Saturday, October 24, 2009

Investing in a Life Insurance - Is It a Good Idea?

Life insurance policies can be divided into two very broad categories - term insurance and permanent life insurance. Term insurance policies are generally prepared to cover you for a temporary period of time, usually 10 or 20 years. With a permanent policy, the insurance can last for your lifetime. Furthermore, there are three sub categories of permanent life insurance policies: Term 100, Universal Life and Whole Life. There are several variations of the latter two policies. An independent and qualified advisor can help you to find which of them is best for you.

The primary difference between Whole and Universal Life insurance is in the investment component - on a Whole Life policy, it is built in the premium, while on a Universal Life insurance it is separate. In addition, Universal Life policies offer a wider variety of investment possibilities. However, the most important aspect when buying a life insurance policy is that it must fulfil your needs. Let's suppose your needs are met and you can pay for a permanent policy. Now you need to ask - is it a sound investment?

Opinions on this subject vary, in part because life insurance as an investment is a very misunderstood topic. Now we will present the crucial pluses and minuses of using life insurance as an investment:


* Profits within the policy and the MTAR limits grow on a tax sheltered basis. In case of Whole Life insurance, the premium shouldn't exceed the MTAR limit, Universal Life policies set a maximum premium according to the MTAR limit.
* The investment portion on an increasing death benefit Universal Life insurance and the dividends on a Whole Life policy are added to the face amount and are paid out on top of the policy face amount tax free.
* You can use the investment component on a permanent insurance to pay for future premiums, allowing you to pay future premiums with pre-tax money, rather than after-tax money.
* The minimum investment rate guarantees are set to more than 4% in case of numerous Universal Life insurance products. This is a great plus for investors who don't like to risk, particularly in today's low interest rate environment.


* For numerous permanent policies, there are strict penalties, if you decide to cancel your insurance within the first few years.
* Generally, it is not a good idea to select a permanent policy, if you don't need a permanent life insurance, as the mortality charge for the life insurance would be higher.

Photo source: thinkpanama

Monday, October 19, 2009

Why Not to Get Life Insurance Policy Directly from a Website

When you see the title of this article, you might think we are fighting against ourselves, as a company specializing in the online marketing of life and health insurance. Every day, thousands of people check our website and many of them contact us inquiring if it's possible to buy an insurance policy directly via our website. After pondering on this problem for a long time, we came to a conclusion that buying life insurance online would mean a disservice to our clients.
The following reasons are supporting our opinion why Internet is not the perfect way to buy a life insurance policy.

1. When you buy a life insurance directly on the Internet, it is just a single product and not a part of an overall financial portfolio. It should always be evaluated carefully and considered for a specific client - why and how much insurance is necessary and what's the best type of insurance. It is very difficult to do this without speaking to a broker over the phone or in person.

2. When you decide to buy your life insurance online, you can get only a limited product offer. Most companies selling life insurance online limit their portfolio to a few carriers and in some cases, just one carrier with just a few of their products.

3. There are often some features of the insurance policy that may not be fully explained to you when you buy the insurance online. When you buy your life insurance online, you may be surprised later about some details - for instance some ten-year term policies are not renewable or convertible, or may have a higher than usual renewable premium, and so on.

4. Many insurance products are just too complex to be sold online. There are too many details in some products (for example Universal Life or Whole Life insurance) that cannot be disclosed when the policy is purchased directly online. In case of BMO's Universal Life insurance policy, there are more than 400 investment possibilities available. There are just too many nuances in the whole plan, which makes it difficult to be offered online.

5. If you wish to get in touch with someone from the insurance company, it would be most likely with a call centre and not a broker.

Just to be understood correctly - of course the Internet is a great source of information when buying life insurance. Some Internet pages can give you a lot of useful information concerning life insurance. For instance tools such as our Instant Quote Calculator or Needs Analysis Calculator may be a great help. But finding information is very different to purchasing.

Wednesday, October 14, 2009

Record Declining Sales for US Life Insurance

US life insurance sales took their biggest six-month decline since 1942, reported by LIMRA International. The current news from Bloomberg show that people have lost hope in investments associated to stocks which is having a knock on effect on sales of individual life insurance.

This however is a totally different story in Canada. While sales of universal life policies have declined 14% compared to the same six-month time span just a year ago, advisers have been able to use steady term life and whole life policy sales to offset those losses. Annual premiums in general have witnessed only a 1% drop this year.

A personal budget may be more rigid in the US, but the best part of US citizens will still have life insurance as the basis of their financial planning. Without decent life insurance, an unexpected death can create a financial tsunami in the normal household. For family members left behind, life insurance policies give security from financial worries.

Of course, that doesn't mean you can't still save cash on your scheme. The following are six brilliant ways to save cash on your life insurance.

One kind of policy to refrain from is accidental death insurance. This is the main type of policy to be sold by Canadian insurance companies to people that don't really require it. Accidental death is extremely profitable for these companies, but provides only rare benefit to the consumer because lower than 3% of all life insurance claims are paid out thanks to death-by-accident. When comparing this policy to a term policy the majority of the time the term policy costs less.

Be wary of captive agents. They can only sell that company's products. Insurance companies employing captive agents generally charge higher premiums than the organizations employing independent brokers do. Captive agents cannot shop the market for the best value for you and, in some instances, may not offer the product best suited to your needs.

Just because a premiums seems low cost, it doesn't mean that it works out the cheapest. The start up premiums could be cheap, but work out the complete cost as it could be more expensive than acquiring a slightly higher priced policy in the first case. Start up offers such as low start up premiums are incentives used by insurance companies to lure you in. Term insurance policies, which offer low start up premiums that grow as the insured ages, are pertinent if used for temporary insurance needs. The main problem with this philosophy is we are not all the same, nor do we all have the same requirements. They don't take alot of time to examine why you're seeking insurance, or how long you'll need it.

See if you can uncover a company offering preferred rates. When it comes to standard or preferred term premiums there can be a telling difference is cost. A 40-year-old man, non-smoker would hand over $62.55/month with Equitable Life for standard rates on a $500,000 Term 20 policy. Taking the same details, using the preferred rates this policy would cost just about $20 less. Click this link to see if you are eligible for your own preferred policy.

Be very careful that you have not got too much insurance. By making use of our Needs Analysis Calculator you can observe at a brief look whether you are over or under insured.

Don't try and go it by yourself, work with an independent broker. A broker that has access to the whole insurance market is more likely to accomplish your requirements than someone who has only got access to their own company or one or two others.

Photo source: Jonathon Colman