March 2013 - Susman
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A ‘No Medical Physical Life Insurance Policy’ Can be a Lifesaver

Many people put off getting life insurance. There are a lot of reasons why. One that tops the list is because of the full medical physical we think we have to take. Squeamishly, our minds ration why we keep putting it off. Usually it comes down to dreading the needle that takes our blood, finding out we gained weight or we just hate to go to the doctors.

No physicals needed

What happens if you are at a parade and one of the large character balloons burst? It falls and covers your body. You are slowly suffocating. As you are, you realize you never obtained life insurance for your family. This may sound silly but weirder things have caused deaths.

Most of us do not even know that we can obtain a life insurance policy without a physical. Now-a-days, it is a myth to think otherwise. One of the most important benefits of going this route is that it can usually be approved in about 24 hours. There will be no more financial worries. Your loved ones will be taken care of if something happens to you in the future.

Questions that will be asked

Some health questions will be asked. None of them will require checking your doctor’s records. As with any insurance policy, the rate or the cost of the insurance will be derived from certain things that you write on your application.

It is easy to acquire quotes from insurance carriers before your final decision is made. Making a decision sooner than later can be a life saver for your family.

All insurance agents are the same (NOT!)

Insurance agents are all about the big sale. They want to sell you everything you don’t need so they can get a tidy check at the end of every month. All they care about is getting your money. These are all common sentiments when people discuss insurance. We have all heard the horror stories. On one hand, we have an uncle who was badgered so much by his insurance agent, he finally got sick and died with the exact same disease the agent told him would be covered if he bought the new policy. Luckily he had purchased the policy, so his untimely death was not in vain.

Insurance agents are often unscrupulous, trying to get clients to purchase more insurance than they really need at inflated prices. They talk so fast you would have to have bionic ears to decipher all the rhetoric they throw in. Most try and convince their intelligent clients they don’t understand, but what they are actually doing is trying to confuse and manipulate the buyer. What they tend to forget is, most of their clients aren’t as dumb as they want them to be and will often wise up fairly quickly.

The fact is all insurance agents are not the same. A good life insurance agent will help you figure out what your family will need in case of an emergency and you are no longer there to provide for them. They will get you what you need without burying you financially. Some agents actually care and try to do the best by their clients.

Do I need an agent to buy life insurance? (yes!)

You can buy life insurance without an agent. As long as you have an internet connection, thousands of companies will always be willing to take your money and offer you generic plans that aren’t tailored to your life. If you love the idea of a web based company that can easily disappear before you get the chance to die, you should definitely consider buying life insurance without an agent.

If you enjoy the idea of just grabbing a random figure for your life insurance coverage out of the blue, you will love working without an agent. When you opt to work without an agent, you can pick any number that you want, and it doesn’t have to match with your reality at all. If you like square numbers, you can pick 250,000.

In contrast, most agents require their clients to look carefully at their own debts and financial obligations. They make their clients go through the onerous process of determining how much money their dependents will need after their death. This ensures that your dependents will be fine, but those five or ten minutes with an agent can be painstaking for the person buying the insurance.

When you work without an agent, you can easily determine whether you want whole or term life insurance. You can skim the sections of your contract that talk about ideas like "living benefits" or "exclusions" or borrowing against your policy. If you turn to an agent, they may require you to read the small print. They may actually explain what the plan offers, and let’s face it, no one wants to listen to all that junk. Who has the time?

If you want to save time and have a policy that may or may not cover anything that you need from a company who may or may not be reputable, then you should certainly not work with an agent. Their experience and knowledge will just be distracting and irritating.

Does life insurance accumulate cash? (sometimes!)

Life insurance is not exactly a sexy or exciting purchase. You get to pay your premiums every month knowing full well that you will never live to see the benefit of it. Your family will, but you won’t. "What’s in it for me," the more selfish of us may ask. Well, if you purchase whole life, universal life or variable universal life insurance instead of term life insurance, there might just be a pot of gold before you reach the end of your life’s rainbow.

With universal life, variable universal life or whole life policies, part of your premiums go into an investment vehicle that builds cash value as you go along. "Great," you’re thinking, "More cash for my ungrateful survivors." That’s not the case. This money builds tax free and it’s technically your money. Most people will leave it in until it gets high enough that the interest will pay their premiums and they get essentially free life insurance for the rest of their lives, but others withdraw some of the cash, particularly in times of need. Probably the most popular option for people with these policies is to leave the cash in the investments, but borrow against it when they need money.

The bottom line is that if you want a life insurance policy that does more than, well, insure your life, they’re out there. You can get a variable universal life, whole life or universal life insurance policy that will accumulate cash for as long as you own the policy, as long as the premiums are paid.

Life Insurance and Beneficiary Taxes

One of the significant benefits of a sizable life insurance policy, aside from taking care of family members or a significant partner after death, is the fact that it is generally exempt from income tax on the named beneficiary. This makes life insurance a powerful estate planning tool, especially when other estate assets do fall under inheritance tax and income tax after death.

Life insurance proceeds can be handled two ways upon death. They can be paid out as a lump sum or they can be held by the insurer and distributed in a series of installment payments over time. In both cases, the actual principle amount is tax-free from income tax. However, where the insurer earns interest on the payments held, that interest becomes taxable when paid to a beneficiary.

The above said, if the life insurance policy ownership is transferred to a third party prior to death, usually in exchange for a cash or asset payment in return, then funds paid to a beneficiary do become taxable as income. This sort of situation is rare, but when it does occur, the beneficiary should definitely consult with a certified tax expert for proper reporting.

All of the above said, estate tax can be a problem. If the life insurance policy was in any way controlled by an owner, it falls under “incidents of ownership.” This frequently occurs with whole life or permanent life plans that allow borrowing, assigning, changing the beneficiary, etc. Such criteria make the payout to a beneficiary taxable under federal estate tax. A spouse is exempted from this charge, but kids and third party beneficiaries are not. As of 2012 this charge triggered on estates bigger than $5 million, but this is a temporary limit through 2013. In past years the estate tax has hit after an estate exceeds $1 million in total.

Can I get life insurance that lasts until I die? (yes!)

When most people think about life insurance, they’re thinking about term life, which you get for a number of years, usually like 15 or 20, and it leads to an interesting dilemma at the end of the term. You find yourself thinking "Gee, I’d really like to go on living, but if I die after this term expires, my family will get nothing. Whatever should I do?" Well, don’t panic! There are solutions to this problem that don’t involve pushing over the line of Harleys in front of a biker bar the week before your term is up.

The trick is to look for something besides term life insurance. There are other types, including universal life, whole life and variable universal life that end when your life does, not when the preset term does. The idea behind these types of insurance policies is that your policy is tied to an investment, with the theory being that your investment makes money throughout the term and eventually makes enough money to fund itself, with the investment paying for your premiums later in life. Of course markets vary and this doesn’t always work perfectly, but at the very least you get to keep the policy for your whole life, even if you are paying some or all of the premium the whole time. Some of these policies will also let you borrow against the cash value of the policy.

So if you don’t plan to conveniently die within the covered period of your term life insurance policy, you might want to consider whole, universal or variable universal life insurance.

Life insurance: First world problem?

Is the worst thing that’s happened to you this morning a drop of coffee on your suit? Do you find it difficult to imagine needing an insurance policy against fire for your house, much less an insurance policy on your own life?

Well, take a look at this disturbing statistic: 100% of people die sometime in their lives. Duh, right? But a lot of people just ignore the risk until it’s too late and then die with no insurance! This is especially common among younger people who would rather defy death by texting as they drive. Clearly they feel that death is escapable and therefore they don’t need to provide for it.

But this is not the case. The Center for Disease Control and Prevention reports that in 2009, 793.8 people died out of every hundred thousand. (http://www.cdc.gov/nchs/deaths.htm) And that’s in one year alone! Can you see what a high chance this gives you of dying this year? Admittedly the chance is lowered a bit if you’re intelligent enough not to text while driving, but what of falling airplanes? UFOs? Biological warfare? Charging rhinos? The dangers are everywhere!

Perhaps wiping the coffee off your suit and looking into a life insurance policy wouldn’t be such a bad idea after all. You know that you’re going to die sometime, and with a life insurance policy you really can’t lose. Besides, you win either way, because if you die your family will be provided for, and if you end up being the first person in America to gain immortality, I think the insurance company would give you a refund. Not that you’d need it- you’d be rich and famous anyway.

Can I Leave My Life Insurance to a Pet?

You’ve heard about pets being pampered by people who have far more money than they have to do with. You may even have heard about pets who receive trust funds, even if grandchildren are left out of the will. Then, you start thinking to yourself. "You know, my dog greets me at the door every day with a wagging tail. He snuggles up when he knows I’m upset. He doesn’t talk back, demand expensive things or forget about me."

Yes, it’s true, you can list your pet as the beneficiary to your life insurance policy. Doing so may even be a very good thing. After all, who is going to take care of your animal if something should happen to you?

Often times, pets as a life insurance beneficiary will need to have a trust set up to manage the funds. Don’t worry. You can control what happens to those funds and your attorney can make sure it happens. The funds, upon your death, would go into a trust. The trust, which doesn’t need to go through probate court, is like a place to store the funds until they are needed. You determine who gets to care for your furry friend, what they can spend the money on and even what to do with anything that’s left over should something happen to your pet.

Should you skip the kids and list your pet as a beneficiary on your policy? That depends on just how much you want to sock it to them after you are gone. Of course, you could have more than one plan in place to cover everyone’s needs.

We Guarantee Not All Life Insurance Guarantees Are The Same Between Companies

Life comes with certain guarantees; some you can trust will happen and others you are sure can’t happen. There is no guarantee you will walk out of your home and get hit by a speeding gazelle down the road. There is no guarantee your coffee pot at work will be filled with chicken noodle soup as every key you press on your computer allows you to print out one dollar on your printer. There is no guarantee that an Egyptian prince will declare you his long lost heir and hit you up for money because the royal vault is empty and the peasants are revolting.

But there is a guarantee that you will eat lunch sometime today. There is a guarantee you will take a shower and kiss your spouse goodnight. And there is a guarantee you will check you bank account to make sure your paycheck is deposited.

Guarantees in life will differ from person to person. This also holds true for life insurance guarantees. No two insurance companies will offer you the same guarantee. Yet if you research the types of policies available, you can be assured that you will find the right policy coverage in case your life ends unexpectedly.

Search for the policy guarantee that appeals to you as you are sure it will give you the perfect benefits. Always compare policies until you find the one that will give you affordable rates and the perfect terms, such as the cash value on interest rates won’t lower or at least a minimum death benefit amount will be granted to your beneficiaries at your death.

Worth More Dead Than Alive?

You ever have one of those days? Your alarm doesn’t go off and you’re positive you’re going to be late for work. You jump out of bed, only to step in cat puke on the way to the bathroom. It’s only after turning the bathroom light on that you realize that you don’t have a cat. Oh, and the bulb above the sink needs replacing. You’re driving down the highway, trying to finger-comb the tangles out of your hair and veer into oncoming traffic. It is at that precise moment you realize that you’re worth more dead than alive.

That’s right, the sister you named as beneficiary shortly after serving as her bridesmaid is going to be receiving a check for more money than you’re likely to earn in your entire career. Oh wait…no she won’t. You went to Cancun with friends two months ago rather than paying your premium and your life insurance policy has been cancelled.

Whew! That was close. At least you can die in peace, knowing that your bossy sister and her lazy husband aren’t going to be living off the fat of your insurance check. Dying without coverage rocks!

Hey, at least you know you’re in good company. According to the Life Insurance Marketing and Research Association, approximately 3,300 people die in the U.S. every single day without life insurance. Oh sure, all your family is going to have to come up with is burial costs and those student loans they co-signed for. You have to feel bad though for families with kids or an elderly relative to care for. It’s pretty stinky that their dead relative didn’t think to look out for them.

If you do survive this highway disaster, you may want to rethink your stance on paying life insurance premiums.

Just saying.