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Life Insurance Simplified!
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Attention: Employers Offering: Benefits to the Employees, At No Cost to the Employer! |
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Need additional information? 1. Term vs. Whole Life ( Part II ) 2. Universal Life vs. Whole Life |
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The
purest form of life insurance is an annually increasing term insurance
policy. Each year, as you get older, there is a need for a higher
premium because the risk of your death increases with age. Again,
this is pure insurance and you are being charged for the cost of the
current insurance premium ( plus the insurance companies expenses and
profit ). In order for a person to budget his/her expenses, a person may purchase a 5 year level term insurance policy. With a 5 year level term insurance policy, you pay the same premium for 5 consecutive years. You are overpaying in years 1 and 2 and underpaying in years 4 and 5. If you want your insurance to continue, a new premium begins in year 6 and remains constant for the next 5 years. The same would occur with a 10 year level term insurance policy, which will provide you a level premium for 10 years before increasing. There would be 5 years of over payment followed by 5 years of underpayment. No matter how many years your term policy covers before an increase in premium, you are going to be overcharged in the early years and undercharged in the later years. This my friend, is exactly what happens in a whole life insurance policy! You will overpay in the early years and underpay in the later years. The Whole Life insurance policy covers you for a term of "from your current age" to age 100 (sometimes age 95). In summation, a Whole Life Insurance policy is a Term Insurance policy. With whole life, however, the term just happens to be longer and you may get dividends from the overpayment of premiums.
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The insurance industry's answer for those wishing to buy term and invest the difference. |
Whole Life Insurance Whole life insurance is designed to be in effect for the entire life of the insured. |
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Premium is Flexible and consists of 1. Cost of Term Insurance (must be paid) 2. Policy Fee and / or administration fee(s) (must be paid) 3. Excess premium receives interest. A. The amount of excess premium is optional B. Policyholder decides premium based on personal finances |
Premium consists of: 1. Current cost of insurance 2. Insurance company's expenses 3. Insurance company's profit 4. Cost of future premiums
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Premiums may be
adjusted as needed ( even stopped ), as long as, the total cash value
generates enough interest to continue to pay the cost of insurance and any
admin fee(s). Premiums may even be increased to take advantage of the tax deferral on the interest. There will be a maximum allowable by law. |
The initial premium is guaranteed for the life of the insured. The
"Cost of future premiums" or overcharge is invested so the
"guaranteed" premium never changes.
When premiums cease, policy "MAY" remain in force, if set up properly. This is not possible in the early years of the policy. |
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If no death
occurs, all excess premium, plus the interest that it earned is available
to the owner of the policy.
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If no death occurs, dividends (return of premium) are available to the insured in the following forms. 1. Applied to reduce premiums. 2. Paid in Cash 3. Option to purchase "paid-up" life insurance 4. Left on deposit to accumulate interest 5. Option to purchase additional 1 year term insurance. |
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Important to know: There is a "guaranteed" interest rate on the excess premium, as well as, a current interest rate on the excess premium. There is a "guaranteed" mortality rate (cost of insurance), as well as, a current mortality rate, which will be a lower premium. Insurance company makes their money on policy fees, administration fees, and any interest earned over and above the interest you are paid.
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When you purchase a policy with a mutual company, you become one of the owners. The life insurance company's profits are returned to the policyholders in the forms of dividends. By definition, a dividend is a return of premium. The Mutual Insurance Companies write "Participating Whole Life" Insurance. There are a few companies that even pay dividends on their term insurance. |
Stock Insurance Company Owned by the Stockholders such as those on Wall Street Stockholders must receive their profits first. Afterwards, the insurance company provides dividends to the policyholders. Stock Insurance Companies write "Non-Participating" Whole Life Insurance. They often write "Interest Sensitive" Whole Life. visit us at www.BESTenrollments.com |
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A life insurance policy designed to pay off your mortgage in the event of your premature death. There are no payments in the event of a disability due to sickness or injury.
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Homeowner's Insurance An insurance policy that provides the following protections: 1. Insurance in case there is a fire in your home. 2. Insurance in case your home is burglarized. 3. Liability insurance in case someone is injured at your home. 4. Your mortgage will not be paid off in the event of your death! 5. There is coverage for additional risks and items. There are also many limitations and exclusions. Read your policy carefully |
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All articles written by Joseph Chappine, Director of enrollments
Offering "Benefits for the Employee, at No Cost to the Employer!
