Life Insurance Buying Tips

Are life insurance policies taxable when collected?

Filed under: life insurance — Alston @ 1:00 am March 23, 2014

Life insurance death benefits are typically not taxable to the beneficiary.  However, of no beneficiary is named, or the beneficiaries have predeceased the insured person, they can be.

You can expect to pay taxes on any interest you earn on the life insurance proceeds.  If you receive the death benefit in installments, some portion of the installment will be considered interest income.

You can find more information about how life insurance is taxed here.

If the estate is the beneficiary of the policy, the proceeds can be subject to estate taxes if the total value of the estate is large enough.  If no beneficiary is named, the estate is the beneficiary by default.

Life insurance allows an individual to leave large amounts of money to their loved ones without the tax consequences of associated with other types of assets.

Tips for Buying Life Insurance #1

Filed under: life insurance — Tags: — Alston @ 1:21 am October 19, 2013

Tip 1 Determining How Much

How much life insurance do you need? If you have no dependents, the amount of insurance you need may not exceed the cost of a funeral. If you do have a spouse, children a family or other people who depend on your contributions, you may need much more.

Even if you don’t work outside the home, your loss may severely impact your family’s financial health. The typical stay-at-home parent provides services that save the family tens of thousands of dollars each year. Unless these services don’t need to be replaced, they probably will need to be paid for if the stay-at-home parent dies before the children become adults.

If your contribution to the family includes the money you are making, obviously the loss of your income would have an impact as well. However, financial plans that do not take into consideration the value of child care is lacking for any family with young children.

The formula for determining how much coverage you need is easier to state and understand than it is to execute or estimate. You need to determine the financial impact of the loss on an annual basis. Then determine how many years the impact will last. Then determine how much coverage you will need to generate that income each year. Then you need multiply that amount by an estimated inflation factor.

Here is an example: Mr. Jones takes home $80,000 a year. He provides the benefits for the family also. You can deduct from that $80,000 any amount that the family saves unless you want to maintain that amount of savings. You can deduct the amount that is spent on Mr. Jones for food, clothing, transportation, etc.

You now need to determine how many years you will need to replace Mr. Jones’ income. This could be the number of years until his youngest child graduates from school.

Then you need to determine how much money would be necessary to generate that amount of money for that number of years. You could simply multiply the number of years by the amount of money or you could factor in the interest that the corpus could earn.

Factoring in inflation is guess work, but some attempt should be made at guessing. You probably couldn’t’ live on the amount of money you made ten years ago. Your family may not be taken care of properly if their income stays flat for the next ten years.

Does Life Insurance Cover Murder?

Filed under: life insurance — Alston @ 12:19 am February 28, 2012

There was a time in the early twentieth century when unscrupulous people purchased life insurance plans on strangers and profited when they died. This gave them an incentive to murder the insured person.

If caught, the murderer would not receive the proceeds.  Beneficiaries who were not involved in the crime could however receive the life insurance proceeds.  Insurance protection included coverage for murder, but a convicted murderer could not benefit from his or her crime.  This is the case today also.

This unsavory business ruined more than one family. The incentive to receive death benefits from a life insurance policy caused many suspicious deaths.

Today a beneficiary can still receive money when the insured is murdered. Instead of limiting the terms of life insurance policies in a way that might disenfranchise widows and orphans, the insurance companies have made other changes.

The insurance companies limit the face amount of their policies on a case-by-case basis. The primary factor is the insured’s income. This means that unless your eight-year-old is a movie star, you will not be able to get a one million dollar life insurance policy on her. The payment of a death benefit that is too high, can add incentive to fraud and murder even for some parents.

The amount of insurance that a person who works for a living can get is largely associated with the amount they are paid in their business or job. The amount needed to provide for a family is higher than most think. Coverage that is twenty times an insured’s annual pay is usually well within the limits imposed by the insurance carriers.

In addition to limiting the amount of coverage that a person can get, the insurance companies generally require that the insured sign the contract. Another party can pay the premium, but the insured should be aware that he or she is insured.

Another change is the limit on who can be listed as a beneficiary when the contract is drawn. The insurers try to make sure that the beneficiary has a financial or other interest in keeping the insured alive. The costs of losing the insured party, whether emotional or financial should be greater than the amount of money the beneficiary receives.

The beneficiary must have what is known as an “insurable interest.” Family members are usually assumed to have an insurable interest. Business partners are also assumed to have an insurable interest each other.

There are much fewer suspicious accidental deaths today than there were before these changes were made. The carriers have limited the potential amount of death claims. They have required the signature of the insured party in most situations. They have also limited the people can receive money when someone dies. This has reduced the number of court cases where insurance was the motivation for a person being killed.

These changes have also had a positive impact on rates. It has also affected the lives of the many that now live for more years than they would have otherwise.

Burial Insurance for Seniors

Filed under: senior life insurance — Alston @ 11:33 pm February 20, 2012

Whether you have parents who are seniors or are a senior yourself, you have probably thought about life insurance for the elderly. If this is the case, you have several things to consider:

  • Do you already have enough life insurance?
  • Do you have other liquid assets that can be used for your final expenses?
  • Will your family have other financial needs after your funeral is paid for?

Perhaps when your current insurance pays, the check from the company will enough to cover all the costs of your funeral service plus your burial or cremation. If you have a policy or have policies that provide enough coverage, there is no need to purchase a separate policy.

There is no need to go through health screening and pay premiums year after year, if you have enough life insurance or enough of your assets will be liquid at the time of your death.

Many senior citizens are underinsured for life insurance. This means that their families will, in many cases, have to take money from their personal investments at the time of their death. Since your family can not buy burial insurance after your death, the time to act is now.

Chances are you can be covered with an affordable policy very easily. Many applications only ask medical questions, but do not require an exam.

Through our site, you can contact an agent who can help you find a policy with low premiums that will cover your needs. You may be surprised at the rates; many companies offer policies with reasonable premiums for people over 50, 60 and even 70.

It pays to start planning now. You can request quotes for senior life insurance and get information on not only the prices, but also the terms.

Does Life Insurance Pay For Suicide?

Filed under: life insurance — Alston @ 7:56 pm January 24, 2012

Life insurance does pay for suicide in many cases. At one time life insurance companies were able to deny claims by alleging that the cause of death was suicide. In some cases, the evidence was ambiguous at best.  Widows and orphans were defrauded in many instances.

A family that should have been the beneficiary of a life insurance policy had to live without that money. The premium paid should have helped to make their lives better. Instead, they had to make do without the death benefits that they expected to receive. The life insurance company did not live up to the guarantee as expected.

This caused a change in the law. Insurance companies can still deny claims based on evidence that the insured killed him or herself but this right was limited. As a rule, the terms of an insurance policy will not allow them to deny claims because of suicide on policies that are beyond their incontestability period.

The standard incontestability period is two years. This means that if the coverage was in place for at least two years a payment to the person listed as the beneficiary should be made. They should expect to receive the death benefits and not a bunch of questions regarding a possible suicide.

Having no limit in the contract regarding suicide clause would also be problematic. A suicidal person who buys a life insurance policy now has to wait two years before executing his or her plans. This waiting period makes it less likely that the people who have a mental illness and/or suicidal thoughts will use the financial gains their family would receive as an additional incentive to end their lives.

Life insurance can help provide the cash your family needs. When an individual with dependents dies or becomes disabled, there is likely to be an amount of money that is taken out of the family budget.

Get the information you need to help your family have the income it needs to survive. You can request free disability and life insurance rates and info on this website. Whether you are looking for a burial policy for seniors, or need information for a family life plan we can help.  You will get rates and contact information for an agent who can provide answers for your questions.

Life insurance for Parents

Filed under: life insurance,senior life insurance — Alston @ 6:31 pm October 6, 2011

Can you buy life insurance for your parents?

If your parents are of sound mind, they will need to agree to and sign any life insurance application on their lives. You can, of course, do all the research for them and bring them a contract to sign.

If you have parents who are not competent to make decisions about their coverage due to their being elderly or due to their suffering from dementia or something similar, you may be able to buy coverage for them without their consent. You will need to have the legal right to make financial decisions for them to be able to buy a senior life insurance policy on their behalf. Unfortunately, age and certain illnesses can mean that certain life insurance options will not be available to them.

As their child, you can be the beneficiary. You can also pay for their policy. You are presumed to have an insurable interest. Insurance companies will want the beneficiary to have more to lose at the insured person’s death than they will gain by the life insurance proceeds.

(Before the concept of insurable interest was used for life insurance, people purchased life insurance policies on strangers. In some cases these strangers were killed for the life insurance proceeds.)

Life insurance for young parents

Parents of young children or older children who are dependent on their parents’ income should have life insurance protection. A face amount of twenty times one’s annual income is recommended by many experts.

If you are planning to have a child, be sure to get your life policy in order before you conceive. This is because insurance companies will not allow expectant mothers or fathers to get life insurance.

In the event that the father or mother waits to get insurance and one of them dies before the baby is born, the baby will be adversely affected. He or she will have only one parent and much less money. You can prevent this from happening by addressing your need for life insurance protection before you start trying to have a child.

What Is Modified Benefit Whole Life Insurance?

Filed under: life insurance — Alston @ 8:14 pm September 13, 2011

Modified benefit life insurance is a life insurance contract that will not pay the full death benefit unless the insured lives for a minimum period of time after the effective date of his or her policy. If the insured person dies during this period of time, the beneficiary will typically receive an amount equal to the premiums paid plus interest.

This period of time is usually two or three years. This allows the insurance company to receive premiums for this period of time without risk.

Why would anyone buy a modified burial insurance policy?

People purchase modified policies because for two reasons. The first is because they don’t know any better. They may not believe that there are other policies available to them. The other, more legitimate, reason is that they don’t qualify medically for an underwritten policy.

These policies are typically purchased by seniors who are afraid that their medical condition would keep them from purchasing a policy that involves an exam or other medical underwriting. Sometimes this is true, but often a senior will qualify for a cheaper policy than they are offered.

Conditions like lung cancer and heart disease might prevent a person from qualifying for a cheaper policy. However, high blood pressure and high cholesterol and other common conditions are unlikely to impact one’s insurability.

Before agreeing to purchase a modified benefit policy, one should make sure that they investigate other life insurance policies to make sure that a better, cheaper policy isn’t available to them.

Are Final Expense Policies Too Expensive?

Filed under: life insurance — Alston @ 8:02 pm April 30, 2011

Final expense or burial life insurance policies can be an important part of an individual’s financial assets. This is true for some but not for all.

Although these policies are typically very inexpensive they may not be a bargain for many seniors. Why? These insurance plans can be much more expensive per dollar of coverage when compared to other types of life insurance policies.

In most cases these are modified benefit policies. In many cases, this means that if you die in the first year or two after purchasing your policy, your family will only not receive the full death benefit. Often the benefit paid to the beneficiaries of these policies is limited to the premiums paid into the policy.

Often the advertisements for these types of life insurance policies focus on the ease of qualifying for coverage. When a policy is easy to qualify for, the insurer is likely to charge more for that policy.

This is similar to loans that are too easy to qualify for. The bank is likely to charge a higher interest rate if it isn’t allowed to investigate your finances.

Life insurers who don’t check into your medical records are also likely to charge more for life insurance. Before purchasing a no medical exam life insurance policy get quotes for traditional life insurance policy.

You may be pleasantly surprised by the life insurance options available to you even if you are not in perfect health. You may be pleasantly surprised by the low cost.

Final Expenses Life Insurance Policies Do You Need One?

Filed under: life insurance — Alston @ 3:35 am April 26, 2011

Burial or final expense life insurance policies are often sold to seniors who fear that they don’t have enough coverage.

Both life insurance providers and their policyholders benefit from these policies. However, sometimes the policies are purchased by people who don’t need the coverage.

Life insurance does not have to be the source of the funds used to pay for burial and other final expenses. Savings or other assets can be used to take care of these costs.

If however, your assets are limited a final expense policy may be the protection you need. It can reduce the burden on your loved ones.

These policies are often very inexpensive because the face amounts are low. Often they are just enough to cover the cost of a simple funeral.

If you have assessed your other insurance policies and your other assets and determined that you won’t leave enough behind to cover your final expenses consider purchasing a small life insurance policy to protect your family.

What is Final Expenses Insurance?

Filed under: life insurance — Alston @ 3:02 am April 21, 2011

Final expenses insurance is a type of life insurance that is designed to pay for one’s final expenses. These expenses can include the cost of a funeral and unpaid medical bills.

These life insurance policies are usually whole life policies. They are typically purchased by seniors, but many younger people also purchase these policies.

The monthly cost for these policies is often quite low. However these policies often cost more per thousand dollars of coverage than other policies.

Be sure to check other options before settling on a final expense or burial policy. You may have enough insurance without purchasing an additional policy. Your family may have access to other assets at the time of your demise.

Insurance to pay for your final expenses can be important. However, be sure to shop around for the best option.

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