in your field. It is a new kind of policy (only around a year since it has become popular with the employers). You must have an idea that investing in a Relevant Life Policy implies that you will be entitled to certain tax advantages. But do you know about these advantages in detail? If not, then this article will aid you in acquiring due knowledge in this regard.

What is a Relevant Life Policy? 

Before going in to the details of the kinds of advantages that you will be entitled to once you avail the Relevant Life Cover, you should have to acquire solid know how of the dynamics that rule the workings of this policy. Let us learn more on that:

  • A Relevant Life Insurance is a single life stand alone cover that is availed by the employer of a small company when he wants to establish a death in service benefit for his employee
  • The company must have at least 5 employees to take the scheme. But the the number of workers should not be large enough to justify a group life scheme.
  • The protection cover expires after the 75th birthday of the client

The advantages that can be availed with this kind of insurance are listed below: 

  • The premiums paid out for this cover are tax free as they are not something that are paid in kind
  • The high earning employees can keep it separate from their pension funds and annual allowances
  • The employers can receive substantial tax benefits by availing this policy as they are considered to be trade expenses
  • There are no P11D charges involved, thus the employer ends up saving substantial costs
  •  As the benefits are payable through a discretionary trust, it ensures that the money reaches  the right person and at the right time thus alleviating fears regarding the pay outs falling in wrong hands.
  • The benefits that are paid out are free of inheritance tax as well
  • It is not subject to the National Insurance purposes

Conclusion

Investing in a relevant life policy might find

You save up a lot than what you would have done, in case you had taken a personal life cover. Here you might as well would have paid from your post tax income or from your company’s account. But the Relevant Life Policy is paid through the discretionary trust, with several tax benefits mentioned above. 

Author Bio: Sam Payn’s informative blogs and articles mainly center on the varied financial matters including home loans and bad credit loans. Recently he has diversified to writing about insurance.

Joint Life Insurance: The Fundamentals

Many people apply for life insurance policies for securing their own as well as their near and dear one’s lives. However, on certain occasions, they become confused as to what is right for their needs – a single life or joint life policy. There are a number of differences between single life and joint life policies that count.

How does a joint life policy work?

A joint life policy helps cover two lives on an individual basis. On the other hand, a single life policy only covers one life.

Term life insurance policies are the most affordable variety of life insurance and they can be purchased both as a single or joint life policy. A term life insurance policy is valid for a certain number of years where you need to pay a specific amount of premium every month. If you pass away within the term of the policy, your family will get a one-time payout.

Differences between joint life policies and single life policies  

A joint life policy is typically cheaper than a single life policy. In simple terms, it is always more affordable to purchase a joint life policy than a single life policy.

However, there are certain benefits of purchasing two single life policies instead of one joint life policy. Despite the fact that there will be more expenditure from your part, two single life policies will offer twice the coverage and also twice the one-time financial benefit.

For instance, if a husband and his spouse purchased a joint life policy and both pass away as a result of a motor vehicle mishap, the kids who are survived will just receive a single payment.

A joint life insurance policy will not work effectively if there is a marital separation. There are a very limited number of insurance providers who will agree to split the cover into two parts.

In addition, if one policyholder of a joint life policy makes a decision that they will stop paying premiums for their policy, it will result in the policy being annulled.

Problems also occur when the divorced person remarries or has new kids. They are to be taken into account when the insured person passes away.

Essential features of Joint Life Insurance

  • Under a joint life policy, payout is typically offered on a first death basis. It implies the first individual will be getting the payout if the other person in the policy passes away
  • Once this financial benefit is offered, the other individual will not be covered by the policy any more. So, this can be an embarrassing situation
  • Certain joint life policies have the “second death” as one of their integral features but the number is quite limited
  • As a whole, the premium costs for joint life policies with a “second death” feature are less than a joint life cover with “first death” feature since the level of risk to the carrier is less.

A substitute to a joint life policy is buying two individual life policies. In this case, payouts will be received for both the first and second expiry.

With whom can I purchase a joint life policy?

You can buy a joint life cover with the following individuals:

  • Your spouse
  • Your registered domestic partner
  • Your partner living with you
  • Your business partner

However, remember that the key to finding a good joint or single life policy is performing comparison of quotes online. The cost of the cover is not the only thing to consider. You should check out how much cover you are receiving and what the exemptions are. It is always essential to guarantee that you are receiving the best value for your money and a cover which suits you the most.

How Useful is a Term Life Insurance Quote?

It is a fact that all of us do not know what’s going to happen in the future. This is definitely true, however the pessimists  among us discern that the uncertainty we all experience in the future is what exactly the insurance agents are preying on; but, among the most rational and clear-cut policies available is the term life insurance. Due to the many information floating around the corner regarding term life insurance – specially term life insurance quotes, it is imperative to comprehend how it works and how it befits to people.

The Definition of Term Insurance

Certainly,  insurance is a significant thing to obtain for all aspects of our life: may it be car, health or home. It is a form of securing our lives. The term life insurance is the first step towards making out life insurance quotes.  In real meaning, this kind of insurance gives coverage only for a limited amount of time, along with fixed rate payments made until the policy matures. When that happens, it would based on the holder of the policy whether to renew or choose differently.  This type of policy varies from the usual policies since this policy is only temporary and actually not for life. For instance, if the term set is 30 years, so after 30 years the coverage would cease and only when the policy holder dies within the fixed period which the insurer is responsible to expend.

Why Term Life Insurance Quote  is The Best Deal

Getting a quote is not that tough if you know what you exactly desire. Determining your budget as well as your coverage will mean anything to your term insurance. It is simple to put the fact that term life insurance quote constantly stands out as  the best deal against the many options of life covers available on the market.  It’s because of two major reasons: first is the fact that payments are constantly affordable. The second one is the cover integrates each financial obligations that are greatly affected during the death events.  The lists of obligations frequently include consumer debt which possibly exists, medical care costs for families or dependents, the mortgage and the university education costs for dependents. Even when you obtain an insurance quote rapidly, it is imperative to carefully look at the lists and ensure that everything will go beyond the conventional costs of the funeral.

Consequently, the key benefit is not just the reasonably priced fixed payments on the life span of the insurance policy, but the piece of information that virtually exists on every expenditure that may unenthusiastically influence the beneficiaries and family of the policy insured is covered.

The term life insurance quote is helpful in any aspects of our lives. It also helps the holder of the policy to take pleasure of a life insurance policy benefit without needing to pay large installments. In addition to, the family of the policyholder will enjoy the financial stability being provided by the term life insurance quote for term life insurance is a solid  plan.

Living Longer than Expected and the Presidential Election

It can be a good quandary. Someone buys life insurance in case something unforeseen happens, or the inevitable and their heirs are left with a valuable asset. In today’s trying economic times, and as people live longer than previously expected, a life settlement may become the best choice for someone to live an independent lifestyle in their golden years.

Life or sometimes known as viatical settlement  is one where someone sells their life insurance policy to a Life Settlements provider for an amount in-between the cash surrender value and the overall death benefit for an amount to be used as the individual sees fit. The Life Settlements Provider then pays the monthly fees for the insurance policy and collects from the policy when the time is due.

The past decade has not been kind to many who were counting on high interest rates from savings, or counting on equities in such instruments as an IRA or 401K. Many projections have left the elderly with far less finances at present than they believed they would be able to appreciate when they first started saving.

The upcoming election and its effect on health care is of significant interest to seniors, as many are faced or will be faced with daunting debt from medical bills. They have a choice between Barak Obama’s Affordable Care Act, or Mitt Romney’s desire to repeal and replace the law.
Under the Affordable Care Act, more citizens of the United States will have some form of insurance than under Romney’s plan. The Affordable Care Act covers more of those in the lower income brackets. The Affordable Care Act is projected to give a tax credit of $3900-$4500 to an estimated 20 million eligible by 2016. Under Romney’s plan, 10 million will be eligible for a tax deduction of $1900-$2600.
Of significant interest to the elderly is the Affordable Care Act’s ban on restrictions of lifetime or annual benefits. The older one gets, the closer they may be towards exhausting their lifetime allotment. This ban does not exist under Romney’s plan.
Obama’s plan for payment involves greater focus on preventative care and pay-for-performance incentives. Romney’s plan will shift more of the burden of health care to the states. He also wishes to put a cap on non-economic damages in malpractice lawsuits.
The next President will have a great influence on savings for the elderly in regards to their health care, as well as influencing the overall economy to improve or decline.