Life Insurance and Loan Value, Cash Value and Surrender Value

You may be aware that there are generally two broad types of life insurance; term life insurance and permanent, or whole life insurance. You may even know that permanent or whole life insurance usually builds some equity over time. This equity may be tapped into to help get you through a difficult time or to take advantage of an opportunity.

You may not, however, be aware of the meaning of the different phrases describing this value. Here is a look at the differences between “cash value, “surrender value” and, “loan value” of a permanent life insurance policy.

Cash Value

The cash value of a life insurance policy is the cash or account value that the policy has accumulated over time. The longer the policy has been in force and the larger the premiums, the larger the cash value is likely to be.

Loan Value

One of the benefits of a permanent life insurance policy beyond that it builds value, is that the value can be accessed through a low interest loan. This allows funds to be accessed by the policy owner while still maintaining some of the protections of the life insurance policy. Money that is loaned through the policy can be repaid to restore the full value of the policy or the loan amount will be deducted in the event of the death of the insured.

Surrender Value

A policy’s surrender value is the net value of a permanent life insurance policy once any loans and/or fees are deducted. If the cash value of a policy, for example, is $5,000 and loans, interest and fees against the policy total $1,000, the surrender value would be $4,000. It is important to remember that if a policy is “surrendered” for its value, it is no longer in force. Any death or other benefits associated with the policy are negated. Surrendering a policy for its value, in essence, cancels the policy.

If premium payments on a permanent or whole life insurance policy stop, the policy may still provide coverage through its build up of cash value. This cash value will frequently be used to extend the coverage unless a policy is surrendered for cash or if its value is absorbed through unpaid loan interests and fees.

If you have a life insurance policy and would like to know if it has value, you can request a policy status from the issuing company. This will provide general details about the policy. If you have other questions, please feel free to contact our independent agents.

Foundations of Health Insurance

Foundations of Health Insurance

How are your health insurance premiums determined? Why does it seem everybody pays at least slightly different premiums for healthcare? Well, it is probably not news that healthcare in the United States is complex. In spite of those complexities, there are still some basic foundations that affect the price of your health insurance you should be aware of. To get a handle on the process, here are some factors that impact the price you pay.

Your Age

While car insurance may actually become less expensive as you age, health insurance will become more expensive. This is understandable as older consumers will generally experience more health issues than younger ones.

Your Location

Where you live will definitely affect the premiums you pay based on your state and how many health insurance companies are competing for your business. The fewer the companies to choose from, the more expensive your health insurance premiums will likely be.

Use of Tobacco

While the Affordable Care Act (ACA) limits the specific factors that can impact rates, tobacco use remains one of them . Tobacco users will likely be subject to a surcharge making health insurance slightly more expensive.

Type of Plan Chosen

It is fair to assume that the less out-of-pocket expenses you will have under your health insurance plan, the higher premiums you will pay. This includes your deductible, co-pays for office visits, prescription costs and policy limits. The ACA categorizes healthcare plans in four categories.

  • These are the least expensive plans and have the highest potential out-of-pocket expenses. Deductibles can start at $5,000 and may be sufficient for those who rarely see a doctor except for preventative care.
  • Silver. These plans are slightly more expensive than Bronze plans but will also have lower out-of-pocket expenses. These may be sufficient for those who have an occasional illness but who do not suffer from any chronic health issues.
  • Gold. Although premiums for Gold Plans can be high, coverage is much better with less likely out-of-pocket expenses. This is an excellent choice for those who frequently visit the doctor or experience chronic illnesses.
  • Platinum. These plans are the most expensive but have the lowest deductibles and out-of-pocket expenses. Under certain circumstances, medical costs may be completely covered by a Platinum Plan. This is a plan that is viable for those who frequently have health issues and chronic conditions.

Health insurance can be a confusing topic. It can also have a significant impact on your finances. If you have questions about your coverage or would like to know about options available to you, please contact us. Let our independent agents go to work for you.

When Term Life Insurance Makes the Most Sense

Life insurance is available in two basic forms, permanent and term insurance. More importantly, these two basic forms can be beneficial in two distinct ways.

Term insurance is insurance that covers the life of the insured for a very specific amount of time or “term”. It is less expensive than permanent and this makes it very useful. So, when does term insurance make the most sense?

When You Have Significant Obligations

Term insurance can be the best choice for protecting you and your family when you are most vulnerable. That is when you have significant obligations. This is generally true for young families who have mortgage and car loans and may have significant credit card debt.

When Covering College Expenses

Term insurance is a good way to make sure college expenses of young children are provided for in the event of the death of the insured. The term would be the period of time it takes for the student to finish and pay for college.

When Starting a Business

Term insurance can be an efficient and cost-effective way to help ensure a young business can be successful in the event of the death of a principal. Should one partner pass, the proceeds could help the surviving partner continue with the enterprise.

When You Buy a House

Buying a home can place you in hundreds of thousands of dollars in debt. A “decreasing term” policy can help cover the cost of the mortgage should a premature death occur. A decreasing term policy provides less and less coverage as the mortgage is paid down through the years.

Getting the Coverage Best Suited for You

In some instances, a combination of permanent and term insurance can be created to fit your situation. This can provide the low-cost benefits of term insurance while assuring you have longer-term permanent coverage. Our independent agents can help create a plan to suit your needs.

As independent agents, we can do the shopping for you, we can search multiple companies for the best protection at an affordable price. We can present a plan to you and you make the decision. There’s no need to overpay or buy more insurance than needed. Simply contact us to get started.

Let’s discuss your situation and get you the protection you deserve today.

“Waiver of Premium” and Other Benefits Your Life Insurance Policy May Include

Although you probably purchased a life insurance policy for the protection it provides in the event of a death, a policy may contain some other surprising benefits.

It May Build Cash Value

Many whole life or permanent insurance policies will build in cash value over time. This cash value can be tapped into at some future time through a low-cost policy loan. It also may be “cashed in” to redeem it for its accumulated cash value. Ask your agent for a policy status report on your life insurance to determine its present cash value, if any.

It May Provide for Additional Accidental Death Benefits

Frequently, life insurance policies will include accidental death benefits that multiply the coverage amount. For example, if your policy has a $10,000 face value, the policy could potential pay $20,000 or more should the death occur by a covered accident. Our independent insurance agents can quickly determine if your policy has such a benefit.

It May Include Loss of Limb or Eyesight Protection

Life insurance policies have also been known to include “Loss of Limb” coverage which also may provide a cash payment in the event of loss of eyesight. This benefit is usually a set percentage of the face value. For example, a 25% payment on a $10,000 policy for a loss of limb would pay the policyholder $2,500 should they lose an arm or leg.

It May Contain a “Waiver of Premium” Benefit

A “Waiver of Premium” benefit pays the costs of the policy while the policyholder recovers from a debilitating accident, injury or illness. It could pay premiums for a few months or in the case of a permanent disability, cover the premiums for the life of the insured. Again, our independent agents can help quickly identify if a policy has such coverage.

In the case of life insurance, you may actually get more than what you think you are paying for. For a life insurance review or to get a quote on a new life insurance policy, contact us. Let us help set you up with the protection you need along with the added benefits you deserve.

Baby Shoes or Life Insurance? What’s a Better Baby Gift?

There’s a cute insurance commercial on television you may have seen. In it, a country singer and retired football quarterback come across a baby shower where ”mom” is opening a gift box. The quarterback says “I hope it’s a life insurance policy.” and the singer responds “What???” The quarterback goes on to explain that a life insurance policy is a practical gift. Turns out the gift is baby shoes, causing the quarterback/spokesman to exclaim “Doesn’t make sense. Babies can’t even walk.”

It may bring a chuckle, but there’s a lot of truth to that clever ad.

Whether it is baby shoes, boxes of diapers or hundreds of toys, we tend to gift babies and small children with items of temporary value. Some items may never be used, played with or worn. Yet, many children grow up without the benefit of a life insurance policy.

What “benefits” you may ask? Well, a life insurance policy not only insures the life of a child but ensures the child will have access to life insurance no matter what health issues may lie ahead in the lives. The appropriate whole life insurance policy can build value through the years. This can be a financial resource the child can borrow against to buy a car or help pay for college someday. It may even be “cashed in” at some future point, like taking money out of a savings account. The best part is that when life insurance is purchased on a young person, it is very affordable. If the child should decide to continue maintaining the policy as an adult, it could become a significant part of their retirement plan.

Whether you are a parent, grandparent, aunt or uncle, if there is a baby or small child in the family, consider gifting a life insurance policy. Maintaining those modest premiums annually can be a lasting gift that will always be remembered. It may also be a lot more practical than another toy or outfit they will outgrow in a few months.

Our independent agents know companies who offer terrific value when it comes to life insurance for children. Contact us for a quote today. It may be a gift that is a little “out of the box” but it is a lasting one with real value.

It’s Time to Start Adulting: Getting Life Insurance When You Graduate

If you are a college senior, you are approaching an exciting date. All the work you have been putting into studies is about to pay off in getting your diploma. Congratulations. You are about to become a college graduate. Let the adulting begin!

Oh, you’ve certainly had some adult experiences along the way. You probably already have acquired a credit card or four. You may have a car loan or the responsibilities involved in leasing a home or apartment. You likely have piled up a fair amount of student loans along the way as well. It is time to take another step forward. That is the acquisition of life insurance.

Why would a single, 20-something who is healthy and without children need life insurance? It is because you are young and healthy and life insurance will never be cheaper. It is because you have obligations and there will be expenses in the event of your death. But life insurance can also serve you well in the future as it builds cash value that you may be able to use in an emergency or for an opportunity.

Life insurance for a healthy 22-year old is extremely affordable. It can help make sure your credit card and student loan obligations are taken care of and not an obligation for those left behind. It will cover final expenses and any medical bills that may have accrued.

Contact one of our independent insurance agents to discuss why life insurance should become part of your personal financial plan. They can show you life insurance plans that build equity, serving as a forced savings account that you can access later in life. Finally, securing whole life insurance when you are young and healthy assures you will have protection even should your health deteriorate.

You will be glad you have an established life insurance program as you enter other phases in your life like potential marriage, having children and owning property. It is an important stage in adulting.

Life insurance may seem contrary for someone just getting started in their careers. A better or newer car, nicer smartphone, or a wider-screen TV may seem more valuable at this stage in your life.  But adulting is about making better decisions that will serve you now and in the long term. An affordable life insurance program is one way to accomplish this. We would be happy to show you how to get started.

What’s the Difference Between Term and Whole Life Insurance?

Many of our decisions in life start by choosing one path or another. We can choose to rent the space we live in or buy a home. We can book a flight or drive to our destination. When it comes to life insurance, your path starts by understanding the basic differences between term life insurance and whole life insurance.

Term insurance covers the insured’s life over the course of a specific period. The term may be five years, 20 years, 30 years or anywhere in between. You may purchase a 30-year term life insurance policy to help ensure a mortgage is paid off in the event of a death. A young breadwinner may decide to take out a large amount of term life insurance to protect a young family, ensuring college will be paid for and the family’s lifestyle can continue. One of the biggest benefits of term insurance is that it is relatively inexpensive to acquire, especially at younger ages. The downside is that term insurance will expire at the end of the term and coverage will cease. There is usually no cash value build-up with a term life insurance policy.

Whole life insurance, or what is sometimes referred to as permanent insurance, will stay in force for as long as premiums are made in a timely manner. While it can be more expensive to purchase than term insurance, it has the added benefit of building up cash value over time. This cash value can be accessed through a policy loan, usually at a very attractive interest rate. The policy may also be “cashed-in” at some future date. The other benefit is that even if the insured were to become sick, even terminally, the policy can’t be canceled. Some families who have a challenge saving money will choose whole life insurance as a form of forced savings.

Generally speaking, term insurance is better for those with large financial responsibilities, who need to acquire a significant amount of coverage at an affordable price. This can include those with large incomes or large debts. It is also a way young families can cover mortgage, car, credit card and student loan payments in the event of the death of an insured, while also providing living expenses for those left behind. Whole life is often chosen for those who require less coverage and may also want to build “equity” in a policy. 

So what’s right for you? Let’s discuss where you are in life and where you want to go. We can discuss any present life insurance you may have and what can be done to enhance it. Get the life insurance coverage best for your situation. Contact us today. 

Why Life Insurance for a Child (or Grandchild) Is a Good Idea

If there has recently been a baby or grandchild added to your family it can be a reminder of just how fast time passes. This is particularly true for grandparents who have seen their own children grow far too quickly. Days soon become months, months turn into years and, well, it goes on and on.

So why should this inspire you to buy life insurance for a child or grandchild? It is because it is a time to remind ourselves the future will be here before you know it. It is time to consider how life insurance can play an important part in the future of that child.

Let’s start with the fact that it will never be cheaper to buy life insurance than when a child is a baby. In fact, depending on the type of insurance that is purchased, the premium can be locked in at the child’s current age for the rest of their life.

Buying life insurance on a healthy baby also insures that no matter what health issues may lie ahead for that child, life insurance coverage is guaranteed. As long as premiums are maintained, coverage of a whole life policy will remain intact.

Perhaps one of the best reasons to purchase life insurance on a child is that your independent insurance agent can help you choose a policy that will grow in value as the years pass. A whole life or permanent insurance policy can build value over time. Depending on the amount and type of policy, this can be significant. Most importantly, a life insurance policy purchased on a young healthy baby guarantees coverage for them in the event they become uninsurable as they get older. It can help them purchase their first car, help pay for college or even contribute to wedding expenses. If a policy is maintained through their life, it can become a foundational piece of their retirement plan. It can all start with a call to your independent insurance agent.

Toys will be bought, used, broken or sold. Clothes will be outgrown, passed along or given away. Money can go into and out of a savings account. A life insurance policy that builds equity, however, will stand the test of time, time that is unstoppable.

If you are a recent parent or grandparent, we encourage you to contact us to discuss the options available for your child or grandchild. A decision today can make a remarkable difference in a future that will be here all too soon.

What Would You Pay for a Genie in a Bottle?

Most are familiar with the story of the Genie in a bottle. The person who finds the bottle and releases the Genie is afforded three wishes. Of course, the story is a fairy tale and isn’t really true. But what if there were some elements to the story that were possible?

What, in fact, you could buy a Genie in a bottle? How much would it be worth to you?

There are some rules with this Genie in a bottle that you need to be aware of, however. First, it will only work if it is purchased out of generosity and love. In other words, this Genie will only work for others.

So, knowing that you could buy a Genie in a bottle, but the wishes would not necessarily be for you but your spouse or loved ones, would you still be interested? Oh, there’s one more thing. To release the Genie from the bottle you can no longer be alive.

This Genie in a bottle we are talking about is, of course, life insurance. When you buy life insurance you are doing it out of love for your spouse or children. Oh, you will get peace of mind and a sense of satisfaction knowing that your family will be financially provided for, but it is really for them. They can use the proceeds to maintain their lifestyle, pay off a mortgage, pay for college or a variety of other “wishes”. Of course, for life insurance to release its benefit, the death of the insured must take place.

This all means that you can, to some degree, buy a Genie in a bottle for your family. One that will help them in your absence. You can even pay for it through monthly payments you can afford. A few more things about this “Genie”. You can usually only buy it when you are healthy and the younger you are when you purchase it, the cheaper it will be.

The added benefit of this tale is that you can write your own story. You can help decide what is important for your family to have in the event of your death, and the wishes are not limited to three. You may not be interested in “life insurance” but you may want to provide that Genie in a bottle for your family. Contact us to discuss how life insurance can play an important role in your financial future.

“I’m Too Young and Healthy for Life Insurance.”

A quick quiz:
If you’ve ever said to yourself “I’m too young and healthy for life insurance” you should:

a.) Be grateful
b.) Knock on wood
c.) Get life insurance
d.) All of the above

Of course, you should be grateful if you are young and healthy. Count yourself as among the very fortunate. You should also knock on wood, because, well,  it can’t hurt. Getting life insurance when you are young and healthy is the BEST time because it is very affordable and you are more likely to qualify. The answer, therefore, is d.) All of the above!

When you are young and healthy you may think you are indestructible and that youth will last forever, but that is an illusion. Forward-thinking people plan for the inevitable, like saving for college, retirement, and yes, getting life insurance.  But getting life insurance while you’re young and healthy is also a practical decision.

Life insurance can take care of any debts, including medical-related ones and student loans in case of an untimely death. It can pay for final expenses and even be used to leave a legacy. In the case of whole life or permanent insurance, life insurance can build equity. As it builds value, funds can be accessed for a variety of purposes including emergencies and opportunities. Once you have a permanent life insurance policy and pay premiums in a timely fashion, it remains in effect, even if your health should deteriorate. In fact, many policies have a waiver of premium that will waive your premiums should you become disabled while the policy is in force.  

Perhaps most importantly, because life insurance premiums are based significantly on age, the younger you are, the less expensive your life insurance policy will likely be. Over the course of time, these savings will be significant. “I’m too young and healthy for life insurance?”  It is actually a terrific time to consider it.

Contact us and let’s discuss your situation in life and your financial obligations and goals. Let us help you find affordable coverage that will provide significant protection, and may even increase in value. See why life insurance can play a significant role in your financial future.