Winning The Life Insurance "Game"

How to make the application process work for you. Provides advice for people with specific risk factors, such as medical conditions and adventurous hobbies, on how to obtain coverage at a reasonable rate.

Do You Feel Proud of Yourself?

Political commentator and columnist John Hawkins just gave America an uncompromising look at itself in His essay is entitled, “5 Things America Should Still Be Ashamed of Doing.” I want to publicly thank him for the “morality check.”

The five things are: Acting Like A Skank In Public, Allowing Your Children To Inconvenience Other People, Being On The Dole, Politicians Lying To The Public, Promoting Separatism And Race Hatred. I think every item on this list hits the mark. I might even add a sixth item: Shirking Our Rights and Duites as Citizens. (We will save that for another time).

Let’s focus on #3 for a second, Being On The Dole. Here is a quote from Mr. Hawkins:

One of the best scenes in Cinderella Man came after James J. Braddock had a hand injury that killed his fighting career and he was forced to get welfare to feed his family. You could tell Braddock was utterly humiliated by the experience. Afterwards, when he started making money boxing again, as a matter of pride, he went and paid the money back. If everybody felt that way, there probably wouldn’t be a person alive who had a problem with welfare…

You’re supposed to be ashamed of not being able to pay your own way. It should be EMOTIONALLY PAINFUL for you to live off other people and if it’s not, it’s a sign that something has gone wrong with you as a human being.

Yes! To live contrary to our inner drive for independence is to lead a pained life. Not only do you suffer, but others can suffer as well.

In my home community, we recently experienced the tragedy of a young father dying of a heart attack. He was only in his 30s and left a pregnant wife and six other kids. He had no life insurance and very little savings.

Fortunately, people stepped up and donated to charity to preserve the welfare of the family. But don’t think for a minute that being forced to live on handouts was good for their morale. Besides which, if he had purchased life insurance, communal funds could have been used for others in need. Disaster victims, abused wives seeking shelter, and many others in crisis could have been helped. Public money only goes so far.

Very affluent people can feel shame too. Can you imagine inheriting a huge business or piece of land, but having no money to pay estate taxes? You would have to sell this asset at a great discount just to pay that bill on time. It would be emotionally painful to lose value on what is yours and let people take advantage of your misfortune. That is a big reason why wealthy people buy life insurance.

Whether you are rich or poor, financial self-sufficiency can keep you proud. Thanks for reminding us of that, John.

Are you proud?



Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How You Can Give $1million to Charity

What are the best ways to give money to charity? Here are a few options:

Sell your share in a business.

Rohini Nilekani, wife of Infosys founder Nandan Nilekani, just sold some of the shares she owns in that company. She intends to use the proceeds from the sale (worth $27 million pre-tax) to fund charities in the areas of water, education, environment and governance.

Set up a private equity fund.

Tim Gocher set up a private equity fund for Nepal. It is an “impact fund” with the goal of creating wealth, creating jobs, and creating a better life for residents.

Buy life insurance.

Life insurance can turn a small premium into a large benefit for the charity of your choice. You don’t have to sell any property or start your own investment fund. You simply buy a policy and make the proper arrangements.

To give you an idea of how economical this gift can be, here is some sample pricing. All rates are for $1 million of universal life guaranteed to age 100. The rate class is preferred nonsmoker.

Male age 40, preferred nonsmoker rate: approx $6000/year for $1million guaranteed to age 100.

Female age 40, preferred nonsmoker rate: approx $5000/year for $1million guaranteed to age 100.

Male age 50, preferred nonsmoker rate: approx $8200/year for $1million guaranteed to age 100.

Female age 50, preferred nonsmoker rate: approx $7200/year for $1million guaranteed to age 100.

Male age 60, preferred nonsmoker rate: approx $15,500/year for $1million guaranteed to age 100.

Female age 60, preferred nonsmoker rate: approx $12,500/year for $1million guaranteed to age 100. 

Can you think of any other financial instrument that can give such a benefit for pennies on the dollar – on a guaranteed basis?



Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should I Leave Money to My Kids? insurance is often purchased to leave a legacy to the next generation.

People buy life insurance in order to…

  • Take care of their family obligations
  • Make sure income is replaced
  • Secure their business interests
  • Provide money to pay taxes
  • And leave something extra for their kids

(Of course, that extra something can be big or small, depending on the net worth of the insured. If your father is not a billionaire, then don’t expect a million dollar inheritance…it would be nice though, wouldn’t it?)

But is this a good thing to do?

Misplaced love

Insurance people often talk about the purchase of life insurance being an act of love.

The insured does not personally benefit, but he or she loves his family enough to take care of them when he passes on.

Sometimes, though, love can be misplaced. We don’t want to spoil people, right?

Apparently, many Americans feel this way. More and more people want to spend all the money they have made.

A nickname for them has now emerged: “die brokers.”

Today, only a small minority of people are willing to constrain their lifestyle to maximize their inheritance.

Even those people who are planning a legacy are being cautious with their generosity. Prospective heirs are being educated in responsible money management. Tools such as trusts are being utilized to control access to the money.

As a matter of fact, compared to other countries, Americans are starting to lag behind in leaving inheritances for future generations. Only 56% of our retirees are planning to leave money to their children. The average inheritance is $177,000.

What is going on here? It used to be that immigrant families came to this country to make a better life. That included making sure their children will have more than they had. Is this no longer the American way?

Perhaps the problem is that adult children these days have been given so much, that to give them any more would spoil them further.

What do you think is going on?





Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Does Your Insurance Broker Treat Women With Respect?

Does your life insurance broker have a bad attitude about women? When I say bad attitude, I mean patronizing, belittling, or otherwise treating them as secondary players in family decision-making. Unfortunately, it is highly possible he does, given the history of the life insurance business. But that is slowly changing. Has it changed enough for you?

A generation back, life insurance salesmen were pretty much members of an old boys club. You know the crowd: a bunch of construction workers with ties. Selling was directed at the man of the house, since he typically controlled the finances.

In my generation, the industry became much more professional. The insurance office became a more suitable place for women. Women salespeople reached out to women consumers to empower them. If the wife was going to be the beneficiary of the policy, she had to make sure the coverage would be sufficient.

Today, opportunities abound for women to get involved in life insurance sales, as well as other financial service professions. Workplace marketing, distribution through banks and other institutions, and web marketing all have made room for women to establish careers. This corresponds to women becoming more prominent as financial decision-makers in society at large. Many are single heads of household, and single parents. Many participate in egalitarian marriages. Many have simply taken charge of their finances because they have the training and skills to do so.

One would think that in today’s climate, women would have achieved a certain parity with men when it comes to treatment as financial consumers. In a lot of cases this is true, but in a lot of cases this is not true. A lot of studies have been conducted to explain this, but the short answer to me is that men can be dumb and thick-headed. We all know that real men don’t have to belittle women to feel good about themselves. Hopefully that idea will catch on more.

In the meantime, women must at times deal with a male financial advisor who cops a bad attitude. Financial writer Amy Fontinelle he has a superb article in Investopedia that shows women how to do this. Her solutions include:

Problem 1: Some advisors patronize female clients. Solution: interview potential advisors carefully.

Problem 2: The advisor only communicates with the woman’s husband. Solution: work with an advisor who addresses both partners as equals.

Problem 3: Advisors treat single women as if they are clueless. Solution: work with an advisor who will empower you.

Please read her article. How how it has helped you deal with your own particular issues?


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Should I Marry Somebody Who Buys Term Insurance?

Dating websites can be pretty personal with their profile questions. Yet, how many ask about preference in life insurance product?

What is that? You don’t think they should? Of what relevance to marriage is the selection of a life insurance product? Well, I think you may be surprised at what you can learn about a person in the term vs. permanent debate.

Here are some examples:

People who prefer term might be considered short-term thinkers, whereas people who prefer permanent might be long-term thinkers.

“Term people” might have a narrow focus, concentrating only on coverage; “perm people” might have a wider focus in thinking, since they care about both death benefit and also cash value.

Term buyers might be more risk-takers in assuming they will be insurable when the policy renews, and they then want to buy new coverage. Perm buyers might be more conservative in assuming they might not be insurable later, so they lock into rates early.

Of course, such old-fashioned criteria as looks, manners, and sense of humor apply as much as ever. But when you are on that first date, don’t be shy about bringing up the topic of life insurance. You might learn something very useful about your prospective mate 🙂

“Compare term life insurance rates at no cost from top rated companies in seconds.”



Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

The Top Five Reasons to Buy Permanent Life Insurance life insurance gets a lot of press these days because it can be cheap. But, as is usually the case, you get what you pay for. There are many other considerations when  buying life insurance. Once you take them all into account, permanent life insurance looks pretty good. Below you will find some perks you may not have thought about.

Note: permanent life insurance here means universal life or whole life. Also: it is assumed that premiums are paid as scheduled. Life insurance can be a little bit technical. Call me and I’ll explain the details about these advantages so you’ll know what we’re talking about.

Here are the top five reasons to buy permanent life insurance, in my humble opinion:

1. No rate increase

You get a lifetime guarantee on the premium. It will never go up, so you won’t be blindsided by a huge rate increase. Also: what if you had a term policy that became too expensive, but you unfortunately were no longer insurable, due to illness? You wouldn’t be able to secure your family or business just at the time when they might need it.

2. No reduction of coverage

You also get a lifetime guarantee on the death benefit. Regardless of the investment performance of the company, they cannot lower your face amount. More than that, the right product will actually increase the death benefit for you!

3. Payment flexibility

You have flexible payment options. You can pay for one year, 10 years, 20 years, or according to another schedule, and still get a lifetime guarantee on the death benefit. Then again, you can pay on a yearly basis and keep your expenditure as low as can be.

4. Guaranteed cash

You can get a guaranteed cash value. If you are the kind of person who wants a guaranteed portion of your financial portfolio, few other products will match the guarantees of life insurance. At the same time, these products can also have non-guaranteed cash values that can grow significantly over time.

5. Low long-term cost

The rate you pay at age 30, let’s say, will be the rate you pay at age 90. You can enjoy a long-term savings by locking into a premium for one permanent policy, as opposed to buying a term policy every time you need one as you grow older. The premium on a policy bought at age 30 for life, is frequently lower than the premium you would pay on a policy at age 30, and then another at age 50, and then another at 70, all added together.

Stretch your brain a little bit and think long-term about life insurance. How does it feel?


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Take Your High PSA Seriously!

This morning I was informed that a gentleman who has applied for life insurance through my firm has prostate cancer. He had no knowledge of any prostate problems when he had applied. He took his insurance exam, and the PSA was very high. The carrier automatically declined him. He then did the right thing: he got the results, went to his doctor, got a biopsy, and found the cancer. It is a low stage, and treatment will be starting soon. Under these circumstances, there is reason to be optimistic that he will be “cured.”

Here are some interesting points to note about this story:

1) He had not seen a doctor in two years. At his age (mid fifties), annual checkups are essential precisely for making sure a sickness is not developing.

2) When he had seen a doctor a few years ago, his PSA was borderline high. The doctor shrugged it off as “getting older.” Don’t you think the doctor should have requested a follow-up soon to monitor the situation?

3) This is the sixth year in a row in which an applicant for life insurance through my firm found out he has prostate cancer. They were all initially declined due to lab results. They all went to their doctor with those results. In a few of those cases the physician didn’t take those results seriously and actually tried to artificially lower the PSA without doing any diagnostic test. In one of those cases the doctor finally did a biopsy and found stage 4 cancer. Too bad he had wasted all that time trying to monkey around with the lab results.

The good news here is that people who recover successfully from prostate cancer can eventually qualify for life insurance, and at a good rate. I am hoping to do business with this gentleman; not only that, he is a good friend and I want the best for him and his family.

I hope his experience can serve as a reminder to us all to take a high PSA seriously.


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Don’t Bank on Your Employer-Paid Life Insurance

Financial writer Amy Fontinelle has an excellent article today in Investopedia. She asks, “Is Your Employer-Provided Life Insurance Enough?” Her answer is basically, no – it is not. I think her conclusion is “on the money.” Here are some problems she identifies, along with my explanation as to why they are particularly pressing in today’s economy and life insurance marketplace. Be sure to read her article for the details of her research.

Problem: Your employer may not offer enough life insurance.

Is one or two years salary enough to provide for your survivors? For most people, it is not. Do you know what is the optimum formula to use to replace your income? Identify a capital sum that can be invested so the interest would be sufficient for your family to pay its bills. Your family will then never run out of money. An employer will never provide that amount, except in a highly selective executive bonus arrangement.

Problem:  You’ll lose your coverage if your job situation changes.

Have you seen the unemployment figures lately? How about all the people whose hours are being reduced to part-time, due to Obamacare? Transiency is the hallmark of today’s employment workplace. The lack of portability of group coverage is therefore a liability.

Problem: Employer-provided life insurance may not be your cheapest option.

Group rates increase as the participants enter new five-year age brackets. This means that the rate you pay at age 35 will not be the rate you pay at age 40, and will certainly not be the rate at age 45. Underwriting leniencies are available on individual policies, even for people with a history of serious illness. In the long term, the total cost for coverage could be much lower.

Are you concerned about your own coverage?


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How Life Insurance Can Help with a Divorce Settlement

When a couple is unfortunately reaching the end of their marriage, they need to know how life insurance can help with a divorce settlement. Yet if you’re going through the heartache of a divorce, one of the last things you may be thinking about is life insurance. Still, did you know that life insurance is often required as a part of the divorce decree? This is usually in place to protect your spouse and/or children if anything should happen to you while the decree is in place.

How to arrange the coverage

Because insurance coverage is stipulated in the divorce decree for a specific amount of time, term insurance is usually purchased. Either spouse may ask the court to require life insurance, though it is typically the dependent spouse or the one with primary custody of the children. This stipulation needs to be covered during the settlement period by making sure that an adequate policy is ordered to be purchased with yourself as the beneficiary and preferably as the owner, since the owner of the policy controls it. The owner is able to change the beneficiaries. Remember that you can add beneficiaries to the policy such as a new spouse or children.

Taking care of the children

Unfortunately, minor children often find themselves at the middle of the divorce. In a divorce, one spouse frequently gets primary custody of minor children. It is essential that there is sufficient life insurance in force on that spouse to protect the children. Though it may seem easier to set them up as beneficiaries, they are not legally competent and doing so may cause more problems for your children than it solves. Consulting an attorney to set up a trust is a better option if you do not feel that your former spouse should be managing their money for them.

Cover all bases

Divorce can be extremely stressful and nerve-wracking, with stress-related conditions developing ranging from anxiety and depression to stomach issues. When you are going through the prequalification stage for life insurance, it is vitally important that you are up front about this. In addition to life insurance requirements, there may also be requirements for carrying health insurance, homeowners or renters insurance.

One final note on how life insurance can help with a divorce settlement

After the divorce decree has been fulfilled and is no longer in action, you can change the policy to provide income replacement benefits to your new spouse if remarried, provided that you remember to change your beneficiaries.


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Will My Spouse Get My Life Insurance Benefit?

You purchase a life insurance policy to provide financial security for your family. You are attracted to the guarantees of the product, and to the financial strength of the carrier. You think through the amount needed, and budget for the premium payments.

You live a long, productive life, and then your final day on this planet finally comes. All arrangements are executed, and your estate is settled. But then, BIG PROBLEM: your spouse does not get the money! What happened?

Here are some possibilities. All of them have to do with errors made by the insured/owner. The good news is that they can all be avoided with proper foresight and policy management.

Policy lapse

Insurance companies are extremely diligent in sending out premium due notices. They even keep records of all the notices sent. They will also send out a number of lapse notices when the policy is in danger. These notices can even be sent to a third-party to make sure they are received.

Yet, people get busy, and the premium notices can fall to the bottom of the pile. Eventually, the time allotted for reinstatement runs out.

No beneficiary update

Unfortunately for many couples, their marriage ends in divorce. Then again, many divorced people remarry. What has to happen then? A  change in the beneficiary of the existing life insurance policy from the old spouse to the new spouse. What will happen if this change is not made? The former spouse can get the money.

It is important to note that state laws, such as community property, can affect this outcome. Be sure to consult with an attorney.

No collateral assignment

Life insurance is often obtained to secure a business loan. Under these circumstances, the benefit should be assigned to the bank – the bank should not be named as beneficiary. If the bank is named as beneficiary, it could end up with more benefit than to which it is entitled.

At that point the lawyers will have to fight it out. This adversity could be avoided simply by filling out a form so the lender will receive only the amount of the loan outstanding at the time of death.

Are you certain that the current beneficiary designation on your policy is correct?



Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

What Do I Need to Know About Life Insurance for Older People?

A recent article in USA today states that older workers may still need life insurance. This is true. Here is what you need to know:

1. If your spouse is still dependent on your income, you will need life insurance for income replacement.

2. If you have incurred debts, such as a second mortgage, you will need life insurance so your spouse can pay those off.

3. If your pension distribution will terminate upon your demise, you will need life insurance so your spouse will not suffer the loss of that income.

4. Term insurance may be appropriate, but many times it is not. If you buy 10-year term insurance at age 70, how much higher do you think the price will be if you have to buy more insurance at age 80? Permanent insurance would avoid that problem

5. Remember that if you have insurance in force, but it is not needed by a family member, you can use it as a charitable bequest. Your favorite group that does good deeds would remember you as a hero.

6. These days, life insurance carriers specialize and even sub-specialize in population niches. Premiums can be very reasonable.

7. Specific needs for life insurance, such as estate preservation, might call for a joint policy with your spouse. Pricing here can be very economical.

Be sure to consult with a planner, and a broker who specializes in policies for older ages.


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How to Get Life Insurance and Plan Your Estate

How to get life insurance and plan your estate? That was a topic recently discussed by two close friends and business owners. Ross, a 50-year-old manufacturing industry executive, sits down for lunch one day with long-time friend George, a 68-year-old small business owner now considering retirement. As they spent time catching up on each other’s lives, estate planning came up. Here, we listen in on their conversation.

“Yeah, I just came down here to visit my mother,” Ross shares with his long-time friend, George. “Sort of giving Courtney a little break, you know?” The pair met years before, when Ross walked into the offices of G & A Manufacturing, the most prominent and prestigious corporation in their industry. As a 21-year-old, fresh faced intern, Ross was at the bottom of the corporate ladder. George took a genuine interest in him, becoming first his mentor, and eventually his friend. Ross always appreciated George for his kindness in those early days; years later, he still sought him for important advice.

George nods in agreement, smiling. “Ah, yes. How’s Courtney these days?” he asked.

“Good. She’s real good. We’ve been working together day and night on the business to wrap it up for sale, as well as on our various charitable commitments. Sometimes when I talk to her, it’s easy to see she needs a break, so I take that four-hour trip down here to give her… what do women call it? A little ‘ME-time?’”

George chuckles a bit. “I know what you mean. So, is the buyer financing in place?”

Problem: taxation of wealth.

“Yeah, it is We are all set to close. Now I have to think about paying a hefty estate tax. My net worth is going to increase considerably, even after all taxes from the sale are paid. I need to make sure the kids can pay Uncle Sam after Courtney and I are gone.” George nods, prompting Ross to continue. “Having that heart attack two years ago really ‘woke me up’, George. So, I started looking for life insurance coverage as soon as I was released from the hospital. I had no IDEA how tough it would be! It’s like companies keep saying, ‘Nope. Not with this medical history.’”

George interjects, “Yeah, companies can be pretty stringent with their requirements these days. I had the same problem recently. I read about estate taxation in Denis Clifford’s estate planning book and started the process. I, too, sought to get a policy. Apparently by their standards, at 68 with my health history, you’re an old geezer and nobody would take a chance on me.”

How to get a low rate with a history of serious illness?

Ross smiled at the joke, but the look of concern soon returned. “So, what do we do now?”

“Glad you asked,” George chimed right in, not missing a beat. “I asked some other buddies of mine who, like me, own small businesses, are looking toward retirement, and are trying to get their financials in order.”

Ross perked up, now sitting at the edge of his seat. “And what’d they tell you?”

Getting started.

“Well, it’s a little uncomfortable, so a lot of us put it off, Ross. But you need everything in writing, you know that. Have your attorneys draw up a will, as well as Power of Attorney, in case you’re sick and can’t tell your family what you want.”

“Okay,” Ross replied. “What about the life insurance?” He looked glum. “I really would rather my kids not have to sell properties just to pay a tax bill!”

How to get life insurance and plan your estate? It takes the right broker.

“They won’t have to!” exclaimed George. “My buddies referred me to a broker who specializes in tough cases. He can help you, Ross — I’m gonna recommend you to him. Listen, he knows how to choose the right carrier. He’ll fight to get it done for you, even if you’ve had problems before. Plus, he is licensed in 48 states, so if you and Courtney decide to retire to Florida to be closer to family, you won’t have to find a new agent.”

“Wow, George! I knew I could count on you. I’ll give him a call today.”


Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How to Purchase Life Insurance for Income Replacement

Purchasing life insurance for income replacement is not exactly a popular activity. The traditional worldview saw death as a part of life. In modern times, we separate the two. The subject of death is something we try to avoid. Oh certainly, in the abstract it’s easy to adopt a grim, gallows’ humor; but when the topic hits close to home, and the death you’re contemplating is your own, the humor gets a bit forced. It becomes particularly troublesome when you have to assign a dollar amount to that demise. Perhaps that’s the reason why people have difficulty arranging for their life insurance needs.

How Much Life Insurance Do you Need?

Unfortunately, there is no one size fits all when it comes to deciding how well a life insurance policy will fit a person’s needs. The answer at the heart of that question is a personal one, and must consider the varying needs, obligations and dreams we each have. At the same time, people share a need for insurance throughout their working career, regardless of their occupation, profession, or business.  That need is to replace your income should it be lost due to your death.

Life Insurance for Income Replacement: What to  Consider

The determination of your income replacement requirement will need some  initial number crunching. The theory behind this approach is that your purchase of life insurance should be equal to the current value of your future earning potential. As such, you will factor in your current salary, annual raises, your earning rate, and finally your work life expectancy to arrive at a figure that will work for your needs.

Fine Tune that Income Replacement

Once you have arrived at a ball-park figure that will safeguard your loved one’s future, you can fine-tune your calculations. See if some of the survivor needs could be covered by other available assets. Make adjustments to include expected passive income such as retirement plan distributions. Be sure that your need for insurance in other areas, such as mortgage protection and educational funding, would not reduce the amount of money designated to replace your income. It is important to look at the whole picture of your insurance purchase needs and make sure they are all covered, before you finally settle on the amount needed for income replacement.

The purchase of life insurance for income replacement is worthwhile once you realize that your are securing the future of your loved ones. They are dependent on you now for their quality of life, and will remain so should they tragically lose you. That is why now is the best time to start buying it.



Want to learn more?
Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

How to Choose Between Term Insurance and Permanent Life Insurance? The Youngest Son Replies.

A Family Discussion is Completed (click here for Part 1, and here for Part 2)

“How to choose between term insurance and permanent life insurance? That is the question you are going to ask me now, Father, isn’t it”

The young man looked expectantly at his father as he approached the kitchen table. His father had been sitting quietly, enjoying his late afternoon tea. As the youngest son, he had found the path down which family discussions flowed. His father would initiate one with his oldest brother, and then proceed to the middle brother. When a point of mutual understanding had been reached with each, the discussion would then culminate with him.

“Yes,” his father said. “The time has come. However, you had not been available when I took my afternoon tea. It would have been nice to sit and drink together.”

“Yes it would have been,” the youngest son replied. “But it is a beautiful night. Will you join me for a walk?”

His father looked at him with some contemplation, and then arrived at a decision. “It is a good idea,” he replied, as he rose from the table. “There are many ways for people to connect.”

Father and son left their home and strode into the cool night air. The moon was full, and its brightness illuminated the homes along the block. The youngest son was eager to speak, so he initiated the conversation.

A  Family Heritage of Understanding Finance

“I appreciate all you have taught me about business and finance, Father,” he started, “and I am grateful for the counsel of my elder brothers. My education has allowed me to arrive at an answer to this question quickly and efficiently.” He nodded his head in emphasis.

His father raised an eyebrow in some surprise. “To arrive at an answer to a big question in a small amount of time can be risky. There is a chance that not all factors involved will be considered sufficiently.”

His son smiled at him. “It all depends on one’s level of confidence,” he stated. “I believe with all due modesty that I have figured out how to make this decision.”

At this father his father stopped walking and turned to him. He had an incredulous look on his face. Finally he spoke in a low but serious tone.

“I would very much like to hear your thinking, my son,” he said. “Please share it with me.”

Is Life Insurance a Commodity?

The youngest son turned his body as well so they were now facing one another fully. “It is simple for me, Father,” he said. “Life insurance is a commodity. One buys it as one needs it, as with any other commodity.” He waited for his father’s reaction.

The senior man showed no emotion on his face, and said cautiously, “Please continue.”

“When I need life insurance for my family, I will buy it. When I have a mortgage that I need to protect, I will buy it. When I become concerned about securing the educational funds of my children, I will buy it.”

“It is a big marketplace,” he said, in completion of his thought. “I am sure that any time I have a need for life insurance, a company will be interested in making me an offer.”

In reply, his father followed his logic. “So,“ he said, “if you start a business and take out a loan, you will buy the policy then. If you take on a partner and need to fund a buy sell agreement, you will buy the policy then. If you hire a key person and need to cover him, you will take out a policy then.”

The youngest son began to reply, but his father raised a finger for him to pause.  “And when you retire and need to maximize your pension distribution, you will take out a policy then. If family members unfortunately become dependent on you, you will take out a policy then. When you decide to make a charitable gift, or leave a legacy to your estate, you will take out a policy then.”

“You will just keep buying policies as you need them, as someone buys cars or clothes. Is that what I am to understand from you?”

The youngest son was taken aback by the sharpness of his father’s rebuke. He did not feel that he deserved such a response, but was careful to keep his emotions in check. Nonetheless, he did respond with emphasis.

“That is exactly right, my Father. The question of how to choose between term insurance and permanent life insurance is not complicated. I will simply buy a new term policy every time I need more coverage.”

“Now, I know what is your concern,“ he smiled assuredly. “You are thinking that if I keep buying a new policy at an older age, I will have spent more money overall than if I had brought a larger policy at a younger age. Am I right?”

Noncommittal, his father waited for him to continue. “I want you to know that I too am concerned about overall finances. For that reason I am making a strong commitment to investing my money. I am 100% certain  of this: with my understanding of investments, I will earn much more money buying term and investing the rest, than I would have saved by locking into a rate for permanent insurance at early age.”

When “Buy Term and Invest the Rest” Will Not Work

His father shook his head. “Nobody denies you your ability to commit, my son,” he replied, “You are disciplined, you are economical, and you have integrity. When you say you will do something, you do it.”

He began to walk, and his youngest son joined him. The fullness of the night had arrived, and there was a quiet in the street. It seemed as if their conversation was the only – and so the most important – event taking place in the neighborhood.

“But my son, your estimation is falling short. There is one factor in your thinking that you have underplayed. It happens to be the most important factor when deciding how to choose between term insurance and permanent life insurance. And that is mortality.”

For the first time, the youngest son seemed perturbed. His confidence had dropped a bit. “Please explain, Father. I do not want to miss an important consideration in my thinking.”

Underwriting Makes All the Difference

His father spoke slowly and deliberately to make his point crystal clear. “The error of your approach lies in treating life insurance as a commodity,” he said. “It cannot be. It cannot be something you simply go out and buy when you need it. You cannot take for granted you will qualify as long as you have the money to pay for it.”

“Life insurance is a product that is underwritten according to mortality risk assessment. You have to qualify for it medically. Your lifestyle and hobbies are assessed. Your family history is assessed. Your official driving record, and legal record, and financial record, are all assessed”.

“Your entire strategy, my son, for deciding on how to choose between term insurance and permanent life insurance, is based on the assumption that you will always qualify for the lowest rate available. That is a very questionable assumption.”

The youngest son looked introspective as he digested his father’s words. “You are telling me, Father,” he said at last, “that if any one of these factors becomes a higher risk, then the financial picture changes. I may not be able to get the life insurance I need at the price I want to play, or even be eligible for it at all.”

“Yes, yes, my son,” his father replied enthusiastically, “that is exactly right. Under those circumstances, you will have lost the financial bet. Should you become a higher risk in any way, your future purchases of life insurance may be jeopardized.”

Which Approach is Best for You?

They were now heading home. The youngest son felt that the discussion was coming to its final point. He knew that his father wanted him to restart his thinking. He wanted very much to please his father, but he recognized that they were different people.  His father had taught him that all economic decisions are made with regards to a measure of risk against reward. Some people, like his father, took a much more conservative approach. Others, like himself, were more aggessive.

The conservative approach here, with regards to how to choose between term insurance and permanent life insurance, would be to make sure life insurance would always be available. That meant buying permanent insurance now. The aggressive approach would be to buy term and invest the rest. The risk would be that he would not qualify for any more life insurance, should he need it. He would then have to settle for more expensive non-insurance options.

The youngest son felt a strong sense of gratitude and appreciation for his father’s teachings. He loved his father dearly. He became motivated to show his own children the caring and dedication that his father had shown him. Smiling, he took his father’s arm and drew him close. “You are my father and my teacher. I cannot tell you how fortunate I am to be in your care.”

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Check Who’s Benefiting from Your Policy, and Other Estate Planning Tips

A prestigious law firm just published it’s top five estate planning tips for 2014.

Number one on the list?

“Check your life insurance beneficiary designation.”

Life Changes Can Change Your Policy

Margaret Barr of McBrayer, McGinnis, Leslie and Kirkland explains why:

“Divorce, births, deaths, and changes in relationship can alter one’s wishes for who should receive the benefits.”

She urges us to look as well at our stock proceeds and other items. Here is her complete list.

Who, What, When, Why of Estate Planning

CNNMoney explains what you need to know about estate planning, including why you need a will in the first place and how to assign power of attorney.



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How to Choose Between Term Insurance and Permanent Life Insurance? The Middle Son Replies.

A Family Discussion Continues (click here for Part 1, and here for Part 3)

dreamstime_xs_29813425“How to choose between term insurance and permanent life insurance?”

The young man smiled at the inquiry by his father. He was the middle son.

“I have been expecting this question, Father,” he answered. “I know that you and my older brother have talked about this at length.”

“Then you have had time to think about it,” his father replied. “Tell me your thoughts.”

The middle son knew his father was a man of ceremony.

Serious discussions required thoughtful attention, and thoughtful attention was prompted by ritual.

He took the initiative to arrange the tea service.

“I will prepare the tea for you, Father,“ he said. “But please forgive me for not joining you. I am a bit agitated by the question, and will not enjoy my drink.”

His father raised an eyebrow, but assented. “Then let us hope our conversation will lighten your mood.”

They sat at the table together. It was late afternoon, and in the waning sun the trees in the yard cast long shadows.

The middle son reflected on how the atmosphere of the yard, cast half in light and half in shade, matched his perplexity on the question.

He yearned to resolve this ambiguity.

A Perplexing Dilemma

Taking a deep breath, he began to explain his dilemma to his father.

“On the one hand,” he began, “My elder brother’s viewpoint makes perfect sense. Of course I want the highest yield from my payment. Of course I want to take advantage of the guaranteed benefit. This is common sense financial thinking.”

Indeed I recognize that I must keep the policy in force as long as I live in order to realize this value. And, I also know that I cannot predict with 100% accuracy my future needs for life insurance. It would then be wise to retain coverage into the latter stages of my life.”

His father nodded in confirmation, and waited for the son to continue.

After a pause, the middle son spoke again, this time with stronger emotion.

“But I have so many financial goals, Father!” he exclaimed. “I want to buy a house. I want to start a business. I need to put away money for my future. If I was to spend the money for all the life insurance I should have, I would have an insufficient amount left over for my other needs.”

He shook his head in frustration.

“To choose between term insurance and permanent life insurance pulls me in two opposite directions.”

A Strong Foundation

His father smiled in acknowledgment.

“I can see that this dilemma bothers you,” he said. “One good way out of this fix is to set priorities. Your elder brother did this. Let me ask you: what is more important than financial security? Think of your finances as a house. Your insurance is the foundation. Life insurance is the core ingredient of that foundation since it is the only claim that will be paid with certainty.”

Does it not make sense to make your foundation as strong as it should be?”

“Yes it does, Father,” the middle son replied. “It does.”

He shook his head ruefully. “I just don’t like the prospect of having a house with the best of foundations, but with walls and a roof of only average quality, if you know what I mean. There is more to life than security.”

He looked out into the increasing darkness. It definitely matched his mood.

His father peered into the dusk as well. Still keeping his gaze towards the horizon, he said to his son, “Sometimes you can find light within the darkness. Is it possible there is a middle ground from which you can choose between term insurance and permanent life insurance?”

The middle son raised his head and pondered this provocative question.

After a few moments of reflection, a smile appeared on his face.

Is Term the Answer?

“I am considering your point regarding priorities, Father. I know that on  the one hand, I need to have a sufficient amount of coverage in force. At the same time, I have a number of expenses on which to spend my money.”

The middle of the road solution,” he continued, “would be a policy be high enough in face amount to cover my current and future needs, but low enough in cost to spare money for other products.”

That is called term insurance.”

His father turned his head from the darkened countryside and looked at his son inquisitively. “Term insurance?  And would you be like everyone else and just drop it when the price goes up? Wouldn’t that defeat your purpose?”

“The Conversion Option”
The middle road between term insurance and permanent life insurance

The middle son rose to the challenge.

“No, Father!” he stated emphatically, “This would be term insurance that I could convert to a permanent product. It would be my intent and plan to do so.”

“And when you do so,” his father looked at him sharply. “You will have paid more for that permanent insurance because you will be at that time older than you are now. Will you still then be satisfied with your plan?”

He raised his tea cup to his lips as he waited for his son’s response.

“Yes I will, Father,” his son replied. “Yes, I will. For me, that would be a small price to pay to get the ‘house’ I want. To choose between term insurance and permanent life insurance means to take one, and then in time take the other.”

He looked relieved, and his spirit renewed.

“I will join you for that tea now.”

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It’s Tax Time! Will I Owe Money On My Life Insurance Policy? people are getting into full gear on their tax return preparation at this point. Here is a list of some of the more popular questions regarding the taxation of life insurance. With each question I have provided a link for an authoritative answer.

As a life insurance broker, I cannot advise you on your tax obligations. But, I can share with you my three principles for dealing with this topic.

Golden rules for taxpayers

Get educated. You are responsible for this money.

Be sure to get expert advice from a qualified professional.

Trust but verify. If something doesn’t make sense, make sure you get comfortable and confident with what you are doing.

1. Q: Are premiums paid on personal life insurance deductible for personal tax purposes?

2. Q: Is the interest increment earned on prepaid life insurance premiums taxable income?

Here is a question about single-premium policies:

3. Q: How are single premium life insurance policies, including single premium variable life insurance policies, taxed?

4. Q: How is the value of a life insurance policy determined for income tax purposes?

5. Q: May a life insurance beneficiary be required to pay estate tax attributable to death proceeds?

Here are some questions about estate taxation and gifting:

6. Q: Can arrangements for payment of the proceeds of life insurance and annuity contracts attract the generation-skipping transfer tax?

7. Q: How can the generation-skipping transfer (“GST”) tax exemption be leveraged using an irrevocable life insurance trust?

8. Q: Are gifts of life insurance to charitable organizations subject to gift tax?

9. Q: If life insurance proceeds are payable to a religious, charitable, or educational organization, is their value taxable in the insured’s gross estate?

Here is a question about a trust:

10. Q: Are death proceeds of life insurance taxable income if they are payable to a trust?

11. Q: Are annual increases in the cash surrender value of a life insurance policy taxable income to the policyholder?

12. Q: What are the rules for taxing living proceeds received under life insurance policies and endowment contracts?

13. Q; How will material changes in the benefits or terms of a life insurance contract be treated?

Here is a question about life settlements:

14. Q: What are the income tax consequences to the owner of a life insurance or endowment contract who sells the contract, such as in a life settlement?

15. Q: Are life insurance proceeds payable by reason of the insured’s death taxable income to the beneficiary?

Here is a question related to divorce:

16. Q: What are the income tax results when an individual transfers an existing life insurance policy to or purchases a policy for the individual’s former spouse in connection with a divorce settlement?

17. Q: How are split-dollar life insurance arrangements treated for gift tax purposes?

18. Q: Does the income taxation of a life insurance policy that insures more than one life differ from the taxation of a policy that insures a single life?

Additional resources for you:

Here is some good advice on how to choose someone to prepare your tax return.

Here are warnings from the IRS about the 12 most common tax scams.





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Read my free guide, How To Get Great Life Insurance Rates and learn how you can get life insurance companies to compete for your business, at no risk or extra cost.

Can I Get a Better Rate on My Life Insurance Than What My Employer is Offering?

This article from Forbes gets right to the point about why your own policy should be less expensive than your employer’s group term product.

Here is the bottom line:

… while group life insurance is a simple way to pay for coverage, and often the easiest way to guarantee it, it may not be the most cost effective way to obtain needed insurance coverage.

And here is a good explanation:

Why is group life insurance an expensive way to obtain life insurance? Mark Maurer of Low Load Insurance Services in Tampa provided the following answers:

  • Pricing negligence. Employer group policies start out very cheap at younger ages. By starting low and maintaining a low rate over a number of years, the power of complacency sets in with many buyers. Employees may know the price has risen, but likely has their coverage need, and they don’t often do the work to compare the cost to a personal plan.

  • Increasing claims. Group coverage is based on the health of the group, or actuarial data on the age bands that comprise the group. We all know as we age there are more deaths, and so the amount will increase over time.

  • Anti-selection. As we age, a higher percentage of people also develop health problems or continue with dangerous habits that place them in higher risk categories that may not allow them to purchase individual health policies. Since these individuals are more likely to stay with the more expensive group coverage, the cost of the group life insurance reflects the inclusion of these individuals with higher premiums.

Have you conducted your own comparison of a group term product vs your own policy? What were the results?

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How to Choose Between Term Insurance and Permanent Life Insurance? The Eldest Son Replies.

A Family Discussion (click here for Part 2, and here for Part 3, of our  family trilogy.)

dreamstime_xs_33371124“My son, do you know how to choose between term insurance and permanent life insurance?”

The young man repeated the question directed to him by his father. He considered it carefully before answering. “I know it is an important question, Father,” he replied. “Unfortunately, I do not feel equipped to provide an answer. Will you help me?”

“Yes, my son,” his father answered. “It is an essential part of your financial education. You are the eldest of my children, and the time has come for you to learn how to make this decision. Come, prepare tea for us.”

The eldest son assembled the tea service. His father joined him at the table overlooking the yard. The day was bright and sunny.

The son waited for the father to resume the conversation. The pleasant noise of the children playing next door filtered into the room. “Tell me the number one question which must be asked,” his father finally said.

A Guaranteed Return

The eldest son considered his response. After a brief deliberation, he replied, “Since this is a financial decision, return on investment must be a prime consideration.” He waited for confirmation from his father that he was on the right track.

His father smiled approvingly. “Yes”, he said. “Return on investment is our priority. How does that affect your decision?”

dreamstime_xs_20863784“To tell you the truth, Father, that makes our decision much easier. Life insurance is the only form of insurance in which a claim is guaranteed to be paid. Each one of us must die; there is no avoiding that eventuality.” The son looked sad as he contemplated his own mortality, but forged ahead in a determined effort to complete his train of thought.

“No other insurance has this certainty,” he continued. “We have medical insurance, but may never get sick or hurt. We have disability insurance, but may never miss work. We have auto insurance, but may never have an accident. And so on with our home insurance, our professional liability insurance, and every other form of protection.  We may keep all these other policies for a lifetime and yet never file a claim. All the premiums will have been paid for benefits just in case they were needed. But with no claim, that benefit would never be collected.  Life insurance is a sure thing!” he concluded with emphasis. “If one holds on to the policy his entire life, the benefit will be paid. There is a guaranteed return on investment.”

“If, however, one selects term insurance, odds are he will drop the policy when it gets too costly. He will then deprive himself of the opportunity to realize a significant return.”

dreamstime_xs_34813421His father nodded in agreement. “Well done,” he said. “That is very important to know.” He sipped this tea and looked out the window. As the eldest son sipped from his own cup, he noticed birds he had never seen in their yard. They were blue with yellow tints. Their song was bright and beautiful.

Insuring Insurability

“We are off to a good start,” his father began again. “Now tell me: what is your next consideration on how to choose between term insurance and permanent life insurance?”

The eldest son felt encouraged by his father’s confirmation. He thought about his answer. After a few moments he stated, somewhat tentatively, “Father, I would say that the consideration of next most importance would be insurability.”

His father furrowed his brow in response. “Insurability!” he exclaimed. “Why is that the next factor in this decision?” Somewhat surprised by his father’s incredulity, the eldest son nonetheless persisted in his argument.

“Here is how I see it, Father. One can never take his insurability for granted. He may be young and healthy today, but in 10 or 20 years things may unfortunately be different. Many medical conditions strike one in the middle and later years.”

dreamstime_xs_10133911“Not only that, but one may adopt a lifestyle that could jeopardize his insurability. People take on adventurous hobbies such as rock climbing. Some may start a business or take a job that requires travel to undeveloped places overseas.”

His father seemed intrigued by his answer. “Those are very valid points,” he stated. “But tell me: what bearing does insurability have on how to choose between term insurance and permanent life insurance?”

Life is Cycles

The eldest son was up for the challenge. “Well, Father, think about this. People tend to think that life is a straight line. One moves from one stage to the other in a linear fashion. One stage is completed and then the next stage begins. There is no overlap.”

“But I do not think life is like that,” he declared with a serious tone. “I tend to see cycles in life, not straight lines”. Noting the appreciative look on his father’s face, the eldest son continued. “For example, when we are young adults, we get married and raise children. At some point our children grow and leave to form their own families. We then think we are done with dependents.”

“But look around us. More and more people, in their middle age are caring for their elderly parents. Their mother and father come to depend on them for some care and financial support.” He smiled at his father and grasped his hand affectionately. “You know I wish you the strength for a long and happy life.” he said sincerely. His father smiled fondly.

The eldest son moved past the moment and made his point.“But the fact remains that one may take on unforeseen obligations later in life. It could be financial support for a relative. It could be a loan to cover expenses. These responsibilities often need to be covered by life insurance. If one had purchased term insurance, but had terminated the policy, he will have to start over again in the marketplace. If any one of the aforementioned risk factors has developed, medical or otherwise, he may not be insurable. Or, if he is insurable, the price will be very high because he is now much older.”

dreamstime_xs_11105915His father appeared to digest the thought. “So you are saying” he offered, “that permanent insurance should be selected in case we have a need for a policy later on in life – a need we had not anticipated.”

The eldest son agreed. “Yes, Father, that is exactly what I am saying . Once one buys permanent insurance, he really does not have to worry about purchasing coverage again. He is never in a position in which his assets and his liabilities are without protection.”

“Most importantly, Father, he knows that the people he loves will be taken care of. They will never lack for money, even if he is tragically lost to them. That to me is peace of mind, and that is something I cherish.”

His father brought the tea cup to his lips and sipped slowly as he looked out the window. It seemed as if he was noticing things he had never seen before, even though the view had been the same for years.

After a while he looked at his eldest son with a smile. He spoke with gratitude and pride.

“As parents, we look for signs of how our children are developing. Asking you the question of how to choose between term insurance and permanent life insurance has been my way of probing beneath the surface of your mind. It is not just an effort to examine your financial thinking. It is really a way of learning your values.”

He rose and bowed to his eldest son. “Come! Let us walk together and enjoy the day.”

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Joint Survivorship: When One is More Than Two

Last will and testamentThis article, written by Veronica Daugher, does a fine job of identifying the potential benefits of joint survivorship and a two-insured life policy.

These include:

  • Liquidity for both federal and state estate tax;
  • Protection for illiquid assets, such as a private business, a real-estate portfolio or an art collection;
  • Tax-free funds for heirs to replace the value of assets a decedent left to charity;
  • Estate equalization for people with many children, regardless of net worth. Parents may leave the family home to a child living nearby, then try to equalize their children’s inheritance by making their other children the beneficiaries of the policy;
  • Special-needs-trust planning.

Daugher writes that the premium for two people in a joint survivorship policy is frequently lower then the premium would be for an individual policy on each spouse. I would add that this is especially important if one of the potential insureds has a serious illness, or other higher risk factor.

Do you have assets to protect within your estate? What kind of challenges have you encountered in your efforts to purchase life insurance for this protection?


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