Life Cycle Financial Planners, LLC

Tag: term life insurance

  • Why Do High Net Worth People Own Permanent Life Insurance?

    Why Do High Net Worth People Own Permanent Life Insurance?

    High net worth people tend to appreciate value and typically want life insurance protection for life.

    Permanent life insurance (sometimes referred to as whole life insurance) offers much better value for life insurance buyers than any type of term life insurance. The net cost of permanent life insurance is undeniably better.

    Net cost is the total premiums paid minus the total cash value. For example, if $80,000 of total premium is paid into a permanent policy over 10 years and the cash value of the policy is $80,000, there is a net cost of $0. That is not an error. It is how permanent insurance is designed. Comparatively, if $40,000 of total premiums were paid into a term policy over the same period, the net cost would be $40,000. The cost of term insurance increases as we get closer to life expectancy while a whole life premiums are level or may have been paid up in the early years.

    The longer you own a permanent life insurance policy, the better the net cost will be. A lower net cost number is better. Conversely, the longer you own term insurance, the higher the net cost will be.

    There are two types of life insurance that all policies fall into – permanent insurance and term life insurance. Most jumbo life insurance policies are permanent policies.

    What are the differences between term insurance and permanent life insurance?

    Permanent life insurance provides lifetime coverage, meaning that it can be designed to provide lifetime coverage or coverage to a target age. The target age is selected by the policy owner, not the insurance company. Not everyone needs or wants coverage for life.

    Some permanent life insurance policies build up equity or cash in the policy and some do not. Because term insurance has lower premiums in the early years, people mistakenly believe that term insurance is “better” coverage. Not only does permanent insurance have much lower net cost over time, it has much greater flexibility and it is more easily customizable.

    Permanent life insurance is the best value for lifetime coverage.

    Term insurance is temporary insurance – it expires at the end of a guaranteed period. Permanent insurance will stay inforce as long as the policyowner wants to keep it. Permanent insurance puts the policyowner in control of when coverage ends, not the insurance company.

    What Nobody Tells You About Term Life Insurance.

    “Over the past 25 years, people were sold a complicated marketing gimmick called “buy term and invest the rest”. Individual policyholders were told they could invest better than insurance companies, encouraging them to invest the annual difference between a term premium and the higher premium for a permanent policy. The difference would go into a side investment fund to be invested with hope it would be used to pay for the much higher term premiums later in life.

    Buy term and invest the difference has proved to be a costly mistake for millions.

    Although this sounded reasonable to unsuspecting life insurance consumers, “buy term and invest the rest” proved to be nothing more than slick marketing. It has been primarily promoted through multi-level marketing groups and entry level insurance agents. The projections are often run using unrealistic interest rates to grow the side fund. Someone who bought a 20 year term policy in 2005 may have seen projections using 7% while the actual interest rate over that period was half that amount, or less. The proponents often use average S&P returns to justify using high growth assumptions within the side fund. That is not a fair assumption either because the side fund cannot afford losses, forcing the side fund to invest conservatively.

    Insurance companies invest and manage billions of dollars compared to individuals who usually invest much smaller amounts. Insurance companies employ the best and brightest in their investment departments and insurance companies are able to monitor assets on a 24/7 basis, while policyholders cannot. There are no taxes paid while the insurance company is managing the assets. Person after person will tell you they never invested the annual difference. They bought inexpensive term insurance but never built up a side fund. The few who did invest, did not invest with discipline. If they skipped years or withdrew funds from the side fund account, the whole thing was derailed. The result is a messy trail of people with expiring term policies or compromised health. In worse case situations, some have no side fund and they cannot get new coverage because of health issues.

    Most people do not convert their term policy for good reasons.

    More and more people buy permanent life insurance when it is properly presented to them. “But what about Dave Ramsey and Suze Orman who don’t like permanent life insurance?” They are not insurance professionals and they do not offer advice to individuals because that would require them to be in compliance, carry the proper licences and put their reputations on the line. It is easy for pundits to make unsubstantiated claims. They sell ad space, books or subscriptions.

    Buying life insurance is often a process over a lifetime, not a one-time event. Term insurance can be the right decision for young families. The right time to consider buying permanent insurance is sooner than later. The following triggers lead people to consider permanent insurance:

    When moving from the “paycheck to paycheck” lifestyle, we become potential permanent life insurance buyers. Since ninety seven percent (97%) of all term policies do not pay a claim, then 97 percent of ALL term premium were wasted. High Net Worth (HNW) consumers and high income earners choose  permanent life insurance because it has better value:

    Replacing Your Income:  If your family  or business depends on you and your income to run smoothly, permanent life insurance is the right product for those who can handle the higher premiums.  

    Immediate Liquidity:  Very wealthy people own permanent life insurance. They want the guaranteed liquidity it provides at death. 

    Permanent Life Insurance Is The Best Tool For Mitigating Succession Planning Problems:

    • The value of assets fluctuates significantly and death is always the worst time to sell a business or other assets. 
    • Many people have children working in a family business. Life insurance is the great equalizer for those children who do not work in the business. Without liquidity in these cases, there is great risk to a smooth succession of a family business.
    • More and more grandparents own a life insurance policy for each of their grandchildren. The insurance policy is straightforward, inexpensive and a “feel good” asset knowing how it will impact the grandchildren. 
    • Premium Financing. Wealthy people have the ability to finance life insurance. When it makes sense, it is a very effective tool to create tax free wealth.

    Please contact us at 561-771-4647 or email me at TB@LifeCyclePlanners.com about a free review.

    Visit us at www.facebook.com/lifecycleplanners

    https://en.wikipedia.org/wiki/Whole_life_insurance l https://en.wikipedia.org/wiki/Life_insurance#Permanent_life_insurance

    best life insurance. what is term insurance?

  • Term Life Insurance Risks.

    If you currently own a term life insurance policy or if you are shopping for one, this information will help you get the best possible policy for your needs.

    Without knowing the future, it is impossible for any of us to “predict” when our need for life insurance coverage goes away, if that ever really happens.

    The most important step when buying ANY life insurance policy is thinking through the issue of duration. How long do you need and want the policy to last? Once you know whether that is for life or only for a number of years, the right type of policy begins to become more clear. Duration is the major factor in price and it determines which type of policy suits you best.

    People who buy term insurance in their 30’s or 40’s are told that 20 year term insurance is a great option because the premiums are low and because life insurance isn’t important in your 50’s and 60’s? It’s true, the premiums are low. They are low because the chance of dying is small in our 30’s and 40’s and 97% of all term policies lapse without paying a benefit.

    Buy Term and Invest the Rest – A Failed Theory.

    If you are worried that your current TERM LIFE INSURANCE policy will expire soon without good options for new coverage, perhaps you were sold a sales concept suggesting that you should buy term insurance and build up a side savings account outside the policy. Known as “buy term and invest the rest”, people were led to believe they could create their own permanent life insurance plan to beat insurance companies. Why give an insurance company your money to invest when you can do it yourself? It sounded reasonable to consumers and untrained insurance planners.

    Many people are told they wouldn’t need or want life insurance once they were near retirement or when their kids were independent. For millions of Americans, “buy term and invest the rest” has proven to be nothing more than questionable assumptions with serious consequences. Too many of the victims have been left without life insurance coverage for the future AND no hefty savings account. Now what they need is proper guidance and help to make sure they can get, and afford, a new policy to fit their current objectives.

    What went wrong:

    1. Buy term and invest the rest was marketed to sell term policies. People were advised to invest the annual difference between a term policy and a whole life policy in a side account.
    2. The side account was to be used 20 years later to pay the future premiums of a new and more expensive policy.
    3. For example, if a 20 year term premium was $2000 & the whole life premium was $8000, the difference of $6000 was to be invested each year by the insurance policy owner.
    4. The salespeople often projected the growth account at 7% or more.
    5. The side accounts have not grown anywhere close to 7%, after tax.
    6. A huge percentage of people never “invested any of the difference”.
    7. Savings accounts were used for other things, if there was any savings.
    8. The conversion deadlines passed in most term policies.
    9. Current health issues cause new policies to cost more than anticipated.
    10. In divorce settlements, any savings accounts were often divided.
    11. Second marriages extend the need for life insurance, well past 50.
    12. Coverage lapses occur well before life expectancy.
    What to do now:
    1. Check your existing policy’s conversion language, asap.
    2. Determine your insurability for new coverage.
    3. Seek counsel from an experienced life insurance professional.
    4. Compare policies with different durations of coverage.
    5. Buy a customized, flexible policy for today and tomorrow.

    CALL NOW FOR A COMPLIMENTARY CONSULTATION AT: 561-771-4647

    Life insurance is a lifetime need. Ask anyone over 50 if they feel differently about how long they need life insurance.

    As we get older, people worry about how their current health issues might affect the rates for a new policy. A few extra pounds, high blood pressure or high cholesterol are common issues that may increase the premium for a new policy, but not as much as you might think!

    More than 95% of all term policies are NOT INFORCE at life expectancy. It would be the equivalent of paying for auto insurance only until retirement age and hoping you don’t get into an accident.

    Mitigating Term Insurance Risks, Seven Tips.

    Term insurance can certainly be appropriate coverage for some young families. They may not yet have the financial resources to pay for permanent protection and buying term is better than being uninsured. Or, term insurance may be appropriate for bank loans, key-person business life insurance and and divorce agreements. However, buying a term life insurance policy if you have a permanent need is throwing away money.

    “Buy term and invest the difference” or “buy term and invest the rest” was a marketing gimmick that gained awareness through non-insurance professionals like Dave Ramsey, Suzy Orman and thousands of untrained insurance agents who promoted a sales gimmick instead of a counseling people about a critically important solution built on guaranteed outcomes.

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    Busting the myths about term insurance!

    As a result of not investing the difference, you end up in the worst possible position: without coverage AND without a savings account to pay future premiums.

    “Life insurance protection is a key risk mitigator in a family’s financial plan and it’s something people need for life,” says Deborah Bernstein. “We stress the importance of working with the right professionals who customize their unique circumstances.” Flexible policies can adapt to our natural life cycles with flexible premiums for unforeseen events like Pandemics or recessions. Lowering or skipping premium payments can prove to be very helpful during these times.

    Life insurance is intersectional in a family’s planning as it is part of the income protection plan, the succession plan and the financial plan. Done correctly, you can buy one policy for life.

    7 tips when buying life insurance:

    Don’t Assume Life Insurance Is Too Expensive.
    This is a common reason people don’t own enough coverage or the proper type of coverage.

    Don’t Count on Employer-Provided Coverage as Being Sufficient.
    Group term insurance through work is not adequate for most people. It is too expensive compared to individual coverage and it is never convertible to a competitive policy with all the current riders and options. Look at it this way: the premiums are the same for the unhealthy smokers as they are for healthy non smokers. Is that the rate you want to be paying?

    Use Experienced Agents Who Represent All Companies.
    The rates or prices between insurance companies can be quite different. Try not to limit your search for a life insurance policy to just one company. Let a professional do the comparison shopping for you. We work with all the relevant companies to find the best match for our clients.

    Disclose All Requested Information to the Insurance Company.
    During the underwriting process, it is important to answer all of the questions honestly. Insurers will verify the information you provide through the application. You are granting permission to obtain medical records from your doctors, check prescription drug history and motor vehicle history. Full disclosure is best.

    What is the difference between whole life and term insurance?

    Don’t Assume Health Issues Will Keep You From Getting Insurance.
    Don’t assume that you won’t get life insurance at affordable rates if you have common health issues. Each life insurance company has its own underwriting guidelines. For example, some may be more lenient about diabetes or cardiac conditions. Some give better prices to smokers.

    Buy The Right Amount of Coverage for the Right Duration.
    The more life insurance coverage you buy, the more you’ll pay. That doesn’t mean you should skimp on coverage, though, just to save money. The Insurance Barometer Study by Life Happens and LIMRA found that one in three respondents said they didn’t have enough life insurance coverage.

    Please contact us at 561-771-4647 or complete the contact form on this page to schedule a complementary discussion.

  • Term Life Insurance Comparison Tips

    Term Life Insurance Comparison Tips

    Use These Simple Tips To Compare Term Quotes Or To Compare An Existing Term Life Insurance Policy To A New Quote.

    Start by determining how many years of coverage remain in your CURRENT policy? For example, if you bought a 20 year term policy in 2015, it now only has 15 years remaining because it ends in 2035. In essence, you have a 15 year term policy. Next year, it will be a 14 year term policy. To get an apples to apples comparison, you need to compare the cost of a new 15 year term policy to your current premium payment.

    How long is your current policy convertible without new evidence?
    This is the most important provision in your existing policy and what you need to know about a new policy. Most people are unsure about the conversion deadline in their current policy. The conversion option matters. It allows the policyholder to switch from term insurance to permanent coverage, without new evidence of insurability. It is critical for anyone with health changes to be aware of this date.

    Make a list of any other features in your current term policy.
    For example, does your current term policy allow you to take a lump sum advance against the face amount of the policy, at no cost? Nobody should own a policy today without accelerated benefits. Another option is a return of premium. It pays you all your premiums back if you stay in the policy to the end. These are just some features that may not have been available when you last bought coverage.

    Base the new quote on a realistic assessment of your current health.
    Getting the best possible underwriting class results in big premium differences. The annual premium differences for Preferred vs Standard can be 20% or more.

    WITH THIS INFORMATION, YOU WILL BE ABLE TO EFFECTIVELY COMPARE THE DIFFERENT POLICIES AVAILABLE TO YOU! Share the information with the agent you trust to obtain these quotes for you. In no time, the numbers tell the story. Maybe you can reduce your cost or maybe you can spend the same and get a policy with more years and more benefits. You will be surprised at how much better new policies are today.

    Get A Quote! Please call us at 561-869-4500 or email Ted Bernstein, about a complimentary phone consultation.

  • Best Life Insurance Policy – All Done Online, No Medical Exam, No Blood. One Hour Approval.

    Best Life Insurance Policy – All Done Online, No Medical Exam, No Blood. One Hour Approval.

    Are the premiums higher if you buy life insurance without going through medical underwriting such as bloodwork or a medical examination? The answer is no. You can obtain the best life insurance policy online without a visit from a medical professional. That means the best rates and the best policies are available online. Accelerated underwriting does not mean expensive, guaranteed issue. The insurance company still underwrites each individual policy but in a completely new way. Some life insurance companies are leading the way by using information and data they believe is better.

    Although this may be counter-intuitive, you do not pay more. Buying life insurance online is not “buying direct” from the insurance company either. Life insurance companies do not sell policies direct to consumers. They sell only through licensed insurance agents, without exception. Some insurance companies tried going direct, without success. Life insurance is sold, not bought.

    Behind every online site selling life insurance, there is a licensed life insurance agent. For every sale, the insurance company pays a commission to the licensed agent named in your application. You may not realize a life insurance agent is writing the policy, but in fact, it is required by law. Some of these online agencies are hoping consumers believe there is an advantage in going “direct” and cutting out agents. It helps to know that online sites are no different than any other insurance agents or agencies.

    Why It Matters.

    Now that you know there is an agent getting paid a reasonable, non-negotiable commission, you want to always use the help and guidance built into the pricing of the policy. The insurance companies want educated consumers. Some life insurance buyers may incorrectly assume that buying online is “going direct”.

    State of the Art.

    In conclusion, you can now purchase the best life insurance policy online and get it done WITHOUT A MEDICAL EXAM, without lab tests (non blood or urine) or face-to-face visits, if that is what you prefer. The maximum is $5,000,000 per person and we have companies that write up to age 65 without medical evidence. The whole process can be done within an hour. 

    Contact us for a quote to apply and buy. Reach Ted Bernstein at 561-771-4647 or by email. We are close. People often search for “life insurance near me” or “life insurance agent near me” and we are one of the results. Online, we’re all close for business purposes. It truly is one of the great benefits of the Internet. Check out our 5 Star rating on Google or on our testimonial page.

  • Best Options Before a Term Policy Expires.

    Best Options Before a Term Policy Expires.

    The two most important considerations to focus on before a term policy expires are your current health and the policy’s conversion option. Every option you will face involves these considerations. Whether you keep, convert or sell the policy, current health and convertibility will be factors. The best time to deal with the end of a term policy is well before its end, allowing for enough time to consider a plan based on the options available in the contract. This way, you retain control over keeping the coverage or shopping for a new policy.

    Long duration, guaranteed term insurance is a relatively new product in the life insurance industry. It started getting popular about 25 years ago. Low premiums have enticed many insurance buyers to overlook some disadvantages. For example, let’s assume a 35 year old person bought a 20 year term policy, 20 years ago. Twenty years later, around age 55, the policy is expiring. What we find is that a very large percentage of people in this boat want to extend the coverage, but they cannot. There are many reasons for this which I cover extensively on this site.

    Before a policy expires, you want to be aware of the following:

    1. If the policy served its purpose, you can walk away, assuming there is no secondary market value. If you are over age 70 with some significant health issues, you might want to explore the secondary market to determine its value to a settlement investor.
    2. Another option is to convert your policy to a permanent one from the company that issued the original term coverage, after making sure the conversion privilege is still in effect and available to you. DO NOT ASSUME IT WILL BE. The conversion option is the single most misunderstood provision in term insurance. Most policies limit the time you can convert. Once it passes, you are out of luck and you will then need to prove evidence of insurability to the insurance company. They will want new and updated health information, new blood and other labs, at the very least. They will re-underwrite you again as if you’re a new policyholder. If, however, you are ABLE to convert WITHOUT evidence, you still may NOT want to exercise this option. It will depend on your health.
    3. Another possibility is to buy another term policy if you are insurable. If you are, shop the market with an insurance professional who can find you the most competitive policy at that time. No matter what you do, you are paying for the professional to assist you. If you buy a policy and use no help from anyone, the insurance company will pay the full commission to the designated agent assigned to your purchase. There is no way around this. Like the car business, you cannot call Ford and bypass the dealerships. My point is to take advantage of what you are paying for and find an agent you are comfortable working with.
    4. Or, you can buy a permanent policy. Beforehand, shop the market with an insurance professional who can maximize the value of your purchase, especially with a permanent policy. See point #3. Be selective and try to find a professional with experience, an impeccable reputation and solid referrals.
    5. Another option is to extend the coverage by paying the “renewal” premium offered by most policies. The rate will be much higher than the rate you’ve been paying. This option usually means the insured is in bad health and has no other options.

    The most important thing I can offer as a takeaway is to review the policy every couple of years and talk through these options to be mindful of when the conversion date expires. Planning around that date will prove to be beneficial in the long and short run.

    Give us a call at 561-869-4500 or email me at TB@LifeCyclePlanners to get started. I offer a complementary conversation about anything on your mind concerning your insurance coverage or succession plan.