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Universal Life Insurance Policy Advantages and Disadvantages

By JMcHood October 17, 2018

A life insurance policy is meant as a way to ensure that a specific amount of money is paid out to beneficiaries upon the death of the policyholder. This money often comes at a time when families and spouses need it the most and have no capacity to deal with any added stress or additional problems. In recent years, life insurance has become more adaptable, and a number of types of life insurance have sprung up in order to differing needs. One type that is becoming more popular is known as universal life insurance, which offers a number of benefits over other types of insurance which are currently on the market.

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A universal life insurance policy is a combination of two other forms of life insurance — term life insurance and whole life insurance. Unlike a term life insurance policy, a universal life insurance policy can be purchased for a person’s entire life. However, unlike a whole life insurance policy, the insured can change the premium rate and level of coverage as need be. Universal life insurance is also similar to a combination of a life insurance policy and an investment. Although universal life insurance is an insurance policy, it is used by many as an investment. There are three major disadvantages to universal life insurance: the rising costs of fees, the possibility of poor investment and the low rate of return versus other investments.

Advantages of a Universal Life Insurance Policy

The first benefit of a universal life insurance policy is that it can accrue interest over time, based on the amount of money that is placed in the policy. The policy is based on a cash value, one that is added to, each time a premium payment is made. If no payment is made to the policy, the costs of insurance itself, as well as any other charges associated with the account, are withdrawn. Over time, the value of the policy can increase significantly and may be tied to a number of different factors for this increase, including a stock, bond or an interest rate index – whatever the insurance company specifies in the policy.

The second benefit of a universal life insurance policy over something like a term life policy is that the amount of coverage can grow over time as the universal life account grows. A term life policy comes with a monthly fixed premium that must be paid in order to have a specific amount of insurance that will be disbursed at death. Universal life, meanwhile, does not have a fixed premium and because of the interest aspect of the policy, it can grow by a significant amount before it is finally cashed.

Another benefit of this type of policy is the ability to use the overages of the policy to pay for things other than a cash disbursement on death. These policies can be used to help pay down mortgages, as a charitable gift, or a life insurance retirement plan. This flexibility makes this kind of life insurance policy one of the most attractive to those who are looking to do more with their life insurance than simply have it pay out a single, large amount upon death.

Universal life insurance offers a number of benefits over other types currently on the market including the ability to grow based on interest, greater flexibility with premium payments, and a broader use over time, making it an attractive option for many families.

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Major Disadvantages of Universal Life Insurance Policies

First, a major drawback of universal life insurance is the rising cost of fees. When individuals choose universal life insurance, they must pay fees to the broker in addition to insurance company fees to invest their money. The fees for this type of insurance are generally higher than the fees charged for any other type of insurance or the fees charged for investment brokers. As the fees continue to rise, individuals make less money on these policies because so much of the money they pay out is not invested but is simply going to pay these fees.

Second, universal life insurance works a little differently than other types of life insurance. Where other types of life insurance have a set benefit, universal life insurance benefits depend on the money made off of investments. If money was invested poorly or if the economy is suffering, individuals will not make as much money as they could have with a different type of investment. In addition, when poor investments lead to a low rate of return, the loved ones that insured people are trying to protect with universal life insurance do not get as great of a benefit, which means that they do not get the money they may need to survive in the event of a sole provider’s death.

Finally, universal life insurance is typically not a smart investment practice. When individuals invest in mutual funds or other types of investments, they generally make more money than they do with a universal life insurance policy. Although some people choose a universal life insurance policy to help them commit to investing, investing in something else will generally earn them more money.

Although universal life insurance may appeal to some, it is not often the best choice due to rising costs and lower returns on investment. Other life insurance policies and investment techniques may yield better results, earning more money to protect a person’s loved ones.

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The Reasons you Need a Personal Liability Umbrella Insurance Policy

By JMcHood January 9, 2018

You have insurance, whether it’s car, homeowners or personal insurance. But what happens when you are involved in a lawsuit and it’s for more than the protection you have? You could end up in financial distress if you don’t have the right coverage. That’s where umbrella insurance comes into play. It gives you extra liability coverage when you need it.

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How Does an Umbrella Policy Work?

In order for an umbrella policy to take effect, you need a primary policy in place. Consider it a secondary insurance. Just like if you had two medical insurance policies. Your primary insurance must pay whatever they cover first. The secondary insurance then helps with whatever amount is left.

In the case of homeowners insurance, your insurance company would pay out on the claim whatever they promised after you pay your deductible. The amount that is left is what the umbrella policy will help you cover.

Who Needs Umbrella Insurance?

The umbrella policy covers you in the event of a lawsuit. Even if you don’t have any assets, someone suing you could sue for future earnings. Umbrella coverage prevents that from happening by providing additional coverage.

Anyone that owns a home, drives a car or operates any type of watercraft needs this type of policy. Even though you have standard insurance, it often isn’t enough. People sue for just about anything today, leaving you liable for thousands of dollars in damages that you don’t have, but will have to pay in the future.

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Is Personal Liability Umbrella Coverage Costly?

Luckily, most personal liability umbrella coverage is very affordable. You can get thousands of dollars or even millions of dollars in coverage for a few hundred dollars a year. Of course, the exact cost depends on the situation, insurance company, and the amount of coverage you obtain. Typically, most people take out at least a $1 million umbrella policy. Most people don’t end up using it, but the protection is there if you need it.

Figuring Out the Right Coverage Amount

The hardest part is probably picking out the right coverage amount. Before you decide, consider the following questions:

  • How much do you have in assets that someone could come after?
  • What is the potential of your future income?
  • What situations do you put yourself in that could result in a lawsuit? (driving a car, owning a home, etc.).

The answers to these questions will help you determine just how much coverage you need. For example, if you spend a lot of time on the road, you may want extra coverage because your risks are increased due to the time spent on the road.

Finding the Right Umbrella Policy

Before you buy an umbrella policy, make sure you ask the requirements. For example, some insurers only provide coverage for current insurance customers. They require all policies, including home and auto to be with them before they will provide umbrella coverage. Other companies offer stand-alone umbrella policies, but may have other restrictions.

The bottom line is that you should consider an umbrella policy, no matter how little or how much you have. Obviously, the more assets you have, the more coverage you’ll need. Talk with your insurance provider to see just how much $1 million or more coverage will cost. It’s often not as expensive as you would think and can provide you with incredible peace of mind in the end.

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Dear Millennials, You Need Life Insurance More Than You Think

By JustinM September 8, 2017

It doesn’t surprise a lot of people when they know that getting a life insurance plan is something that they usually put off because of a few reasons. One, they feel that they don’t really know where to start or who to properly reach out. Second, they would think that this something that they don’t need… yet.

If you’re still at your early adulthood, considering life insurance is still probably not part of your top priorities. It’s normally the time where you experiment, build a career, figure out what you really want to do with your life.

In fact, a lot of millennials still have not started getting coverage. And while millions have expressed their interest in getting one but somewhere along thinking about it and actually applying for it, they lost touch. Also, many insurance companies are focused on campaigning their products to them because let’s all face it, this is something that needs to be seen as a priority.

In life, everything is not certain. There are things that happen in life that we have no control of. That includes illnesses and even death. Having a life insurance policy protects you and your family should anything happen to you.

That is just one of the many reasons why you should put a value on your life while you can. Uncertainties are understandable. But it’s never too early to get started; it always pays to be prepared. And if that’s not enough to convince you, let’s count more reasons why you should.

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When you’re young, policies are cheaper.

Life insurance coverages are quite cheaper when you get one when you’re still young and able. The younger and healthier you are, the better. At this time, premiums don’t cost much since you’re still in perfect health. If you decide to wait it out, you might not be able to afford it anymore.

Even if you’re single and don’t have kids, people still depend on you.

Yes, you might say you’re single and have no dependents that’s why it’s not that much of a priority for you. But getting a plan now would benefit your parents. Should anything happen to you, they will also deal with the costs. And that is something we don’t want to burden them with.

It’s an opportunity to create a safety net for your loved ones.

Getting a life plan can give you an opportunity to repay your parents for everything they have done for you. Your life insurance could be your chance to give back and help them deal with any financial obligations if anything unfortunate happens to you.

It’s an opportunity to create a safety net for YOU.

Life insurance policies sometimes come with an option to add coverage for specific situations like if you have a critical illness and such. Other than your health insurance, this can add another layer of protection for you and lessen your financial burden from out of pocket expenses that your health coverage won’t cover. Your insurance plan could even help you build an emergency fund for yourself.

Your employer’s insurance might not be enough.

Even if your employer provides you a life insurance coverage, it would be a wise move not to depend on that alone. In fact, while the coverage that your employer provides can help in some way, it might not be entirely perfect for your situation. Other than that, not all jobs are guaranteed to stick. There might be instances where you need to shift your career, move toward better opportunities or you might even lose your job and would lead to you losing those benefits, too.

Again, everything in life is uncertain. You will never know what happens next. Therefore it’s best to be prepared for whatever life might throw at you. So why wait? Now is the perfect time to get started.

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Homeowners | Tips for Saving Money and Finding Cheap Home Insurance

By gmg February 23, 2017

If you’ve watched the news over the past few years, you know that more and more home insurers are pulling out of coastal communities and that across the nation homeowners insurance rates are rising.

Unlike auto insurance, the typical term for homeowners insurance is an entire year. Additionally, it’s a bit more difficult to change home insurers, though it’s certainly not impossible.

The good news is that it is possible to reduce what you spend on this vital coverage.

5 Ways to Find Affordable Homeowners Insurance

Here are some suggestions to help you find affordable homeowners insurance coverage while shopping around for quotes:

  1. Shop Online: Just as with auto insurance you can save a lot of money on a new home policy by shopping online. This will allow you to easily compare multiple companies, and cut down the time you spend looking for coverage. Shopping online is one of the fastest ways to narrow down which companies offer cheap home insurance. Reputable companies will still have a live person available to answer your questions, even if you do the initial application online.
  2. Raise Your Deductible: The higher your deductible, the lower your actual premium. If you have the cash on hand to cover your deductible in the event of a claim, consider increasing your deductible – it can net you a savings of 15-30 percent.
  3. Pay Attention to Home Maintenance Recommendations: Basic home repairs and maintenance can reduce the way your insurance company perceives risk. Consider simple things like adding storm shutters, reinforcing your roof or retrofitting your home to make it more earthquake resistant. Then let your insurance agent know about the changes. Likewise, upgrading the systems in your house (especially the plumbing, heating, and electrical work) can reduce the risk of damage from fire and water, and may also save you some cash when you make your insurance company aware of the changes. Insurance carriers are more likely to offer affordable homeowners insurance with an updated house than a home that has not been updated.
  4. Boost Your Home Security: Most insurers will give you a discount of at least five percent when you install a smoke detector, burglar alarm or dead-bolt locks. If your alarm system is also monitored, you may be able to save even more, and some companies will increase your savings if you also have a sprinkler system installed to help douse a fire should there be one. Most of the better systems are fairly expensive, so check with your insurance company before spending your money, to be sure they approve the brand and style.
  5. Bundle Your Coverage: If your home and auto insurance already come from the same company, good for you! You’re likely getting a significant discount on one or both policies. You can also save money by purchasing your life insurance policy from the same company as your homeowners insurance, even if your auto insurance is with a company that only sells auto coverage.

These five suggestions are just a few of the ways you can cut costs on homeowners insurance coverage without compromising your family’s safety or security. When renewal time approaches, be sure to ask your insurance agent about any other discounts that may apply to you.

Group Health Insurance – Save Money on Business Health Insurance

By gmg February 23, 2017

If you’re one of those Americans who is lucky enough to be both employed and covered by a business health insurance plan, you probably know that this time of year – mid-October through early-November – is the usual time for open enrollment in health plans, as well as the time when you can change your benefits for the next plan year.

It may be tempting to continue with the same options you’ve had so far, but before you decide what you have is enough, make sure you read everything. You may find that some benefits that used to be automatic are now optional, or that there are changes to coverage options.

Other tips for working with business health insurance plans to get the coverage you need and save money where you can include:

Look past the premium. Cheap health insurance is usually cheap for a reason. In most cases if a premium is really low it either means that you’ll receive fewer benefits or that you’ll be paying larger co-payments.

Read everything, and then check your choices. Many people forget to select optional coverage like dental and vision care.

Consider a higher deductible. Just as with auto insurance, the higher the deductible, the lower the premium. Just be sure you set aside enough money to cover the out-of-pocket expenses you’ll accrue until your deductible is met.

Consider an HSA or FSA HSAs, or Health Savings Accounts, usually come with high-deductible insurance plans, and allow you to carry the balance over from year to year, or bring it with you if you change your group health insurance companies.

FSAs, or Flexible Spending Accounts, are more, well, flexible. You can set aside a certain amount of pre-tax income for any health-related item that your insurance doesn’t cover (including some prescriptions, and elective surgery), but you have to use it by the end of the year, or you’ll lose whatever money is left in the account. Beginning in 2013, there will be an annual cap of $2,500 on these accounts.

Separate can be more than equal. If you and your spouse or partner are both employed, and both qualify for benefits, it’s far less expensive for each of you to carry your own health insurance, and for whomever has the least expensive policy to cover any children, listing the other parent’s insurance as secondary coverage.

Stick with the plan. If your health plan is an HMO or PPO, be sure you always use doctors who are part of the network, as insurance will pay a greater percentage of your medical bills.

Avoid the ER. Even if your insurance covers ER visits, you should make a point of only going when it really is an emergency. Otherwise, check to see if your coverage includes urgent-care or after-hours clinics, and go there for things that are urgent but not truly critical.

These are just a few ways you can maximize your group health insurance care, but the best thing you can do is not need it. Joining a wellness program or taking other steps to keep yourself healthy are better for your body and your wallet.

Exclusion-free Life Insurance?

By gmg February 23, 2017

Until fairly recently, it was usual for life insurance policies to be filled with exclusions – lists of conditions under which there would be no payout. Common coverage exclusions were war, military service, aviation, dangerous hobbies like mountain climbing and scuba diving, and certain health conditions, like HIV. If your death was caused by one of those excluded conditions, the insurance company didn’t have to pay.

The good news is that the world has changed, and life insurance companies have been eliminating exclusions, partly because it’s good business – the fewer exclusions in a policy, the more confident consumers tend to be – and partly because certain risks are perceived differently than they used to be.

Two of the exclusions that are no longer part of most policies are those for HIV and aviation. The former is still an issue, but a patient who is HIV-positive won’t be denied coverage for it. Instead, it will be treated like any other chronic health condition, though there will likely be an increased charge for a policy. Likewise, aviation is no longer considered terribly risky, so now, unless you’re an extremely inexperienced pilot or an extremely old (say, in your 90s) pilot, there is no exclusion for it.

Otherwise, there are two types of exclusions that still exist. One is an “outright” exclusion that applies to everyone insured by a given company. An example of this is the exclusion for suicide. There are virtually no life insurance companies that will pay out death benefits to the family of someone who commits suicide. The other type of exclusion is an option that underwriters use at their discretion, when they don’t like the risk associated with an applicant, or don’t have enough information to set a price.

The reality, however, is that even those optional exclusions are rarely used. Instead, an applicant who is so far outside the norm that actuarial tables don’t apply will be assessed some kind of “flat extra,” which is an added fee per thousand dollars of coverage.