Life Insurance Archives - Hanover Mortgages

May 1, 2021

How to Budget for Insurance

The cost of insurance can be a big hit to your personal bottom line. That’s especially true when you consider all the types of coverage you may need to pay for, including auto, health, and life insurance plans. Here are some tips for how to budget for insurance without compromising your lifestyle.

Steps for Budgeting for Insurance

In addition to being legally required in many instances, insurance is often a good investment for your wallet and your peace of mind. The expense of insurance can actually save you money in the long run.

Budgeting for insurance may seem complicated, but it really comes down to two simple actions: First, decide what type of insurance you need. Then, start budgeting for it. Here are five steps for incorporating insurance into your personal finances.

1. Decide how much insurance you need

For each type of insurance you decide to get, you’ll need to decide how much coverage to buy. When it comes to insurance, cost shouldn’t be the only factor in your purchase decision. Instead, think critically about how much coverage you need. If you’re not sure how much insurance or what type to get, consider talking with an insurance agent for advice.

Do you need your homeowner’s insurance to include liability in case someone else is injured on your property? Is term life or whole life insurance better for your situation? Who needs to be covered by your auto insurance?

2. Get quotes from agents or online

Once you know what type of insurance you want and how much coverage you need, get some quotes. Shop around and get quotes from multiple companies. Remember to compare the coverage and not just the premium price—you might find that you’re getting a much better value when paying only a little more a month with one company over another.

3. Find out what the payment schedule is

Discuss the payment schedule before you agree to an insurance policy. It’s common for auto insurance companies to offer a significant discount if you can pay for six months of insurance at a time, for example. Here are some common pay schedule options for various types of coverage.

Home Insurance: Paid annually or biannually, often out of escrow if you have a current mortgage
Car insurance: Paid every six months or monthly
Life insurance: Paid monthly
Health insurance: Paid monthly or via pretax deductions from your paycheck if the coverage is through your employer

Understanding the payment schedule will help you budget for insurance more effectively.

4. Set aside enough money monthly

However you plan to pay for insurance, break the amount down into a monthly budgeted amount. For example, if your home insurance is $900 every six months, set aside $150 every month. It’s much easier to budget for $150 than it is to come up with $900 all at once.

5. “Pay” the bill monthly

If you do pay monthly, go ahead and budget so that you can pay your insurance bill at least a week before it’s due. That leaves you plenty of wiggle room if something ever comes up.

If you don’t pay monthly, act like you do. Move the monthly budgeted amount into a savings account and don’t touch it. Act like it’s not there so you’re not tempted to use it on something else and risk not having the money when the bill comes due.

How to Budget for Different Types of Insurance

Trying to include a large insurance expense in an already tight budget can be difficult. Here are some tips for making various types of insurance potentially more affordable so they are easier to budget for.

Car Insurance

The average American pays around $2,388 per year on auto insurance. But your actual expense can vary widely depending on your age, state of residence, type of car, credit score, and many other factors. Here are some tips for saving money on car insurance.

Increase your deductible. You may need to shell out a bit more in the event of an accident, but you can save a lot of money on your premiums.
Ask about discounts if you’re married, have multiple cars, are buying different types of insurance from the same company, or are a good driver. Some insurance companies also offer discounts for students with good grades.
Lower your liability amounts. This can reduce premiums, but you should ensure that it’s a good move for you financially overall.

Health Insurance

According to numbers from the Kaiser Family Foundation in 2018, the average amount people were contributing to their employer-sponsored health care plans each year was $1,186 for single coverage. You don’t have to pay that much for health insurance, though. Some ways you can save on this expense, especially if you’re purchasing as an individual through the marketplace, include:

Buy a plan with a higher deductible.
Enter all your income data into the marketplace application form to see if you qualify for subsidies or credits.
Apply for Medicaid if you’re eligible.

Life Insurance

The cost of life insurance depends heavily on your age, the type of insurance, and how much you’re purchasing. If you’re young, you might want to buy a whole-life policy that you can pay for now and still have when you’re older. If you’re older, you may want to opt for term life insurance, which is cheaper than other types.

Homeowner’s or Renter’s Insurance

One of the reasons insurance costs might be lower is because the company sees you as less of a risk. Homeowner’s and renter’s insurance may be cheaper for those that invest in security measures such as home security systems.

The Bottom Line on How to Budget for Insurance

You can get discounts and great deals on insurance if you’re willing to do your research. But, in most cases, insurance may still be a sizeable expense. Planning ahead and budgeting every month for these expenses is one of the best ways to ensure you can afford the coverage you need.

And since your insurance costs are sometimes impacted by your credit score, make sure you’re keeping up on all your other bills and reviewing your credit reports regularly.

DISCLAIMER. The information provided in this article does not, and is not intended to be, legal, financial or credit advice; instead, it is for general informational purposes only.

Source: credit.com

April 25, 2021

7 Ways to Utilize Your Life Insurance Policyâs Cash Value

Permanent life insurance policies—like universal, variable and whole life—offer more than a death benefit. Some include cash value, which is a pool of money you can use while still alive.

If you’ve had a policy for years, the cash value could be considerable. “The accumulation could be more than you put in, and this opens up all kinds of options,” says Jonathan Howard, a certified financial planner with SeaCure Advisors in Lexington, Ky.

The cash value in permanent life insurance is your money, to be tapped as needed, but your options for doing so will depend on the type of policy and the carrier. Before doing anything, ask the insurer how much you can safely withdraw per year based on the cash value balance and policy terms. If you withdraw too much too early, the policy’s cash value could run out, forcing you to start paying more in premiums or have the coverage lapse.

If you no longer need coverage, it might be tempting to stop the policy and cash out all at once, but consider the tax ramifications, says Luke Chapman, a partner with Precision Wealth Partners in New Castle, Del. Any cash value growth above what you paid in premiums is taxed as ordinary income when withdrawn. For example, if you paid in $20,000, have $100,000 in cash value and withdraw the difference, the $80,000 of growth is taxable.

There are better ways to put that cash value to work that won’t ramp up your tax bill.

1 of 7

Live Off of It

A more tax-effective option is to withdraw only what you need each year. Howard recommends keeping some money for an emergency fund, perhaps 12 months of expenses, with the rest used to supplement your retirement income. Withdrawals draw down the tax-free premium payments first; taxes are owed only after you start withdrawing the gains.

2 of 7

Borrow Money

A person ready to sign some documents to take out a loan.

You can also tap the cash value through a policy loan. You won’t owe taxes for withdrawing gains this way. Plus, you’ll have the option to repay the money, whereas you can’t reverse withdrawals. If the money is not repaid, the death benefit will cover the loan balance when you pass away.

The insurer will charge interest for the loan. “The interest rate is determined by the policy contract and is carrier specific,” says Howard. “It’s typically 4% to 8% a year.” Policy loan rates don’t usually change with market conditions, he says, so don’t expect a deal today just because overall interest rates are low. Your remaining cash value can be used to pay the interest.

3 of 7

Exchange It for an Annuity

Concept art with several people looking at charts and graphs.

The IRS lets you swap your permanent life insurance for an annuity through a 1035 exchange, which is a tax-free transfer of one contract for another. This move can generate more retirement income. “Let’s say the max payout stream from a cash value insurance policy is $10,000 a year. Converting to an annuity might generate $12,500,” Chapman says. An annuity could also guarantee the payments will last your entire life, but you will be canceling your life insurance policy, a move that can’t be reversed.

4 of 7

Convert to a New Policy to Pay for Long-Term Care

A nurse helps a woman at a nursing home.

If you’d like coverage for long-term care, consider converting your life insurance into another policy with a long-term care rider (if yours doesn’t have it already). You keep your life insurance, but part of the death benefit can be used to pay for long-term care expenses.

5 of 7

Use It as Collateral

The cash value is an asset that increases your chances of qualifying for a loan or mortgage from a lender. It can even serve as the loan’s collateral, but Chapman warns to structure the deal carefully, as there can be tax consequences. Always ask an insurance expert before using cash value this way.

6 of 7

Tap It to Pay for the Policy

Concept art showing a life insurance policy document and calculator.

The cash value can also be used to cover your life insurance premiums.

7 of 7

Leave It Alone

A couple who are declining something while speaking with a man on a laptop.

You aren’t forced to do anything with your cash value. Left alone, the cash value will continue to accumulate, leaving a larger inheritance for your heirs, as withdrawals and loans reduce the final death benefit.

Source: kiplinger.com

April 12, 2021

A Simple Financial Spring Cleaning Checklist

Spring is the perfect time to complete a financial clean-up. Here we share a few financial areas of your life that may need some sprucing up. No mop required!

1. Banking

The banking industry is quite competitive. If you’re not getting any perks from your credit card company or bank, it’s time to make a switch.

Credit Cards

Credit card companies today offer everything from travel rewards to gift cards to cash back. Many cards even offer perks without requiring an annual fee. If you pay your credit card balance faithfully each month and are only rewarded with a good credit score, it may be time to shop around for a new card. Keep in mind that when you apply for a new credit card, your credit report takes a hit, so take your time researching and don’t apply for multiple cards.

Bank Accounts

Are you still paying minimum balance fees, monthly checking, or savings account fees? How about ATM or overdraft fees? Don’t! There are too many bank options these days competing for your business to still be paying multiple fees.

What about interest rates? Is your money making money? The Federal Reserve recently raised interest rates, but the average savings account rate is still only 0.06%. If you’re not making at least that, it may be time to think about switching.

Do you bank with a brick-and-mortar bank? How often do you actually go into one of their branches? If you think you can go without having an actual bank to walk into, consider switching to an online bank. Not only do online banks have minimal fees, they boast some of the highest interest rates around.

E-Statements and Auto-Pay

Save a tree and lower your risk of identity theft by switching to receiving online statements only. If you prefer to have a paper copy, make sure you shred the statements before tossing them out.

Consider switching to auto-pay whenever the option is offered. American households tend to have many different bills to pay all due at different times; it’s easy to accidentally overlook one. If you switch to an auto-pay billing option, payments are deducted automatically when they are due, so it’s one less thing to worry about. Just be sure to occasionally review your statements to ensure the right amounts are being deducted.

2. Taxes

You most likely have already filed your taxes. Did you have to pay in or did you get a refund? If the outcome was not what you expected, it’s time to double-check your withholding allowance on your paychecks.

We all want to lower our tax bill. Deductions can help, however, unless you pay to work closely with an accountant, how do you know what qualifies as a deduction?

Some common tax deductions include:

Dependent child credits,
Mortgage interest and real estate taxes,
Health insurance premiums,
Student loan interest.

Take a look at this article for some perhaps surprising tax deductions you should consider for next year: 9 Things You Didn’t Know Were Tax Deductions.

3. Budget

When is the last time you sat down and wrote out a monthly budget? Do you know your debt-to-income ratio?

A few years ago when I was in the market to buy a house, I opened an Excel spreadsheet and calculated what I spent on average each month compared to the income I bring in. Thankfully, Intuit recently introduce a new app, Turbo, which does this for you with ease. Generally, you want to aim to keep your debt-to-income ratio below 36% and mine was 53%. I had to make some changes. I tightened my budget (mainly by canceling cable TV and renegotiating my Internet bill) and paid off my auto loan. My ratio today is still a bit high, but it’s getting better.

Going through the memberships and subscriptions you currently pay is a great way to quickly lower your debt-to-income ratio. Chances are you’ll find you are paying a monthly fee for something you seldom use, or at least can live without. Do you need both Netflix and Hulu? Both Spotify and iTunes Music? Both Blue Apron and Hello Fresh? Probably not.

Print off the last two to three months of your credit card and bank account statements and go line-by-line to figure out a way you can save some money. Additionally, if you have a Mint account, log in and check out the Trends tab. You can view your spending and see where the majority of your money is going. You may be shocked at how much you spend within a certain category. It’s easy to just hand over your credit card, but actually seeing a graph of how much you spend can be a much needed wake-up call.

Spending by Category _ Mint

4. Retirement

It doesn’t matter how old you are, you need to plan ahead for retirement.

If your employer offers a 401(k), take advantage of it. This is the easiest way to save for retirement (not to mention it lowers your taxable income.) If they offer to match a certain percentage, even better. Aim to increase your contributions each time you get a pay raise, this way you won’t even miss the money.

Do you have more than one 401(k) or IRA? Consider consolidating.

Consolidating retirement accounts that share the same tax treatment can be beneficial for two reasons:

1. Keeping all your money in one place makes it more simple and manageable.

2. Having only one account reduces the amount of fees you’re paying.

A retirement rollover is the best way to move money from one account to another. It’s important to do so correctly to avoid fees. Check out this article for more information: How to Handle Retirement Rollovers Correctly.

For those of you whom have established retirement accounts, when was the last time you rebalanced your investment portfolio? Never?

Typically, the younger you are, the more risk you can handle in your investments because you have more time to make up for any losses. The closer you get to retirement age, the more conservative you should be. Financial planning experts recommend that you rebalance your portfolio once or twice a year, but check up on it frequently to make sure you’re in line with your target.

As you’re thinking about your retirement planning, also think about your beneficiaries. How long ago did you open your retirement accounts? Are your parents still listed as your beneficiaries on your 401(k) from your first job? Or maybe an ex-spouse is still designated? Review your beneficiaries as it may be time for an update.

5. Legacy Planning

Just because Spring is all about rebirth, doesn’t mean we should avoid the subject of death. There are three important aspects of legacy planning that should be dealt with sooner rather than later:

1. Writing a will

2. Authorizing power of attorney

3. Buying life insurance

Wills

If you don’t want the state to decide where your assets go when you die or, more importantly, who will be in charge of your children and funds owed to them, then you better draw up a will. Another, often forgotten, reason to have a will is to ensure no tension occurs within your family after you are gone. Without a will, you may have relatives arguing over your possessions and everyone may want input on what should happen to your assets.

If you have a complicated estate, such as business interests, trusts, multiple investment properties, etc., then you should probably hire a lawyer to help with your will. However, if your estate is a bit more simple (e.g.: married with kids and you own a house) you can draw up your will right online, if you’d like. You’ll need to print it off and get it witnessed and notarized, but it’ll be much cheaper than hiring a lawyer.

Power of Attorney

There are two kinds of power of attorney: financial and medical.

A financial power of attorney is most often just simply referred to as a power of attorney (POA) and this is a document that states a person or organization you name to act on your behalf in regards to handling financial and business transactions.

A medical power of attorney is a document that states a person you name who has the authority to make medical decisions for you if you are unable to do so, for example if you’re unconscious or mentally incapable.

Most people assume only elderly individuals need to have these POA documents in place, but you don’t need to be 80 years old to get into a car accident and become unconscious. If you become mentally or physically incompetent, your designated POA agents can make decisions on your behalf instead of it being left up to strangers who wouldn’t know your wishes, such as doctors and judges.

If you’re over 18 and considered of sound mind, you can draw up both types of POA documents. Hiring a lawyer is an option, but, like wills, you can create these documents online for a fee. Be sure to discuss with your agents of choice before drawing up the documents and make sure they understand your wishes and their responsibilities.

Life Insurance

Life insurance isn’t the happiest financial product to think about. However, while many Americans admit life insurance is important, many households are underinsured. People are telling themselves “It won’t happen to me,” meanwhile they really should be asking “What if?”

If you have young children, life insurance is a must. How would your loved ones be affected if your income were to suddenly disappear? Stop postponing and get a term life insurance quote today. Life insurance is more affordable than you think and because the process is mainly digital, it’s also become much more convenient to buy.

If you already have life insurance, good for you! But don’t forget to review your policies periodically after life changes such as a new baby, marriage or divorce, or changing jobs. Your coverage needs may have changed, not to mention beneficiaries may need updating.

Although many of these financial spring cleaning to-dos may take a bit of time to complete, you’ll feel accomplished and will ultimately be in a better financial place. Do you have any financial spring cleaning tips to share? Leave a message in the comments section.

Natasha Cornelius is a content manager and editor for Quotacy. She has worked in the life insurance industry since 2010, and has been making life insurance easier to understand with her writing since 2014. A long-time Mint user, Natasha loves making frugal fun by creating new DIY projects. Connect with her on LinkedIn.

From the Mint team:

What’s Turbo and why are we talking about it?

Turbo is part of the Intuit family of products, just like us. We work with Turbo, TurboTax and Quickbooks to get all our customers on the right track financially. While Mint provides free credit scores to our customers, Turbo combines the same score, plus other information like verified IRS filed income and debt to income ratio to create a broader financial health profile. Try out our sister app to see where you truly stand financially – beyond the credit score.

Mint may be compensated by some of the links that appear in this article. Our partners do not endorse, review or approve the content. Any links to Mint Partners were added after the creation of the posting. Mint Partners had no influence on the creation, direction or focus of this article unless otherwise specifically stated.

Learn more about security

Mint Google Play Mint iOS App Store

Source: mint.intuit.com

February 28, 2021

7 Questions to Ask a Life Insurance Agent

Life Insurance

A life insurance agent can make the process of buying life insurance much easier. They can find you the best deals and ensure you’re completely covered. This is important, as close to a third of all Americans admit to lacking confidence about the insurance application process and can’t answer many basic questions about their needs and the coverage they seek.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

But what sort of questions should you be asking your life insurance agent and what answers can you expect in reply?

Who is Offering the Insurance?

Does your life insurance agent work on behalf of a single company or multiple companies? What are the names of those companies, and can you verify their legitimacy using a simple Google search?

No two insurance companies are the same. Many policyholders focus their attention solely on the price of the policy and the coverage it provides. But the company’s history of payouts and its reputation also comes into it. A cheap life insurance policy is pointless if the company has a reputation for not paying out.

Fortunately, it has never been easier to determine the legitimacy of an insurance company and a simple online search is all you need.

What Are the Guarantees?

The numbers you need to focus on the most are the guaranteed ones. This tells you how much a permanent policy will pay regardless of market changes. The projected figures are subject to change, but the guaranteed figures will provide you with some stability and assurances over the term of the policy.

Will It Adjust for Inflation?

It’s important to make sure the grant you receive will be paid after adjusting for inflation, because what seems like a lot of cash today may be worth much less in the future after years or decades of inflation.

$250,000 can seem like a huge sum of money today. If anything happens to your spouse and they are the breadwinner, this money can help to clear the mortgage and bolster your savings, securing you for years to come and allowing you to prepare for a future without them.

In forty years, however, $250,000 may count for very little. As an example, let’s imagine that you took out an insurance policy for your spouse in 1980 and they have just passed away. That policy was $100,000 at the time and this was a huge sum, enough to buy you two houses or 13 cars based on the national average rate.

Today, after accounting for inflation, that sum would be over $315,000, which is also a lot of money (although not quite enough for two houses). However, if the policy didn’t adjust for inflation, you’d get $100,000, which simply isn’t enough to cover an individual for life, especially if they have just lost most of their household income and still have a big mortgage to repay.

What Happens in the Future?

What happens to your policy as you age, can you switch your term policy to a permanent one, what options do you have, and can you save any more doing this? The older you are, the more you will pay, and by quite a considerable amount.

What costs you $100 a year when you’re in your forties could cost you $500 a month when you’re in your seventies. You’re a higher risk, and because life insurance is based on probability, you will be expected to pay a lot more.

Are You Covered if You Become Ill or Disabled?

Life insurance is designed to support your family in the event of your demise. However, you have your own wellbeing to think about as well. What happens if you become disabled or fall ill—what happens if you can no longer work and have growing medical bills to worry about?

This could place a big financial burden on your household and it’s something that you need to prepare for. Ask your life insurance agent if you will be covered in the event that you fall ill or become disabled. And, if so, what will that cover provide?

Many life insurance policies offer some kind of disability or illness cover, but this can vary greatly from policy to policy. More importantly, life insurance companies have their own definitions of what constitutes “disabled”. For some, it’s the inability to perform specific actions; for others, it’s about being unable to perform any actions at all.

What Happens if I Can’t Pay the Premium?

Life insurance providers are not as forgiving as banks and creditors when it comes to missed payments. They won’t chase you down, give you multiple chances, and then offer payment plans and other assistance programs to get those payments started again. In many ways, the ideal outcome for a life insurance company is if you meet the payments for twenty years and then stop.

That way, they have secured a sizeable profit without the risk of a payout. And if you need to resign, you’re now much older and will, therefore, have higher premiums to repay.

Discuss this potential issue with your life insurance agent in advance. Ask about grace periods and automatic premium loans; the former will give you a break to allow you to find your feet again, the latter will allow you to borrow against the policy.

What if Your Health Improves?

If your health gets gradually worse, your policy shouldn’t change and that’s a good thing, otherwise, life insurance would be pretty pointless. However, if you’re not in the best of health when you take out the policy, but this soon improves, there’s a chance you could get a discount.

Ask your life insurance agent what your options are in the future if your health or your situation changes. You could get a new underwriting if you lose weight, stop smoking, stop drinking or remove some other negative trait that initially increased your premiums.

Summary: Keep the Questions Coming

Life insurance agents are there to answer questions and support you in whatever way they can. Obviously, they benefit more if you don’t take up too much of their time, agree with the first policy they offer you and quickly sign on the dotted line. But you’re not there to make their life easier, you’re there to make a commitment that will impact you for years to come, one that will continue to provide for your family after you’re gone.

It’s important, therefore, to take your time and get everything off your mind. Don’t worry about sounding stupid and asking a question you feel you should know the answer to. You’d be surprised at how little the general population knows about life insurance and how common the most basic of questions are.

The most important thing is that you get the answers you seek and the policy you need. If that means asking a string of questions and making a life insurance agent wish they’d never met you, so be it!

Source: pocketyourdollars.com

February 19, 2021

Indexed Universal Life (IUL) vs. 401(k)

Indexed Universal Life (IUL) vs. 401(k) – SmartAsset

Tap on the profile icon to edit
your financial details.

When creating your personal retirement plan, there are a variety of tools you can use to fund your long-term savings goals. An employer-sponsored 401(k) is one of them while indexed universal life insurance (IUL) is another. A 401(k) allows you to invest money on a tax-deferred basis while also enjoying a tax deduction for contributions. Indexed universal life insurance allows you to secure a death benefit for your loved ones while accumulating cash value that you can borrow against. Understanding the differences and similarities between IUL vs. 401(k) matters for effective retirement planning. Working with a financial advisor can also make a substantial difference in the amount of money you’ll have when you retire.

What Is Indexed Universal Life Insurance?

Indexed universal life insurance is a type of permanent life insurance coverage. When you buy a policy, you’re covered for the rest of your natural life as long as your premiums are paid. When you pass away, the policy pays out a death benefit to your beneficiaries.

During your lifetime, an IUL insurance policy can accumulate cash value. Part of the premiums you pay are allocated to a cash-value account. That account tracks the performance of an underlying stock index, such as the Nasdaq or S&P 500 Composite Price Index. As the index moves up or down, the insurance company credits the cash value portion of your policy each year with interest.

IUL is different from fixed universal life insurance or variable universal life insurance. With fixed universal life insurance your rate of return is guaranteed, making it the least risky of the three. With variable universal life insurance, your cash value account is invested in mutual funds and other securities so you’re exposed to more risk. An indexed universal life insurance policy fits in the middle of the risk spectrum.

Cash value that accumulates inside an IUL insurance policy grows tax-deferred. You can borrow against this cash value if necessary, though any loans left unpaid at the time you pass away are deducted from the death benefit.

What Is a 401(k)?

A 401(k) is a type of qualified retirement plan that allows you to set money aside for retirement on a tax-advantaged basis. Contributions are deducted from your paychecks via a salary deferral. Your employer can also offer a matching contribution. The IRS limits the amount you can and your employer can contribute each year.

With a traditional 401(k), contributions are made using pre-tax dollars. Any money you contribute is automatically deducted from your taxable income from the year. When you begin taking money out of your 401(k) in retirement, you’ll pay ordinary income tax on withdrawals. Any withdrawals made before age 59.5 may be subject to a 10% early withdrawal penalty as well as income tax.

Traditional 401(k) plans allow you to invest in a variety of securities, including mutual funds and exchange-traded funds. Target-date funds are also a popular option. These funds automatically adjust your asset allocation based on your target retirement date.

There’s no death benefit component with a 401(k). This is money you save during your working years that you can tap into in retirement. Unless you’re still working with the same employer, you’re required to begin taking minimum distributions from a 401(k) beginning at age 72. Failing to do so can trigger a tax penalty equivalent to 50% of the amount you were required to withdraw.

IUL vs. 401(k): Which Is Better for Retirement Savings?

Indexed universal life insurance and 401(k) plans can both be used as investment tools for retirement. But there are some important differences to note. With IUL, returns are tied to the performance of an underlying index. If the index performs well, then your policy earns a higher interest rate. If the index underperforms, on the other hand, your returns may shrink. Your insurance company can also cap the rate of return credited to your account each year, regardless of how well the underlying index does. For instance, you may have a cap rate of 3% or 4% annually.

In a 401(k) plan, you have the option to invest in index mutual funds or ETFs but you’re not locked in to just those investments. You can also choose actively managed funds, target-date funds and other securities, based on your time frame for investing, goals and risk tolerance. Your rate of return is still tied to how well those investments perform but there’s no cap. So, if you invest in an index fund that goes up by 20%, you’ll see that reflected in your 401(k) balance.

A 401(k) also affords the advantage of an employer matching contribution. This is essentially free money you can use to grow retirement wealth. With an indexed universal life insurance policy, you’re responsible for paying all of the premium costs.

Another big difference between the two centers on tax treatment and withdrawals. With an indexed universal life insurance policy, you can borrow against the cash value at any time. You’ll pay no capital gains tax on loans and no penalties unless you surrender the policy completely or fail to repay what you borrow. Death benefits pass to your beneficiaries tax-free.

With a 401(k), you generally can’t tap into this money penalty-free before the age of 59.5, even in the case of a hardship withdrawal. You may be able to avoid a tax penalty if you’re withdrawing money for qualified medical expenses but you’d still owe income tax on the distribution. You could take out a 401(k) loan instead but that also has tax implications. If you separate from your employer with an outstanding loan balance and fail to repay the loan in full, the entire amount can be treated as a taxable distribution.

Qualified distributions in retirement are taxable at your regular income tax rate. And if you pass away with a balance in your 401(k), the beneficiary who inherits the money will have to pay taxes on it. Talking with a tax professional or your financial advisor can help you come up with a plan for managing tax liability efficiently both prior to retirement and after.

The Bottom Line

Indexed universal life insurance and a 401(k) plan can both help you build wealth for retirement but they aren’t necessarily interchangeable. If you have a 401(k) at work, this may be the first place to start when creating a retirement savings plan. You can then decide if IUL or another type of life insurance is needed to supplement your workplace savings as well as the money you’re investing an IRA or brokerage account.

Tips for Investing

When using a 401(k) to invest for retirement, pay close attention to fees. This includes the fees charged by the plan itself as well as the fees associated with individual investments. If a mutual fund has a higher expense ratio, for instance, consider whether that cost is justified by a consistently higher rate of return.
Consider talking with a financial advisor about how to maximize your 401(k) plan at work and whether indexed universal life insurance is something you need. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool makes it easy to get personalized recommendations for professionals in your local area in just minutes. If you’re ready, get started now.

Photo credit: ©iStock.com/yongyuan, ©iStock.com/kupicoo, ©iStock.com/Piotrekswat

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.

About Our Retirement Expert

Have a question? Ask our Retirement expert.

smartasset.com

February 17, 2021

Why Everyone Over 30 Should Start Thinking About Life Insurance

I don’t like to make generalizations too often, but I do feel that everyone over 30 should start thinking about the importance of life insurance. That is, if you’re 30 and over and don’t have any life insurance.

No one likes to think about their demise, but life insurance is an extraordinary product that can be used to reduce the financial burden you could leave behind for loved ones. Plus, different types of life insurance can even help you build wealth and diversify your assets.

Here are 4 important reasons why everyone over 30 should start thinking about life insurance.

The Insurance At Your Job is Probably Not Cutting It

By now you probably realize the life insurance coverage that your job offers is not enough. Some employers include life insurance in their list of benefits which is great, but the coverage amount often doesn’t come close to your insurable need.

Your insurable need represents how much life insurance you should hold depending on factors like your age, liabilities, health conditions, and so on. One common rule of thumb is that your average life insurance coverage amount should be 7 to 10 times your annual income.

So if you’re earning $60,000 per year, you might want to consider a policy of $420,000 to $600,000 depending on your needs. However, the average employee life insurance policy amount is only around $25,000 to $50,000 or one years’ salary. This is not nearly enough.

Plus, when you leave your job, you’ll lose your insurance benefits too. This is why it’s always important to consider having your own life insurance coverage independent of your employer. So many people are switching jobs every 2 to 3 years so you may not want your life insurance benefits to be tied to your employer anyway.

Term life insurance is pretty affordable and you can get a free quote in just a few minutes from Bestow.

Here are 4 important reasons why everyone over 30 should start thinking about life insurance. Click To Tweet

You Want to Protect Loved Ones From a Financial Burden

You don’t have to be married with kids and a house to want to consider life insurance. However, more people in their 30s do focus on settling down and working toward some of these milestones.

If you do have kids, a mortgage, etc. you’ll definitely want to consider how your partner would get by if anything did happen to you. Would the kids still be able to go to college? Would your spouse be able to keep the house? These are important questions that life insurance can help you answer.

Even if you’re single and at the height of your career. More people in their 30s are carrying debt like student loans and personal loans. Did you know that some types of student loan debt can not be forgiven even if you died? You probably don’t want to pass on any financial burdens to your parents or other loved ones who would have to fit the bill.

Life insurance provides a tax-free payment to your beneficiary which can help cover everything from debt payments, loss of household income, funeral arrangements, and more.

RELATED: How Much Life Insurance Do You Really Need

30 Is Still Young Enough to Lock in Affordable Rates For Whole Life Insurance

Let’s say you’re considering the importance of life insurance. Whole life insurance in particular. Whole life insurance is permanent insurance that builds cash value as you continue to pay your premiums.

Other types of insurance, like variable whole life, even allow you to invest some of the cash value and grow the amount faster. You can borrow from your cash value, use it to pay your life insurance premiums, or even withdraw it while you’re still alive and well.

While whole life insurance is cheaper than term life, costs increase around the board as you get older. If you’re considering whole life insurance, the best option is to get a policy while you’re younger. Thirty years old is not too old to still get a decent rate for your life insurance premiums. Plus, it allows you enough time to build cash value that could be put to use in the future.

Get Insured and Protected From Medical Issues

Yes, life insurance is geared toward providing financial relief for your loved ones. Depending on your policy, you may be able to obtain something called ‘living benefits’. Living benefits are an insurance rider (which means it’s an added on feature) that can be added to your term or whole life insurance policy.

Living benefits can allow you to use some of your life insurance coverage amount to pay medical expenses for a serious illness or condition. Of course, this will reduce the benefit provided to your beneficiary, but it can still be a helpful feature to help you cover medical bills that could otherwise be left for your loved ones to deal with anyway.

No one likes to think about getting sick or becoming terminally ill, but planning for the best and worst is just a part of adult life. As you get older, your health tends to decline but if you’re still healthy in your 30s, it’s the perfect time to lock in a life insurance policy and consider adding a living benefits rider.

RELATED: Should You Get Disability Insurance? 4 Ways to Decide

Summary

Life insurance should be apart of everyone’s financial plan. Knowing the importance of life insurance can be life-saving information. If you’re over 30 and still don’t have coverage. Consider all the reasons to get a term or whole life policy. Consider your current future needs and carefully weigh the pros and cons.

Remember, you can get a free no-obligation quote from Bestow in just two minutes.

Source: everythingfinanceblog.com

January 27, 2021

Term Life vs. Whole Life Insurance: Which Is Best for You?

div#contentdisclaimer background: #fff;padding: 1.5em;line-height: 1.25em;max-width: 500px;
Advertiser Disclosure

Disclaimer

Taking out a life insurance policy is a great
way to protect your family’s financial future. A policy can also be a useful
financial planning tool. But life insurance is a notoriously tricky subject to
tackle.

One of the hardest challenges is deciding
whether term life or whole life insurance is a better fit for you.

Not sure what separates term life from whole
life in the first place? You’re not alone. Insurance industry jargon can be
thick, but we’re here to clear up the picture and make sure you have all the
information you need to make the best decision for you and your family.

Life Insurance = Financial
Protection for Your Family

Families have all sorts of expenses: mortgage payments, utility bills, school tuition, credit card payments and car loan payments, to name a few. If something were to happen and your household unexpectedly lost your income or your spouse’s income, your surviving family might have a difficult time meeting those costs. Funeral expenses and other final arrangements could further stress your family’s financial stability.

That’s where life insurance comes in. Essentially, a policy acts as a financial safety net for your family by providing a death benefit. Most forms of natural death are covered by life insurance, but many exceptions exist, so be sure to do your research. Death attributable to suicide, motor accidents while intoxicated and high-risk activity are often explicitly not covered by term or whole life policies.

If you die while covered by your life
insurance policy, your family receives a payout, either a lump sum or in
installments. This is money that’s often tax-free and can be used to meet
things like funeral costs, financial obligations and other personal expenses.
You get coverage in exchange for paying a monthly premium, which is often
decided by your age, health status and the amount of coverage you purchase.

Don’t
know how much to buy? A good rule of thumb is to multiply your yearly income by
10-15, and that’s the number you should target. Companies may have different
minimum and maximum amounts of coverage, but you can generally find a
customized policy that meets your coverage needs.

In addition to the base death benefit, you can enhance your coverage through optional riders. These are additions or modifications that can be made to your policy—whether term or whole life—often for a fee. Riders can do things like:

Add coverage for disability or deaths not commonly
covered in base policies, like those due to public transportation accidents.
Waive future premiums if you cannot earn an income.
Accelerate your death benefit to pay for medical bills
your family incurs while you’re still alive.

Other
riders may offer access to membership perks. For a fee, you might be able to
get discounts on goods and services, such as financial planning or health and
wellness clubs.

One
final note before we get into the differences between term and life: We’re just
covering individual insurance here. Group insurance is another avenue for
getting life insurance, wherein one policy covers a group of people. But that’s
a complex story for a different day.

Term Life Policies Are Flexible

The “term” in “term life” refers to
the period of time during which your life insurance policy is active. Often,
term life policies are available for 10, 20, 25 or 30 years. If you die during
the term covered, your family will be paid a death benefit and not be charged any future
premiums, as your policy is no longer active. So, if you were to die in year 10
of a 30-year policy, your family would not be on the hook for paying for the
other 20 years.

Typically, your insurance cannot be canceled
as long as you pay your premium. Of course, if you don’t make payments, your coverage will lapse, which typically
will end your policy. If you want to exit a policy you can cancel during an
introductory period. Generally speaking, nonpayment of premiums will not affect your credit score, as
your insurance provider is not a creditor. Given that, making payments on your
life policy won’t raise your credit score either.

The major downside of term life is that your
coverage ceases once the term expires. Ultimately, once your term expires, you need to reassess
your options for renewing, buying new coverage or upgrading. If you were to die
a month after your term expires, and you haven’t taken out a new policy, your
family won’t be covered. That’s why some people opt for another term policy to
cover changing needs. Others may choose to convert their term life into a
permanent life policy or go without coverage because the same financial
obligations—e.g., mortgage payments and college costs—no longer exist. This
might be the case in your retirement.

The Pros and Cons of Term Life

Even though term life insurance lasts for a
predetermined length of time, there are still advantages to taking out such a
policy:

Comparably lower cost: Term life is usually the more affordable type of life insurance, making it the easiest way to get budget-friendly protection for your family. A woman who’s 34 years old can buy $1 million in coverage through a 10-year term life policy for less than $50 a month, according to U.S. News and World Report. A man who’s 42 can purchase $1 million in coverage through a 30-year term for just over $126 a month.
Good choice for mid-term financial planning: Lots of families take out a term life policy to coincide with major financial responsibilities or until their children are financially independent. For example, if you have 20 years left on your mortgage, a term policy of the same length could provide extra financial protection for your family.
Upgrade if you want to: If you take out a term life policy, you’ll likely also get the option to convert to a permanent form of life insurance once the term ends if your needs change. Just remember to weigh your options, as your rates will increase the older you get. Buying another term life policy at 50 years old may not represent the same value as a whole life policy at 30.

There are some drawbacks to term life:

Coverage is temporary: The biggest downside to
term life insurance is that policies are active for only so long. That means
your family won’t be covered if something unexpected happens after your insurance
expires.
Rising premiums: Premiums for term life
policies are often fixed, meaning they stay constant over the duration of the
policy. However, some
policies may be structured in a way that seems less costly upfront but feature
steadily increasing premiums as your term progresses.

Young Families Often Opt for Term Life

The rate you pay for term life insurance is
largely determined by your age and health. Factors outside your control may influence the rates you
see, like demand for life insurance. During a pandemic, you might be paying
more if you take a policy out amid an outbreak.

Most consumers seeking term life fall into
younger and healthier demographics, making term life rates among the most
affordable. This is because
such populations present less risk than a 70-year-old with multiple chronic
conditions. In the end, your rate depends on individual factors. So if
you’re looking for affordable protection for your family, term life might be
the best choice for you.

Term life is also a great option if you want a
policy that:

Grants you some flexibility for
future planning, as you’re
not locked into a lifetime policy.
Can replace your or your spouse’s
income on a temporary basis.
Will cover your children until
they are financially stable on their own.
Is active for the same length as
certain financial responsibilities—e.g., a car loan or remaining years on a
mortgage.

Whole Life Insurance Offers
Lifetime Coverage

Like with term life policies, whole life
policies award a death benefit when you pass. This benefit is decided by the
amount of coverage you purchase, but you can also add riders that accelerate
your benefit or expand coverage for covered types of death.

The biggest difference between term life and
whole life insurance is that the latter is a type of permanent life insurance.
Your policy has no expiration date. That means you and your family benefit from
a lifetime of protection without having to worry about an unexpected event
occurring after your term has ended.

The Pros and Cons of Whole Life

As if a lifetime of coverage wasn’t enough of
advantage, whole life insurance can also be a highly useful financial planning
tool:

Cash value: When you make a premium payment on
your whole life policy, a portion of that goes toward an account that builds
cash up over time. Your
family gets this amount in addition to the death benefit when their claim is
approved, or you can access it while living. You pay taxes only when the money
is withdrawn, allowing for tax-deferred growth of cash value. You can
often access it at any time, invest it, or take a loan out against it. However, be aware that anything
you take out and don’t repay will eventually be subtracted from what your
family receives in the end.
Dividend payments: Many life insurance
companies offer whole life policyholders the opportunity to accrue dividends
through a whole life policy. This works much like how stocks make dividend
payments to shareholders from corporate profits. The amount you see through a dividend payment is
determined by company earnings and your provider’s target payout ratio—which is
the percentage of earnings paid to policyholders. Some life insurance
companies will make an annual dividend payment to whole life policyholders that
adds to their cash value.

Some potential downsides to consider include:

Higher cost: Whole life is more expensive than
term life, largely because of the lifetime of coverage. This means monthly
premiums that might not fit every household budget.
Interest rates on cash value loans: If you need emergency extra
money, a cash value loan may be more appealing than a standard bank loan, as
you don’t have to go through the typical application process. You can also get
lower interest rates on cash value loans than you would with private loans or
credit cards. Plus, you don’t have to pay the balance back, as you’re basically
borrowing from your own stash. But if you don’t pay the loan back, it will be
money lost to your family.

Whole Life Is Great for Estate Planning

Who stands to benefit most from a whole life
policy?

Young adults and families who can
net big savings by buying a whole life policy earlier.
Older families looking to lock in
coverage for life.
Those who want to use their policy
as a tool for savings or estate planning.

To that last point, whole life policies are particularly advantageous in overall financial and estate planning compared to term life. Cash value is the biggest and clearest benefit, as it can allow you to build savings to access at any time and with little red tape.

Also,
you can gift a whole life policy to a grandchild, niece or nephew to help
provide for them. This works by you opening the policy and paying premiums for
a set number of years—like until the child turns 18. Upon that time, ownership
of the policy is transferred to them and they can access the cash value that’s
been built up over time.

If you’re looking for another low-touch way to leave a legacy, consider opening a high-yield savings account that doesn’t come with monthly premium payments, or a normal investment account.

What to Do Before You Buy a
Policy

Make sure you take the right steps to finding
the best policy for you. That means:

Researching different life insurance companies and their policies, cost and riders. (You can start by reading our review of Bestow.)
Balancing your current and long-term needs to best protect your family.
Buying the right amount of coverage.

If you’re interested in taking next steps, talk to your financial advisor about your specific financial situation and personal needs.

Infographic explaining the difference between term and whole life insurance policies.

Source: credit.com

January 25, 2021

A Guide to Universal Life Insurance

Life Insurance

Universal life insurance is a type of permanent life insurance, offering both a cash value and a death benefit. It offers numerous tax benefits and is often considered to be a combination of a life insurance policy and an investment; it can pay dividends, be cashed out, and offers a guaranteed death benefit at the same time.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

How Does Universal Life Insurance Work?

Universal life insurance is split into two different components: the cost of insurance, known as the COI, and the cash value; and unlike whole life insurance and term life insurance, it can be adjusted over time. The cost of insurance is simply the price needed to keep the policy alive and it includes elements such as administration charges and mortality costs.

As for the cash value, this includes all accumulated premiums that exceed the necessary cost of insurance. This sum will increase as it earns interest in line with the market rate. The policyholder can choose to increase or decrease premium payments, as well as the rate at which they are paid, which is why this type of insurance is also known as adjustable life insurance.

The cash value can cover the cost of the universal life policy, but if there is not enough money to cover the premiums then the policy can lapse.

A universal life insurance policy offers two types of death benefit. One is a fixed sum that doesn’t change and guarantees your loved ones will get a specific amount when you pass away; the other is an increasing lump sum, in line with the policy’s cash value. This sum is tax-free but will not be paid if the cash value is withdrawn before the policyholder dies or if the premium payments stop. In such cases, the policy will lapse.

Whole life Policy vs Universal Life Policy vs Term Insurance Policy

There are pros and cons to all life insurance products. Some offer cash values, others don’t; some are easy to understand, others are a little more complicated. If you’re not sure which policy is right for you, speak with an insurance agent and they’ll discuss your options and help you decide.

A term life insurance policy is the better option for many applicants and covers them for a specific period of time, often from 10 to 30 years. There is no cash value or additional benefits, and the entire purpose is to provide a death benefit in exchange for monthly life insurance premiums.

A term life insurance policy is generally a cheaper and more widely available option as it provides some more assurances to the insurance company, as all policies are based on the probability of the individual dying during the term.

By carefully weighing up these odds, using information such as their age, health, and family medical history, the insurer can almost guarantee a profit while still giving the policyholders what they need.

The younger you are, the less you will pay and the greater the death benefit will be. Whole life insurance and universal life insurance, however, have a cash value attached and this can be surrendered (surrender charges may apply) for the cash value.

If the surrender value is not taken, and the policy premiums are paid, a guaranteed death benefit will be paid to the beneficiaries regardless of the age of the policyholder.

In this way, a fixed whole life insurance policy and a variable universal life insurance policy remain for the entire life of the policyholder, while giving their loved ones some assurances. These policies are often said to combine the benefits of a death benefit with a savings account, one that can boost your retirement income and provide an additional option when everything turns sour and you’re in dire need of a cash injection.

As a result of these extra benefits, whole life insurance policies typically charge higher premiums. For instance, a healthy 30-year old man can expect to pay between $200 and $300 a year for a term life insurance policy that lasts for 30 years and offers a $250,000 payout. This covers them until the age of 60, and statistically, there is a high chance they will outlive this policy, thus affording the life insurance company more leeway and allowing them to offer lower rates.

However, if a 30-year old man were to apply for a whole life insurance policy offering the same death benefit, they would likely be charged in excess of $2,000 a year.

Is Universal Life Insurance Right For You?

Whether a universal life insurance plan is right for you or not will depend on your age, health, budget, and goals. If you’re looking for a death benefit to protect your family and you don’t have a lot of money to spare, it’s probably not the best option and you should look for a term life insurance policy instead.

However, if you have a large estate to protect or a dependent who will rely on you for the life of the policy (such as a disabled child) a permanent life insurance policy is probably the better option. It’s also worth noting that insurance coverage can be switched and tweaked.

A universal life insurance policy can be adapted to suit your growing needs, with a flexible premium and death benefit. A term life insurance policy, on the other hand, can be switched to a permanent life insurance policy if you find that you have more money and more options further down the line.

This isn’t always the case, however, so if there is a chance you will want to switch make sure you use a life insurance company that will let you do this.

Bottom Line: A Safe Investment

A universal life insurance offers several benefits and combines an investment with a death benefit. If you need both of these and have the money to pay the premiums, it’s a good option.

However, if you’re mainly looking for a death benefit or an investment, look into a term life insurance policy or a stock market investment, because neither of these options are strong enough on their own. It’s only when they are combined that universal life insurance begins to look worthwhile.

Source: pocketyourdollars.com

January 25, 2021

3 Tips for Finding an Affordable Life Insurance Policy

September 12, 2019 &• 5 min read by Alice Stevens

0 Comments

div#contentdisclaimer background: #fff;padding: 1.5em;line-height: 1.25em;max-width: 500px;
Advertiser Disclosure

Disclaimer

Life insurance offers protection for your family’s financial security. Many people buy themselves a life insurance policy that will protect their family. It’s also possible for people to purchase life insurance policies for someone else. For example, children can purchase policies for their parents and vice versa.

Life insurance coverage offers valuable financial protection. You need to find a policy that meets your coverage needs and fits your budget. Here are three tips that will help you find the right fit:

#animation-wrapper max-width: 450px; margin: 0 auto; width: auto; height: 600px; font-family: ProximaNova-Regular, Arial, sans-serif; #animation-wrapper .box background: linear-gradient(#0095D8, #1D4BB6); color: #fff; text-align: center; font-family: ProximaNova-Regular, Arial, sans-serif; height: 130px; padding-top: 10px; .content .box p margin: 0 0; .box .btn-primary color: #fff; background-color: #ff7f00; margin: 10px 0; .chat ul margin: 0; padding: 0; list-style: none; .message-left .message-time display: block; font-size: 12px; text-align: left; padding-left: 30px; padding-top: 4px; color: #ccc; font-family: Courier; .message-right .message-time display: block; font-size: 12px; text-align: right; padding-right: 20px; padding-top: 4px; color: #ccc; font-family: Courier; .message-left text-align: left; margin-bottom: 6px; .message-left .message-text max-width: 80%; display: inline-block; background: #0095D8; padding: 8px 15px; font-size: 14px; color: #fff; border-radius: 30px; font-weight: 100; line-height: 1.5em; .message-right text-align: right; margin-bottom: 6px; .message-right .message-text line-height: 1.5em; display: inline-block; background: #1D4BB6; padding: 8px 15px; font-size: 14px; color: #fff; border-radius: 30px; line-height: 1.5em; font-weight: 100; text-align: left; .chat background: #fff; margin: 0; border-radius: 0; .chat-container height: 450px; padding: 5px 15px; overflow: hidden; .spinme-right display: inline-block; padding: 15px 20px; font-size: 14px; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2; .spinme-left display: inline-block; padding: 15px 20px; font-size: 14px; color: #ccc; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2; .spinner margin: 0; width: 30px; text-align: center; .spinner>div width: 10px; height: 10px; border-radius: 100%; display: inline-block; -webkit-animation: sk-bouncedelay 1.4s infinite ease-in-out both; animation: sk-bouncedelay 1.4s infinite ease-in-out both; background: #000; .spinner .bounce1 -webkit-animation-delay: -.32s; animation-delay: -.32s; .spinner .bounce2 -webkit-animation-delay: -.16s; animation-delay: -.16s; @-webkit-keyframes sk-bouncedelay 0%, 100%, 80% -webkit-transform: scale(0); 40% -webkit-transform: scale(1); @keyframes sk-bouncedelay 0%, 100%, 80% -webkit-transform: scale(0); transform: scale(0); 40% -webkit-transform: scale(1); transform: scale(1); .ad-container padding: 15px 30px; background-color: #fff; max-width: 690px; box-shadow: 1px 1px 4px #888; margin: 20px auto; .ad padding: 10px 6px; max-width: 630px; .ad-title font-size: 20px; color: #07b; line-height: 22px; margin-bottom: 6px; letter-spacing: -.32px; .ad-link line-height: 18px; padding-left: 26px; position: relative; .ad-link::before content: ‘Ad’; color: #006621; font-size: 10px; width: 21px; line-height: 12px; padding: 2px 0; text-align: center; border: 1px solid #006621; border-radius: 4px; box-sizing: border-box; display: inline-block; position: absolute; left: 0; .ad-link a color: #006621; text-decoration: none; font-size: 14px; line-height: 14px; .ad-copy color: #000; font-size: 14px; line-height: 18px; letter-spacing: -.34px; margin-top: 6px; display: inline-block; .ad .breaker font-size: 0; .box .box-desc font-family: ProximaNova-Bold, Arial, sans-serif; font-size: 17px; font-weight: 600; width: 225px; margin: 0 auto; .btn display: inline-block; margin-bottom: 0; font-weight: 400; text-align: center; vertical-align: middle; touch-action: manipulation; cursor: pointer; background-image: none; border: 1px solid transparent; white-space: nowrap; padding: 6px 12px; font-size: 14px; line-height: 1.428571429; border-radius: 4px; -webkit-user-select: none; -moz-user-select: none; -ms-user-select: none; user-select: none; font-family: ProximaNova-Semibold, Arial, sans-serif; text-decoration: none; .btn-group-lg>.btn, .btn-lg padding: 10px 16px; font-size: 18px; line-height: 1.3333333; border-radius: 6px; #ad-4 font-family: Arial, sans-serif; background-color: #fff; #ad-4 .ad-title color: #2130ab; #animation-wrapper .cta-ec background: #79af3e; color: #fff; width: 155px; height: 41px; font-family: ProximaNova-Semibold, Arial, sans-serif; font-size: 14px; margin: 10px auto 4px auto; #animation-wrapper .ec-logo display: block; margin: 0 auto; width: 140px; @media (max-width:500px) .ad padding: 20px 18px; max-width: 630px;

I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
Luckily I don’t have to worry about that. I have ExtraCredit, so I get $1,000,000 ID protection and dark web scans.
I need that peace of mind in my life. What else do you get with ExtraCredit?
It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
…we live in Oklahoma.

Get everything you need to master your credit today.

Get started

Understand Policy Options

Premium rates vary based on the kind of policy you choose. There are two broad categories of life insurance—temporary and permanent.

Temporary life insurance, or term life insurance, offers a death benefit payout if the insured passes away during the timeframe the policy covers.

Policyholders can choose the length of the term and the death benefit amount. Some companies offer additional coverage options, called rides, that can be attached. These range from accelerated death benefit riders to return of premium riders. These additional riders add more value to the policy, which also affects the rates.

Permanent life insurance has its own two categories—whole life and universal life. Both kinds of permanent life insurance accrue cash value over time. The cash value can be used to purchase paid-up additions, pay premiums or be borrowed against.

Like term life insurance policies, policyholders can choose to add additional coverage with riders. Riders vary by company and affect the monthly premium.

Whole life policies typically have the highest premiums because the coverage is permanent, and there’s generally a guaranteed cash value growth rate. Most whole life policies come with high death benefit amounts. Policyholders can choose the amount when they sign up for the policy.

However, for those who need less coverage or only enough to cover funeral expenses, final expense insurance policies are a great option. Final expense insurance is designed for seniors. It’s a type of whole life insurance, but the death benefit amounts are much lower. Because the death benefit is only enough to cover funeral expenses, premiums tend to be lower.

There are a few kinds of universal life insurance policies. The biggest difference with these policies is how the funds are invested. The cash value of variable universal policies is invested in multiple accounts, including stocks and bonds. The cash value of indexed universal policies is invested in indexes, which are diversified investments.

Because there is no guarantee of how the cash value will grow in the investments, universal life insurance premium rates tend to be lower than whole life insurance premium rates.

Work with an independent agent

While the various types of life insurance are common among life insurance companies, not all companies carry every kind. It’s a good idea to know what kind of life insurance policy you want before starting to work with companies.

If you’re not sure what kind of life policy you want, work with a life insurance agentto ensure that you find an affordable policy that meets your coverage needs. A licensed agent can help you through the entire process of selecting and applying for a policy.

Working with a licensed independent agent also has other advantages. The specific terms, riders and premium rates can vary by company. Independent agents sell policies from multiple companies, so they can help you compare similar policies across companies.

An independent agent can help you understand the underwriting process and find a policy that is a good fit for your situation. In addition to comparing coverage and terms across companies, an independent agent can help you compare premium rates.

Working with an independent agent makes the research process easier for you because you don’t have to reach out directly to companies. Instead, you can work with one person to find the best company and rate for you.

Use quote websites wisely

While some people like working with an agent, others may prefer to do independent research. Quote websites come in handy because they make it easy to quickly view your options.

There are many life insurance quote websites to choose from. So, how do you know if you’re working with a good company?

First, it’s important to understand what kind of quote website you’re using. Some websites, like Geico and Progressive, show quotes from multiple life insurance companies. These quotes allow visitors to compare their policy options across companies. However, these companies just show quotes and connect their visitors to companies.

Others, like Bestow, Haven Life and Ladder, only show quotes for the policies they offer. These companies help their clients through the application process, which is another benefit of working with them.

Others, like Quotacy, show quotes from multiple life insurers and help their clients through the application and underwriting process. Quotacy agents even assist their clients in making updates to their policy after they purchase a policy.

Second, it’s important to know what kinds of policies the website shows. Many online tools focus solely on term life insurance. While this is a shared characteristic across many quote websites, each one has its unique features.

For example, Ladder stands out because its policies allow policyholders to adjust coverage during the term as their needs change.

In contrast, other quote websites show quotes for different kinds of permanent life insurance. This is true of many sites that only offer quotes, like Geico and Progressive. Websites that offer more comprehensive services, like Quotacy and Policygenius, also offer quotes for permanent life insurance policies.

Finding affordable life insurance

Life insurance offers valuable financial protection for your family. It can pay off remaining debt, cover funeral expenses and even replace income.

While the protection offered is highly valuable, it’s important to find a plan that fits into your monthly budget. The first step is determining what your needs are and which kind of life policy best meets those needs. From there you can work with an independent life insurance agent and do your research into policies and premium rates offered by different life insurance companies.

Alice Stevens loves learning languages and traveling. She currently manages debt and tax relief, life and health insurance, and car warranty content for BestCompany.com.

#animation-wrapper max-width: 450px; margin: 0 auto; width: auto; height: 600px; font-family: ProximaNova-Regular, Arial, sans-serif; #animation-wrapper .box background: linear-gradient(#0095D8, #1D4BB6); color: #fff; text-align: center; font-family: ProximaNova-Regular, Arial, sans-serif; height: 130px; padding-top: 10px; .content .box p margin: 0 0; .box .btn-primary color: #fff; background-color: #ff7f00; margin: 10px 0; .chat ul margin: 0; padding: 0; list-style: none; .message-left .message-time display: block; font-size: 12px; text-align: left; padding-left: 30px; padding-top: 4px; color: #ccc; font-family: Courier; .message-right .message-time display: block; font-size: 12px; text-align: right; padding-right: 20px; padding-top: 4px; color: #ccc; font-family: Courier; .message-left text-align: left; margin-bottom: 7px; .message-left .message-text max-width: 80%; display: inline-block; background: #0095D8; padding: 13px; font-size: 14px; color: #fff; border-radius: 30px; font-weight: 100; line-height: 1.5em; .message-right text-align: right; margin-bottom: 7px; .message-right .message-text line-height: 1.5em; display: inline-block; background: #1D4BB6; padding: 13px; font-size: 14px; color: #fff; border-radius: 30px; line-height: 1.5em; font-weight: 100; text-align: left; .chat background: #fff; margin: 0; border-radius: 0; .chat-container height: 450px; padding: 5px 15px; overflow: hidden; .spinme-right display: inline-block; padding: 15px 20px; font-size: 14px; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2; .spinme-left display: inline-block; padding: 15px 20px; font-size: 14px; color: #ccc; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2; .spinner margin: 0; width: 30px; text-align: center; .spinner>div width: 10px; height: 10px; border-radius: 100%; display: inline-block; -webkit-animation: sk-bouncedelay 1.4s infinite ease-in-out both; animation: sk-bouncedelay 1.4s infinite ease-in-out both; background: #000; .spinner .bounce1 -webkit-animation-delay: -.32s; animation-delay: -.32s; .spinner .bounce2 -webkit-animation-delay: -.16s; animation-delay: -.16s; @-webkit-keyframes sk-bouncedelay 0%, 100%, 80% -webkit-transform: scale(0); 40% -webkit-transform: scale(1); @keyframes sk-bouncedelay 0%, 100%, 80% -webkit-transform: scale(0); transform: scale(0); 40% -webkit-transform: scale(1); transform: scale(1); .ad-container padding: 15px 30px; background-color: #fff; max-width: 690px; box-shadow: 1px 1px 4px #888; margin: 20px auto; .ad padding: 10px 6px; max-width: 630px; .ad-title font-size: 20px; color: #07b; line-height: 22px; margin-bottom: 6px; letter-spacing: -.32px; .ad-link line-height: 18px; padding-left: 26px; position: relative; .ad-link::before content: ‘Ad’; color: #006621; font-size: 10px; width: 21px; line-height: 12px; padding: 2px 0; text-align: center; border: 1px solid #006621; border-radius: 4px; box-sizing: border-box; display: inline-block; position: absolute; left: 0; .ad-link a color: #006621; text-decoration: none; font-size: 14px; line-height: 14px; .ad-copy color: #000; font-size: 14px; line-height: 18px; letter-spacing: -.34px; margin-top: 6px; display: inline-block; .ad .breaker font-size: 0; .box .box-desc font-family: ProximaNova-Bold, Arial, sans-serif; font-size: 17px; font-weight: 600; width: 225px; margin: 0 auto; .btn display: inline-block; margin-bottom: 0; font-weight: 400; text-align: center; vertical-align: middle; touch-action: manipulation; cursor: pointer; background-image: none; border: 1px solid transparent; white-space: nowrap; padding: 6px 12px; font-size: 14px; line-height: 1.428571429; border-radius: 4px; -webkit-user-select: none; -moz-user-select: none; -ms-user-select: none; user-select: none; font-family: ProximaNova-Semibold, Arial, sans-serif; text-decoration: none; .btn-group-lg>.btn, .btn-lg padding: 10px 16px; font-size: 18px; line-height: 1.3333333; border-radius: 6px; #ad-4 font-family: Arial, sans-serif; background-color: #fff; #ad-4 .ad-title color: #2130ab; #animation-wrapper .cta-ec background: #79af3e; color: #fff; width: 155px; height: 41px; font-family: ProximaNova-Semibold, Arial, sans-serif; font-size: 14px; margin: 10px auto 4px auto; #animation-wrapper .ec-logo display: block; margin: 0 auto; width: 140px; @media (max-width:500px) .ad padding: 20px 18px; max-width: 630px;

Get everything you need to master your credit today.

Get started

Source: credit.com

January 24, 2021

Final Expense Life Insurance: What You Need to Know

Life Insurance

Also known as burial or funeral insurance, final expense life insurance is a variant of whole life insurance designed to cover a single expense after the policyholder passes away. Often aimed at seniors, these insurance policies have reasonable monthly premiums but generally pay much smaller death benefits than term life insurance policies.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

What is Final Expense Life Insurance?

Final expense life insurance is a whole life insurance policy that releases a lump sum when the policyholder dies. It charges a fixed monthly premium and generally offers a simplified sign up process, with few complications, fast decisions, and no medical exams.

Policyholders use final expense life insurance to protect their loved ones after their death. It’s often taken in lieu of a traditional whole life policy or term like policy, with the former not available to seniors and the latter proving very costly and limited.

Policyholders can add a beneficiary to their final expense life insurance policy to ensure that the money goes to this individual when they die. They can also arrange for the money to be paid in monthly or yearly installments, although considering the purpose of this policy is to cover “final” expenses that may arise or remain after death, it’s often best to release it as a lump sum.

Who Can Benefit from Final Expense Life Insurance?

You can benefit from a final expense life insurance if you:

Have dependents
Don’t have a whole life or term-life policy
Have sizeable debts
Are worried about funeral costs

Think about what will happen when you die. It’s a morbid thought to have, but it’s important to see things from your family’s perspective.

Can they afford to provide you with an honorable send-off; can they afford to clear your debts? Will your death impact them financially or will you leave them with enough cash and assets to cover necessary expenses?

Your loved ones need time to grieve, to mourn your loss. They shouldn’t have to worry about financial issues, as that will just make a bad situation worse.

What is Final Expense Life Insurance Used For?

You can use final expense life insurance to cover any costs that your loved ones would otherwise be required to pay. The most common uses for this type of life insurance include:

Funerals

The average funeral costs close to $10,000, and those costs are rising. It’s one of the five biggest expenses that the average American will incur during their lifetime, and unlike a wedding, car or home, it’s not something you can simply avoid by going without, nor is it something you can delay until you have more money.

If you die, your loved ones will need to cover these costs quickly and completely, and while you might want them to cut costs and avoid spending too much, they will want to ensure that you have the best possible send-off.

The only way to guarantee that you have a good funeral and they don’t bankrupt themselves is to cover the costs before you die.

Final expense life insurance can be paid directly to your loved ones or to the funeral home. In the case of the latter, you can plan your funeral yourself, choosing products and services based on the value of the death benefit that will eventually be paid to the home.

Of course, you can’t be sure that the funeral home will honor all of your requests or even still be operating by the time you pass, so unless you don’t have anyone who can arrange your funeral, we recommend paying the death benefit directly to your beneficiaries.

Medical Bills

You are predicted to spend over a quarter of a million dollars on healthcare during your lifetime, most of which will occur in the final decade of your life. That’s a huge sum of money to spend on anything, and it’s a terrifying prospect to think that this money could be passed onto your loved ones.

In most instances, your loved ones won’t be responsible for your debt, but there are exceptions. What’s more, all medical debt charged during the final months of your life will be at the head of the queue to take money from your estate when you die. If that debt strips your assets bare, it means your loved ones won’t get anything and may struggle to cover their own debts and expenses.

With final expense life insurance, you can use a death benefit to repay those medical bills and remove the burden of responsibility from your loved ones.

Debt

Unsecured debt is often at the back of the queue when it comes to taking money from your estate. However, if you live in a community property state or your partner cosigned on the debt, they will be responsible for it.

You also have to think about mortgage and auto debt. These loans can pass onto your heirs, who will then be tasked with continuing the repayments if they want to keep the assets. If they don’t have the money, they could lose those assets, and this is where a final expense life insurance benefit can help.

Frequently Asked Questions about Final Expense Life Insurance

Still got a few questions about final expense life insurance and its many nuances? We have answered some of the most frequently asked questions below to lend a helping hand.

How Much Does It Cost?

Final expense life insurance varies depending on your age, sex, weight, smoking status, and whether or not you have any preexisting medical conditions. Generally speaking, a woman between the age of 50 and 55 can expect to pay between $30 and $40, while a man of the same age will be charged between $40 and $50.

This cost increases as you age and while you can still apply when you hit 80, you can expect premiums as high as $200 a month, or $2,400 a year.

Why Does it Cost So Much?

The costs are higher than term-life insurance because the risks are greater. Unlike term-life insurance, the term will not expire, which means the odds of the recipient receiving the death benefit are higher.

Of course, there is still a chance that they will fail to meet their payment obligations, at which point the policy will void, but such instances are rare for this particular type of insurance.

Does it Expire?

Your final expense life insurance policy will remain active for as long as you make your insurance premiums. It will not expire like a term-life insurance policy, but you will lose it if you stop making payments while you are still alive.

Does the Money Have to be Used for Funeral Costs?

Not at all. The insurance company doesn’t care what the money is used for as it doesn’t impact their bottom line. There is also nothing preventing your loved ones from pocketing the cash and burning your body in the garden, if that’s what they choose to do.

We don’t mean to sound bleak, but the point is, there are no restrictions or limits and your loved ones are only bound by your word and their promise, so if you want the money to be used for a specific purpose, make sure you get everything in writing lest they forget.

How Much is the Death Benefit?

Final expense life insurance typically pays around $20,000 and is always less than $50,000. It’s a small sum when compared to many term-life insurance policies, but that’s because it serves a specific purpose and is not designed to clear mortgages or cover one or more family members for the rest of their life.

Is There a Medical Exam?

Because the payout is less than $50,000, a medical exam is rarely required. You will be asked some basic health questions and you need to be honest during this process, but in most cases, you will not be required to undergo a medical exam.

Source: pocketyourdollars.com

Steps for Budgeting for Insurance

1. Decide how much insurance you need

2. Get quotes from agents or online

3. Find out what the payment schedule is

4. Set aside enough money monthly

5. “Pay” the bill monthly

How to Budget for Different Types of Insurance

Car Insurance

Health Insurance

Life Insurance

Homeowner’s or Renter’s Insurance

The Bottom Line on How to Budget for Insurance

Live Off of It

Borrow Money

Exchange It for an Annuity

Convert to a New Policy to Pay for Long-Term Care

Use It as Collateral

Tap It to Pay for the Policy

Leave It Alone

1. Banking

Credit Cards

Bank Accounts

E-Statements and Auto-Pay

2. Taxes

3. Budget

4. Retirement

5. Legacy Planning

Wills

Power of Attorney

Life Insurance

Find the Right Life Insurance for You!

What Is Indexed Universal Life Insurance?

What Is a 401(k)?

IUL vs. 401(k): Which Is Better for Retirement Savings?

The Bottom Line

Tips for Investing

About Our Retirement Expert

The Insurance At Your Job is Probably Not Cutting It

You Want to Protect Loved Ones From a Financial Burden

30 Is Still Young Enough to Lock in Affordable Rates For Whole Life Insurance

Get Insured and Protected From Medical Issues

Summary

Life Insurance = Financial Protection for Your Family

Term Life Policies Are Flexible

The Pros and Cons of Term Life

Young Families Often Opt for Term Life

Whole Life Insurance Offers Lifetime Coverage

The Pros and Cons of Whole Life

Whole Life Is Great for Estate Planning

What to Do Before You Buy a Policy

Find the Right Life Insurance for You!

How Does Universal Life Insurance Work?

Whole life Policy vs Universal Life Policy vs Term Insurance Policy

Is Universal Life Insurance Right For You?

Bottom Line: A Safe Investment

Understand Policy Options

Work with an independent agent

Use quote websites wisely

Finding affordable life insurance

Find the Right Life Insurance for You!

Life Insurance = Financial
Protection for Your Family

Whole Life Insurance Offers
Lifetime Coverage

What to Do Before You Buy a
Policy