Monday, September
6 2010
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Monday, September
6 2010
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Announcing a new acquisition!!
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What's New at Forte for the year 2007 March 2007 - Now Is the Time to Pick Up Low-Cost Life Insurance By Forte News Department If you need life insurance, now may be the time to buy
it. Insurance premiums are expected to
drop 4 percent this year, following a 5 percent decline last year, according to
the Insurance Information Institute, New York.
In fact, premiums are less than half of what they were a decade ago. There are two basic types of life insurance policies that
have lowered their premiums: terms and permanent. Term insurance is basic coverage. You pay a premium and just get life insurance for a specific
period, typically from 1 to 20 years.
Upon the renewal of a term insurance policy, though, you’ll pay a higher
premium because you’re older. Permanent insurance, on the other hand, provides both
insurance coverage and a savings account, known as the “cash value.” Cash value policies include whole life,
universal life, variable whole life, and variable universal life. Cash value insurance is permanent
protection. You lock into a premium
when you purchase the contract.
Universal policies let you make flexible premium payments. Why are life insurance rates dropping? People are living longer. The longer you live, the lower your
insurance premiums. Life insurance
rates are dropping because death rates for the 25 to 44 age group—the primary
purchasers of life insurance—have decreased significantly over the past 10
years, according to Weisbart. In 1996,
the death rate per 100,000 for the 25-to-44 year-old age group was 177.8. By 2004, it had dropped to 161.8, based on
National Vital Statistics Reports preliminary data. That represents nearly a 10 percent drop in the death rate in
less than a decade for the prime insurance-buying ages. The drop in insurance rates can represent a substantial
savings. The annual premium for a
40-year-old male nonsmoker buying a $500,000, 20-year level term life insurance
policy in 2007 would run $615 if he qualifies as a “standard” risk and $340 if
he meets the more stringent requirements of a “preferred” risk. Rates for women, younger people and for
larger amounts of insurance would be lower. Premium rates for traditional whole life, universal life,
and variable universal life insurance also are lower. Today, someone age 35 would pay about $8 per $1,000 of coverage
for permanent protection. Ten years ago
it was more like $12 per $1,000 of coverage. With rates lower than they ever have been, parents might
reassess the amount of life insurance they carry, and consider purchasing
more. For example, it takes, calculated
in the most simplistic of ways, a $500,000 death benefit to pay a widow $2,500
a month for 17 years. Yet, in 2004,
according to LIMRA International, Hartford, Conn., the average 25 year-old to
34 year-old adult with life insurance had only $145,000; the average 35 to 44
year-old adult had only $323,000 of life insurance. So what should you do if you’re sitting on a higher rate
term insurance or cash value policy?
Have an experienced life insurance agent conduct an insurance needs
analysis to determine how much coverage you need. On average, you need about five to eight times your wages to be
adequately protected. Most life insurance companies charge lower rates for larger
amounts of insurance. So buying one
larger policy rather than keeping a smaller one and starting a second policy
should further lower your premium.
Rates often drop at the $250,000, $500,000, and $1 million levels. Do note on the application that you plan to
replace an existing policy. And, don’t
drop the existing policy until the new one is in place. The drawbacks: If your age, occupation or health has
changed, you may not be able to get lower premiums from another insurer. You can check term insurance rates at Web
sites such as www.accuqote.com or www.selectquote.com. There are more factors to consider when switching a whole
life, universal or universal variable insurance policy. In addition, consider: -
Although
you can do a 1035 tax-free exchange to move the cash value from your old policy
to a new policy, you’ll pay commissions and other insurance costs on the new
policy. This can mean more than 50
percent of your premium in the first year and other commissions on the cash
value that is moved to the new company. -
If the
total of all prior premiums is less than the cash value in the policy you are
replacing, you will owe income taxes on the difference. A 1035 tax-free exchange should be
considered in this situation. -
Usually,
if a cash value policy has been in force for 7 to 10 years, with a quality
carrier and you are not changing the type of underlying investment from a fixed
portfolio to a variable portfolio, it is unwise to make a change. -
Life
insurance policies are incontestable after they have been in force for two
years regardless of any errors or misstatements on the initial application. Replacing an existing policy with a new
policy will start the incontestability period over again. -
Any
policy loans on your old policy will have to be repaid. Tip: Always check the financial strength of the insurance
company you are considering. The
strongest companies are rated A++ and A+ by A.M. Best and AAA by Standard &
Poor’s. -30- March 2007 — This column is produced
by the Financial Planning Association, the membership organization for the
financial planning community, and is provided by David W. Henion , a local
member of FPA | ||||||||||||||
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