Life Insurance is More Than Just a Death Benefit

Now is a great time to take a new look at life insurance as part of a holistic financial plan, according to experts inside and outside of the financial planning world.

“The recession has been a wake-up call for many Americans, exposing weaknesses in people’s long-term financial plans,” says Northwestern Mutual Vice President, David Simbro. “With life expectancy at an all time high, the average American should be financially prepared to live well beyond traditional retirement age. And the recent hike in unemployment levels has likely left many without their group life insurance. The good news is that, in addition to providing a death benefit, individual life insurance is a flexible asset that can plug existing holes in many financial security plans. This flexibility makes it an attractive tool in both good times and bad.”

Although life insurance is most often purchased to provide a death benefit, many consumers don’t realize that the cash value of a permanent life insurance policy grows tax-deferred over time and is guaranteed to increase in value each year, never going down.

Is Permanent Life Insurance Right for You? >>>

Art, Wine, Furniture: Insured Investments You Can Live With!

According  to the Wine Spectator Auction Index, investment grade wine sold at auction has outperformed the S&P 500 since 1996. Quality drawings and paintings are a better deal today than they’ve been in several years since a major Fine Art Index  dipped 32.5% for the first three quarters of 2009.  A set of eight mahogany chairs from 1810 recently sold for $10,635 at Christies.

Each of these tangible investments shares more than investment-grade appreciation in common. The valuables  all must be insured to protect their worth against theft, loss, or damage.

TrustandEstates.com’s Wealth Watch writes: “While neither art nor insurance may be at the top of your to-do list, it’s wise to make sure that you have insured that Babe Ruth autographed baseball, wine collection or Georgia O’Keefe paintings of awe-inspiring value.”

Check that any valuable collectibles are fully covered for crimes, fire, flood, breakage and natural catastrophes, including hurricanes, earthquakes, tornados and wind damage. You also want to make certain they’re covered if they happen to travel anywhere. That way if anything happens to these precious items, you’re a hero.

When there are just a few antiques and other collectibles worth a measly few thousand dollars, they can be covered simply via a rider on a homeowner’s insurance policy. A Civil War memorabilia collection worth $5,000, for example, may cost as little as $21 per year, according to State Farm Insurance Companies.

But a homeowner’s policy may not be appropriate to insure millions of dollars worth of fine art and collectibles. “Specialized insurance may be best. A homeowner’s policy has exclusions and deductibles, warns Janece White, assistant vice president of Chubb Group of Insurance Companies in Warren, N.J. When you have separate coverage, those issues aren’t a concern. Look to Efinancial for  free insurance quotes for everything you’re protecting against loss, including you!

Where Do Life Insurance Firms Stand on Using Genomic Information for Coverage Decisions?

Life insurance providers in the US may not be using genetic information to make underwriting decisions right now, but the lobbying efforts of a Maryland-based interest group to limit legal restrictions in this area suggest that the industry’s unofficial moratorium on the use of genetic information may eventually come to an end.  So reports the latest edition of Genomeweb.com’s Pharmacogenomics Reporter.

The passage of the Genetics Information Non-discrimination Act in 2008 appeared to have quelled fears of genetic discrimination in the US — at least regarding health insurance and the workplace. However, life insurance companies are exempt from GINA and most states do not restrict the use of genetic information in life insurance underwriting.

A Maryland-based interest group for life insurers is lobbying the state legislature not to pass laws restricting the use of genetic information — an effort that underscores the prevailing view of payors that genetic data is no different than other clinical factors in making underwriting decisions.

“We use these genetic test results in underwriting exactly as we use all medical information: with care and based on sound scientific basis or clinical or actuarial relevance,” the League of Life and Health Insurers of Maryland said in a statement to the Maryland Insurance Administration’s Genetic Testing Workgroup last September. “We know of no problem of misuse of genetic information or tests in the underwriting of life, disability income, or longterm-care insurance.”

Where do you stand on the issue of using genetic information for insurance underwriting purposes?

When Calculating Life Insurance Need, Answer this Question. Are You Replacing One Income or Two?

When calculating the need for life insurance, the conventional, “inside the box” thinking typically takes into account the need to replace just one income…the income that is lost by the primary income earner who is no longer there to make a financial contribution. But like so many things in life, the most simplistic, top-of-the-head way of thinking about a problem is not always the most useful.

Tragically, when the life of one parent in a young family is lost, a paycheck is only one part of what disappears into the enormous void that is suddenly created. The working partnership that existed between two parents role-playing is forever changed. The multifaceted roles that were performed by both spouses in running a family can hardly be filled by a single parent alone.

In so many cases today, the reality of the situation is that both spouse’s income earning potential is affected when one is lost. As a practical matter, when both parents work, many families will need to take into account two incomes when calculating life insurance need.

Should your life insurance coverage account for just one income? >>>

Suze Orman’s Top Priorities for Financial Planning in 2010

With “Nine Small Financial Steps That Will Pay Off Big in the Future,” financial advisor and  consumer advocate Suze Orman offers readers some valuable advice for 2010.

In a recent article, Orman puts (1) savings, (2) retirement and (3) life insurance among the top priorities for personal financial planning. Orman’s recommendations for savings include admonitions to “save a bit at a time” and exercise more personal financial self discipline. In planning for the future, Orman encourages 401(k) participants to “max out their company match” and to invest in a Roth IRA. She rounds out her 2010 recommendations with a call to create the “most loving documents in existence” — a living trust, a durable power of attorney and a will. She concludes with a recommendation to guarantee “peace of mind” by purchasing a life insurance policy.

Experts note that more one-third of all adults carry no life insurance and the majority of those adults who do carry life insurance rely on more limited group life polices obtained through an employer.

Suze Orman notes, “If a child, a spouse, a life partner, or a parent depends on you and your income, you need life insurance. Keep it simple and buy term life insurance; it’s good only for a specific number of years and then expires. That’s okay — life insurance wasn’t meant to be permanent; it’s there to protect your family before you’ve had a chance to accumulate enough funds (through investments and savings) to do so.”

She adds, “Most people should get a 20-year level term policy that has a value equal to 25 times the amount of annual income your family needs to live securely.”

To ensure that you are getting the best value when purchasing a life insurance policy, experts say to conduct research and compare life insurance quotes and prices online for different policies. Life insurance costs can vary widely depending on variables such as age, health, and whether or not a person smokes. There are a number online sources that a consumer can consult when considering life insurance: The American Council of Life Insurance (www.acli.com) has a range of information and brochures, and Efinancial.com offers a fast, secure and effective way to compare insurance rates at America’s top companies.

When is Insurance Tax Deductible?

Insurance may not be the first place you look for a significant deduction on your federal income tax return this tax season, but it definitely shouldn’ t be your last.

The most common deduction for medical insurance often goes unnoticed by a large segment of the workforce.  The premiums your employer pays under a group health insurance plan with pre-tax money are never included in your W-2 wages, and so are never taxed.  That’s a deduction you may never have realized you were getting,

Insuring Against Divorce. A Whopper of an Idea!

A bride and groom can safeguard their wedding day with insurance for the reception, the caterer, the flowers, the limousine and the honeymoon. Now, a University of Illinois professor is suggesting that the same couple insure their marriage against breaking up.  The innovative new idea? Divorce insurance!

To create such an insurance product, underwriters think like statisticians identifying several “risk factors” associated with divorce that could figure out who would qualify and how much the insurance would cost. These include age, work location and education level, among other factors.

Insuring against Divorce? Will it work?! >>>

Stroke of Midnight 2010. A Matter of Life and Death?

It’s a human tragedy when a terminally ill patient’s life or death struggle comes down to how much they will pay in estate taxes. But that is the unintended consequence of  what could happen  at the stroke of midnight on January 1, 2010 when changes in federal tax law dictate  that the estate tax will disappear for one year.

One wealthy, terminally ill real-estate entrepreneur told his doctors he is determined to live until the estate tax law changes. “‘Whenever he wakes up,’ says his lawyer, ‘He says: “What day is it? Is it Jan. 1, [2010] yet?’”

Starting Jan. 1, the estate tax — which can absorb up to half of a wealthy person’s estate — goes on hiatus for a year (UNLESS reinstated by Congress before the year is up, which can make it retroactive back to January 1!). For families facing end-of-life decisions in the immediate future, the change is making one of life’s most trying episodes considerably more taxing, emotionally and in every other way.

Read how it happened and what you can do about it? >>>

Study Finds Investment Behavior is in the Genes

Claremont McKenna College and University of Washington collaboration says whether you’re a cautious investor or a high roller, heredity’s at play

Investor behavior is largely determined by nature rather than nurture according to a new study by finance professors at Claremont McKenna College and the University of Washington. By studying twins and their financial behavior, researchers found that genetics account for one-third, on average, and as much as 45 percent of investor behavior. Other factors previously studied, such as age, gender, education, wealth and home ownership, when combined explain only five to 10 percent of investor behavior.

The study, “Nature or Nurture: What Determines Investor Behavior?” cross-referenced nearly 38,000 twins in the Swedish Twin Registry, the world’s largest, with comprehensive personal financial data–stocks, bonds, real estate, cash–collected by the Swedish government. This data allowed a comprehensive method to measure genetic versus environmental impact on investing and personal finance.

Read more about "Nature vs. Nurture" In Investment Strategy >>>

How Much Money is a Life Worth?

Is it possible to put a value or a price on human life?  Strange as it may sound, that is exactly what underwriters and insurance companies attempt to do when they are qualifying an applicant for a life insurance policy.

One of the first considerations an insurance company will make when evaluating a new customer is whether the amount of insurance being applied for is consistent with the net worth of the individual. These underwriters need to do what can sound a bit inhuman, but the calculation of “human life value” is used by life insurance companies to determine the maximum amount of insurance that they can offer you.

Learn the Formula Underwriters Use to Value Human Life >>>

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