Posts Tagged: Life Insurance

People spend a lot of money on complicated financial products and it is sometimes difficult to keep track of what products perform what tasks. Many people are not aware of all the financial products that are available or they only know of them vaguely. They may not know how much they cost or the potential benefits they offer. How can consumers make informed decisions on what products they would be willing to buy if they do not have this basic information? This problem can often lead to consumers buying unsuitable of overpriced products simply because they feel they should have some financial protections available but dont have the details to make an informed choice.

One of the common questions many consumers have is regarding the difference between insurance policies and assurance policies. Put simply, insurance policies cover the costs of an event that might happen while assurance policies will pay out on the occurrence of an event that is certain to happen. Insurance policies only last for a specific period of time. If the event occurs within that time, they pay out, otherwise they are finished. Therefore, if no claim can be made within the term of the policy, they have no remaining value.

Guaranteed Payout

An assurance policy is different. Assurance policies always pay out. For example, a life assurance policy will generally pay out upon death or upon reaching the age of 65. How does this policy work? Well, they combine two elements; an insurance element, which will pay out if, the person dies early. This will then be used to pay for the funeral or support his family. But then there is another payment made every year and this is the investment portion. The insurance company invests this part of the premium on behalf of the policyholder and when they reach the age of 65, they pay this out. Life assurance policies are therefore often used both as a method of life insurance and as a method of saving for retirement.

Do You Need Money Now?

If you wish to cash in the investment portion of a life assurance policy early this is generally possible. However, there will usually be hefty penalties added to this so it is unadvisable to cash in early if you dont have to. The distinction between insurance and assurance is also becoming more blurred as more companies offer both types of policy or add features of one type of policy to their other type to make them more attractive. The distinction is still important so that you know what to ask for and know what kinds of facilities are available for insuring your life and providing for your future.

The average man in the street assumes that Life Insurance and Life Assurance are names for the same form of insurance. How wrong they are! But don’t hang your head in shame, many financial commentators get it wrong too! Life Insurance and Life Assurance perform different financial roles and are poles apart in cost – so it helps to surf for the correct product.

Life Insurance provides you with insurance cover for a specific period of time (known as the policys term). Then, if you were to die whilst the policy is in force, the insurance company pays out a tax-free sum. If you survive to the end of the term, the policy is finished and has no residual value whatsoever. It only has a value if there is a claim in that context its just like your car insurance!

Life Assurance is different. It is a hybrid mix of investment and insurance. A Life Assurance policy pays out a sum equal to the higher of either a guaranteed minimum underwritten by the policy’s insurance provisions or its investment valuation. The value of the investment element is then a reliant on the Insurance Companys investment performance and length of time you have been paying the premiums.

Each year the insurance company adds an annual bonus to the guaranteed value of your life assurance policy and there is normally an extra terminal bonus at the end. Therefore, as the years go by your life assurance policy increases in value as the investment bonuses accumulate. The value of these bonuses are then determined by the insurance companys investment performance. Once investment value has been assigned to the policy, you can cash it in with the insurance company. However, most people get a far better price for their life assurance policy by selling it to a specialist investment broker rather than cashing it in with the insurance company.

If you were to die during a Life Assurance policys term, the policy pays out the higher of either the guaranteed minimum sum or the accumulated value of the annual investment bonuses. However, if you are still living when the policy terminates, you usually get a bigger payout. This is because with most insurance companies, an additional terminal bonus is awarded.

There is a also a specialised form of life assurance called “Whole of Life”. These policies remain in force for as long as you live and as such, have no preset term.

There is also a practical difference for the internet user. Whereas you can buy life insurance online, the Financial Services Authority view life assurance as fundamentally an investment product. As such they believe it is best suited to being sold by a Financial Adviser with advice based on the Advisors full understanding of your personal details. Therefore, you will be unable to buy life assurance online. However, you can use the internet to find a suitable financial adviser with whom you can meet and discuss your requirements.

What are Life Insurance polices and Life Assurance policies used for?

Life Insurance is usually a focal point of the family’s financial protection. It is ideally suited to ensure that known debts such as a mortgage, are repaid in full in the event of the policyholders death.

When it comes to providing a lump sum for general use in the event that the policyholder were to die whilst the policy was in force, either life insurance or life assurance can be used. The differences are that with life insurance the size of payout would be preset whereas with life assurance it would depend on the guaranteed minimum and the insurance company’s investment performance. But remember, at the end of the policy’s term life insurance is worthless, whereas life assurance should payout a sizeable investment sum. In this context Life Assurance seems far more worthwhile but in practice more people elect for life insurance. Why? It’s a matter of cost. Life Insurance is considerably cheaper than Life Assurance. Furthermore, in recent years, investment returns on Life Assurance policies have fallen significantly and many insurance companies have placed penalties for cashing in policies early. This has adversely affected the resale value of Life Assurance policies.

Finally, if you want a product to provide a lump sum on your death whenever that is with a minimum payout guaranteed, you’ll probably elect for Whole of Life insurance. It’s really a form of lifetime investment with the benefit of a guaranteed minimum. They’re particularly useful for Inheritance Tax Planning.

Have you filled in a life assurance application recently? Theres a little box that strikes fear into the heart of the slightly overweight. It simply asks you to state your weight. Do you go straight to the scales, undress to the state of nudity and jiggle about on the said scales, trying to pinpoint the lowest mark on the gauge? No, I thought not, you probably take a vague and over optimistic guess, write it in and swiftly move on to the next question. Most of us do it. Its not really cheating. You know youre going to lose it soon, before Christmasholidaysthe wedding. If only!

Now, one of Britains biggest names in life insurance, namely Scottish Provident, in an effort gain more accuracy in working out the risk factors, has added another innocent little question, i.e. When did you last weigh yourself? Aware of the fact that many people are self conscious about their weight and tend forget the odd few pounds gained since they were last on their diet to end all diets, they feel that this should help to give a true picture of their clients potential health risks. It should also be noted that there are some people who will lie in an effort to obtain cheaper premiums.

Scottish Provident are quite rightly concerned that they are being told the truth. The UK government are taking obesity very seriously and it has been announced recently that almost a quarter of us are overweight, and its thought by Cancer research UK that around a quarter of these are not interested in losing weight. We are second only to Greece in obesity levels as a nation.

The definition of obesity is based on the British Medical Associations Body Mass Index (BMI). To work this out, you need to know your height in metres and then multiply by the same figure. Take the result of this and divide by your weight, using kilograms. This gives you your BMI, which can be used to indicate if you are underweight, normal, overweight or obese. It will, however, overestimate fatness in people who are muscular or athletic. These figures are for adults.

BMI categories are

Underweight = less than 18.5
Normal weight = 18.5 to 24.9
Overweight = 25 to 29.9
Obesity = BMI of 30 or greater

In a recent study of 33,000 adults reported in the Lancet, the above figures for normal weight were agreed and there was a suggestion was that only adult patients with a BMI of 35 or above would present a serious lowering of life expectancy.

Most of the life insurance industry has accepted a BMI level of 30, which seems fair and even generous. For anyone with a BMI of over 30 your premium will be loaded and you may even be asked to take a medical examination. This means if youre overweight you could find your critical illness or life assurance premium could increase by 50% and it seems likely that for some, cover could be refused.

Its a risky business!

Though Life Insurance is neither an investment plan nor a savings scheme, it still plays a significant role in the financial portfolio of most individuals. The main purpose of Life Insurance is to protect the dependents of a person from financial loss in the event of his death.

Financial obligations arise out of many situations in life like when getting married or divorced, having a baby, buying a house, sending your child to college, starting a business, taking care of a parent who is aged or sick or on retirement. If a person is shouldering these responsibilities he must ensure that these obligations continue to be fulfilled even after his death. If he has a family who depends upon his earning capacity, he is a perfect candidate for life insurance. A person should consider the long term as well as the short-term financial obligations to decide whether he needs life insurance. The questions to ask are:

1.Do you have people including family and business partners who are financially dependent upon you over a long period of time?

2.In the event of your death, do your dependents have enough assets and resources including liquid cash to take care of all their needs and to pay off your financial debts?

The second question requires a further assessment of the short-term financial needs of the family of the deceased. These include working out the following factors:

Inheritance procedures can be time consuming and the family will need funds till they get access to the property of the deceased.
The availability of other liquid assets like bank accounts or stocks can reduce dependency on life insurance.

The existence of a large amount of non-liquid assets as against liquid assets makes it necessary to have insurance.
The amount of debts and taxes the person stands to owe after his death.

Businessmen must ensure there is enough cash flow in the business for his inheritors to maintain his business.

Considering the above questions, one would find most people do need life insurance, though one can do without it if one has no dependents or young kids to support. Still, other obligations like a home mortgage or a sole proprietary business or planning for a comfortable retirement for yourself or your spouse are some of the reasons why a life insurance is still a good financial program to pick up.

Life Insurance Medical history increases the cost for 66% of applicants

Lucky applicants for life insurance can be insured within 48 hours and at the premium quoted – but 2 in 3 applicants are faced with delays plus the prospect of having their premium loaded.

So who are the lucky ones? Basically, you’ll have to be as fit as a flea with no family history of serious illness, under 45, in an office type job and probably applying for less than 250,000 cover. For everyone else there is going to be some hassle.

When an insurer provides an initial quote for life insurance, all they know is your age, sex and smoking status. They use these details to make an initial prediction of how long you are likely to live and on that basis they give you an initial quotation. They call it their Standard Terms.

If you want to progress your application you’ll have a multi-page application to complete. This isn’t as daunting as it may seem, as most online operators take your details over the phone and send you a copy of the completed application for you to check over. But the questions are extensive and if you miss out anything that later turns out to be significant, your insurance may well be invalidated. So be warned and take care!

The insurers use your application details to look out for anything that signals current or future concerns about your health or life style. Besides the obvious questions that reveal health problems, they also evaluate your weight, alcohol and nicotine intake, and any potentially inherited health problems. So if your father died of a heart attack or mother died from breast cancer, they’ll be concerned.

Then there’s your life style. If you’re in a type of job where accidents do happen, construction jobs are a good example, or you are involved in any form of dangerous sport or flying, your premium is in line for loading. They’ll even want to know whether you regularly travel to countries that are known to represent health risks for visitors. And whilst the law doesn’t allow discrimination against same sex relationships, the insurance companies will almost always insist on a medical for these applicants.

Insurers freely admit that the number of questions they ask is increasing. They claim it’s to reduce the number of claims they refuse. Whilst that may be partly true, the trend has also coincided with an increase in the proportion of applicants who are seeing their premiums loaded. Some years ago it was nearer 40% – today’s for some insurers the level is virtually 66%.

How much extra might you be asked to pay? That’s a bit like how long is a piece of string. But to give you a feel, a woman aged 40 receiving medical treatment for post-natal depression was recently faced with a 50% loading on an initial quotation of 7.60. A woman whose mother had breast cancer similarly faced a 50 % loading. Seriously overweight people can also expect loadings of 50% to 100% or even refusal.

Faced with a loading what can you do? It’s important to appreciate that the insurance companies giving the cheapest initial quote are also likely to have particularly choosey medical criteria. That’s how they keep their quoted prices low. So if you’re faced with a loading, the best advice is shop around, Try one of the more expensive providers like Friends Provident who are sometimes a bit more lenient.

Whilst this may sound overly complicated, remember that over the years, an extra 10 a month on a 25 year policy represents 3,000 of your hard earned money. If you don’t have the experience or time to do this, and after few of us do, speak to an online life insurance broker.

Competition is high on the Internet and online brokers will normally reduce your premium by cutting their commission. Their systems are also well versed in finding alternative providers to alleviate loading problems. So keep things simple. Let your keyboard fingers do the walking and let the online broker do all the hard work!

Life and health insurance have long been recognized as necessary and essential elements in an individual’s or a family financial program. In a modern society, a sense of family responsibility meant that life and health insurance would grow in importance.

And still today life and health insurance continue to occupy an important role in the financial planning process.
This article has the purpose to provide an introduction to this process and highlights the means by which life and health insurance can assist in accomplishing one’s financial plans.

A personal financial planning can be considered the process where an individual or a family decided to develop and implement an integrated plan to accomplish their objectives. The essential elements of this financial planning concept are the identification of financial goals and the development of an integrated plan to accomplish the objectives.

As all of us know humans are exposed to many serious perils, such as property losses from fire and windstorm, and personal losses from disability and death. Although individuals can not predict or prevent completely the occurrence of these dangerous events, they can provide against thier financial effects. The function of insurance is to safeguard against such misfortunes by having the losses of the unfortunate few paid by the contributions of the many who are exposed to the same peril.

The essence of of insurance is the sharing of losses and, in the process, the substitution of a certain small loss ( that is to say the premium payment ) for an uncertain, large loss.

In the peril under consideration is that of the death, the financial loss suffered can be reduced through life insurance. If the peril is instead disability, the financial loss can be compensated by the health insurance.

Insurance may be defined from two perspectives: that of the society and that of the individual. From the society’s point of view, life or health insurance may be defined as a social device where individuals transfer the financial risks associated with loss of life or health to the group of individuals, and which involves the accumulation of funds: and this concept means that the insurance exists when there is a transfer of the risk from the individual to the group.

From the individual’s point of view, life or health insurance may be defined as an agreement where one party pays a stipulated consideration ( the premium ) to the other party ( the insurer ), in return for which the insurer agrees to pay a defined amount of money if the person whose life is insured dies or suffers an illness to a stated time.

It might be hard to know how much one should pay for life insurance. But it is something that you need, because you never know when you will die. The sooner you get life insurance the better it is for you and your family. Save them the pain of leaving them with nothing.

Expensive life insurance can be a deterrent to some people as some people might not be able to afford it. But not having life insurance can result into a bigger hassle down the road, as funerals can cost a lot of money. Leaving your spouse with nothing is also something to consider about. They can suffer more then just a loss of a loved one. Bear then in mind before you make the decision not to get life insurance.

When you calculate the amount of life insurance you need you should think about immediate and short terms need as well as long term needs. What would fall into the current term need would be funeral costs. So would mortgage payments and child care. And example of future expenses would have to be college. If you look online there are places that can help you calculate exactly how much life insurance you need. So dont worry if youre really sure what to do or how to go about calculating it.

If money is one of the reasons you hesitate about life insurance, dont worry you can get many quotes so you can get the best deal out there. And these quotes do not cost you anything. You can shop around as much as you want to see which life insurance is right for you and fits your budget. Go out there and do something that will not only benefit you, but your family. Dont leave them with any burdens.

Do you know what life insurance is and how it work? If not, then read on to learn more about it. This insurance is the kind that the insured transfers a risk to the insurer; they will then get a policy and pay a premium. The risk that is assumed is the risk of death, but of course it could be something else.

For the most part there are 3 groups of people involved in a life insurance transaction, the insurer, the insured or the owner of the policy and the beneficiary. The contract of the life insurance is a legal contract that specifies the risk assumed. It can be nullified for different reason. For example, if the insured commits suicide within a specified time for the policy date. You should read the fine prints and ask what other reasons it can be nullified there wont be any surprises for you and your family.

The main reason most people buy life insurance would have to be to protect their financial interests in chase of death. Charges of life insurance depends on many things for instance age, diseases etc. So there is a wide rang of prices on life insurance that you could pay. Basically, the more of a liability you are the more you will pay.

But if the insured death seemed to be suspicious and the policy amounts warrants it, the insurer can investigate if they want whether there is any evidence of its legal obligation to pay the claim. The proceeds from the policy can either be paid in lump sum or over time as regular payments for their life or a specified time.

Hopefully this article has cleared up a few things about life insurance for you. So you can decide whether life insurance is in fact right for you and your family.