Insurance World

Copyright 2006 Ronald Hudkins

Not too many years ago life insurance was considered to be the indispensable platform upon which all other estate planning efforts should be based. In fact, for those in the median and lower income ranges, it was often the only recognized method for protecting one’s heirs, particularly in the event of untimely death. However, over the past twenty or so years, the concept of financial planning has changed considerably. The proliferation of varied retirement plans available through work (IRAs, SEPs, SARSEPs, mutual funds, etc) has changed people’s perspectives about the need for life large life insurance policies.

Does that mean that you don’t need life insurance? No. Most people, perhaps with the exception of the very wealthy, do need some sort of life insurance, although even the very wealthy may opt for a life insurance policy (generally whole life) to defray the costs of burial and estate taxes.

In general, the options are whole life (also called permanent insurance) and term life, with variations like universal life or variable life that combine some of the benefits of each. Different companies offer different options, but which you need and how much you need are matters for heated debate. Those who sell one and make most of their commissions from it will vehemently try to convince you that the other is not a good investment. Here are some facts for your consideration.

Whole Life Insurance Advantages:
• Offers a guaranteed death benefit no matter how long you live
• Is generally not subject to rising premiums; rates stay the same
• Many policies become “paid up” at some point (15 years, age 65, etc.) after which no more premiums are paid
• Has investment value which can be cashed out after some specified interval
• Can be borrowed against in case of financial emergency
• Can, in many cases, occasionally earn dividends depending on the company’s solvency and accuracy in predicting actual costs
• The income from a whole life policy is tax deferred
• Can be cashed out after age 65 and used for retirement

Whole Life Insurance Disadvantages:
• Costs more than term life insurance
• Generally returns a fairly low rate of interest
• Does not begin to accumulate any real value for the first 10-15 years
• If the policy is surrendered within the first few years, money paid into it is lost
• Does not provide the investment value of a mutual fund or other investment

Term Life Advantages:
• Premiums are generally very inexpensive
• Lower premiums allow the buyer to purchase more insurance with higher death benefits
• Can be quite useful if the buyer only needs coverage for a specified period (while paying off the mortgage or while kids are in college, etc.)
• Leaves the buyer with more money to purchase other investment vehicles like mutual funds, stocks, bonds, etc. that provide higher rates of return than whole life
• Often beneficial for younger families who can’t afford whole life rates, but need to insure the primary income earner

Term Life Disadvantages:
• Only pays if and when you die; you can never personally recoup any of the money spent on term life insurance
• While premiums are lower than whole life, they also tend to go up and can become unaffordable
• Term life is only available for a specific term (up to 30 years), and then goes away; if you don’t die within the term, your premiums are lost

Almost everyone needs life insurance of one variety or the other. The type of insurance and the amount to purchase depend entirely upon you, your family and your mutual goals and needs. In any case, make sure the company you purchase insurance from is reputable and financially solvent. Don’t be convinced by a fast-talking sales person without doing your homework first. There are few remedies if your life insurance company dies before you do.

Shopping for the most reasonable term life insurance prices is what you should always do in your search for life insurance. You want to do all you can to get the absolute lowest price out there.

While this is common practice among every individual, some things you just won’t be able to have an influence on. Term life insurance rates are one of them. This also goes for universal, whole, and many other life insurance optionsavailable to you.

You see, each and every single household and family member will have a unique situation that will affect the outcome of the life insurance quote granted. Some of these factors include but are not limited to:

- Age
- Smoker vs. Non-smokers
- Current health conditions
- State of residency
- And many others

If you have certain conditions that can make your life insurance rates higher than the norm, don’t reconsider your choice for getting life insurance. Even if you’re paying two times more than the average consumer, the coverage you get will far surpass the premiums being paid.

Now that you understand consumers don’t have a significant influence on life insurance rates, I’m going provide a couple examples of certain conditions that will have an impact on the quotes you receive.

The two conditions that can sway life insurance prices are high blood pressure and cholesterol. These two conditions are on top of the list when it comes to cardiovascular disease.

The huge percentages of deaths are contributed by these two conditions alone. This is why many life insurance companies will want to know the current status of your blood pressure and cholesterol levels.

The more these numbers fall outside of what’s considered healthy, the more of a risk it is to cover you as a policy holder. This is what can cause you to pay higher premiums versus another person with healthier blood pressure and cholesterol levels.

Weight is another important factor all life insurance companies look at when determining the best rate for your family. This is also something that many people have no control over even through proper eating and exercise. This could easily be caused by hereditary traits past down from generation to generation.

Don’t be worried about not getting the best rate if your health isn’t a 10/10 on the rating scale. You may end up paying higher premiums due to not being in the best of health, but the investment is still minimal compared to the benefits of it all.

You should also remember that it’s vital to get coverage now and not a moment later because the sooner you get it the better.

Also, the younger you are the better because companies see youthful individuals as a lower risk to insure compared to older people that might suffer from age related ailments.

In all, the best things you can do is live life to the fullest and maintain a healthy lifestyle. Be sure to schedule routine checkups with your doctor and follow-up on health recommendations that are given. This can help you in your search for getting the best term life insurance prices for you and your family!