Author Archives: Jay

Increasing The Amount Of Life Insurance Money Exempt From Creditors

The 2010 Colorado legislative ended last week, with mixed reactions from lawmakers (seemingly divided along party lines in terms of whether they felt that the session was bipartisan or not). ?One of the bills that passed was Senate Bill 147, sponsored by Senators Lundberg, Penry, King K., and Sandoval.

SB 147 will allow up to $100,000 of life insurance proceeds to be exempt from the insured’s creditors. ?This law will go into effect on September 1, 2010. ?Until then, the current cap of $50,000 will apply. ?26 states have an unlimited exemption for the protection of life insurance settlements from an insured’s creditors. ?The new Colorado law will bring the state a little closer to the protections offered to beneficiaries in other states, although $100,000 still isn’t really a lot of money in terms of protecting a family’s financial future if the primary earner dies.

Owning Fast Food Stock Not Such A Bad Thing

A few weeks ago, a news story broke about health and life insurance companies owning stock in fast food companies. ?The story was quickly picked up by bloggers and spread around the internet as an example of the evil practices of insurance companies. ?From the beginning, I saw it differently. ?Any publically owned company (as most health and life insurance companies are) has a responsibility to its shareholders to do what is in the best financial interest of the company. ?In the case of life and health insurance companies, premiums are typically invested before they are used to pay claims, and it makes sense that they should be invested in the stocks that will make the most money.

The Notwithstanding Blog recently published an excellent article detailing the reasons why the tiny percentage of fast food stocks owned by major health and life insurance carriers is insignificant when compared with their overall portfolios, and also not detrimental to their policyholders. ?In fact, if stock market profits are used to help keep premiums lower than they would otherwise be, policyholders are financially better off than they would be if the insurance companies were invested in a less profitable stock.

Would we be better off without fast food restaurants, or with far fewer of them? ?Probably. ?Would we be healthier and our health and life insurance premiums be lower? ?Maybe, although it’s reasonable to expect that people might find other sources for junk food. ?We pay insurance companies to protect our assets and our financial futures (and those of our loved ones) in the event of an illness, injury, or death. ?Their chief responsibility to us as policyholders is to remain financially solvent and profitable in order to be able to pay claims as they arise. ?Investing in profitable stocks is a good way to go about that, and the fact that some of those stocks are in fast food companies is irrelevant.

In addition, I’m curious as to how many of the people who are outraged by this issue own mutual funds or index funds that hold some stock in fast food companies. ?McDonalds is part of the Dow and the S&P 500, so it’s likely included in a lot of basic funds.

Life Insurance Popularity Increasing

The first quarter of 2010 has seen an sharp increase in the number of life insurance policies purchased, compared with the first quarter of last year. ?It does make sense that after the economic problems of the last couple years, that people would be more focused on managing risk now than they were before the recession. ?Term life insurance is especially appropriate now for risk-averse clients, as it is an inexpensive way to provide financial security for one’s family, without concerns about stock market volatility.

Certified financial planner Carl Richards had a great article on the New York Times blog last month, about why life insurance shouldn’t be treated as an investment. ?The napkin drawing is chuckle-worthy, but it also makes a really good point: ?for most people, it’s a better idea to keep investing and life insurance as separate entities. ?There are exceptions, such as people who need to generate cash upon their death to pay estate taxes on assets like real estate or a business that they would like to pass to their heirs without selling. ?For situations like that, the financial obligation won’t diminish over time and the life insurance policy needs to be permanent. ?But for most people, the need for life insurance does indeed diminish over time as children finish college and mortgages get paid off and net worth grows. ?For many people, the need for life insurance after retirement is low, as there is no longer an earned income that would need to be replaced.

For people who still have many years of work ahead of them – and many years of financial obligations – now is a great time to look into securing life insurance. ?A term life insurance policy will allow you to lock in the premium based on your current age, and is a great way to protect your family’s financial future without taking financial risks.

Electronic Underwriting Coming To Life Insurance

At Insurance Shoppers, we’re big fans of things that can be done electronically. ?We switched to an electronic fax system years ago, and long ago made the change to electronic application for all of our health insurance clients. ?So we’re excited about Hooper Holmes’ new iParamed e-Exam, which can create a complete digital case file for any life insurance applicant in the US.

Roy Bubbs, President and CEO of Hooper Holmes, noted that life insurance carriers spend an average of $500 to underwrite an application, and he believes that his company’s product that reduce that amount by half. ?My guess would be that it will also speed up the underwriting process, much as the electronic application process for health insurance policies reduced underwriting times for some policies from weeks to days over the last decade.

The iParamed e-Exam technology will come out in four stages over the course of the next several months, and will be fully operational by the end of 2010. ?Nine life insurance companies (hopefully including some that we work with here in Colorado) will be using the technology initially, and my guess is that the rest will soon follow, either with the Hooper Holmes product or with a similar electronic system.

What You should Know About Permanent Life Insurance

A recent article on CNN Money lists five things you should know about permanent life insurance:

1. ?It might be more coverage than you need… or at least coverage for longer than you need. ?Because permanent life insurance is so much more expensive than term life insurance, people might get a lower face value than they really need, but end up with life insurance long after their children are grown and the house is paid off. ?It usually makes more sense to purchase a less expensive, higher face value term policy, which will truly provide financial protection to your family while they need it – ie, while children are young, college still has to be funded, and payments are still being made on the house.

2. ?It may not be your best investment. ?The idea with permanent life insurance is that it provides a death benefit, but also builds cash value via investments. ?But for most people, it makes more sense to purchase insurance separately from investments. ?It’s hard to tell where your money is being invested in a permanent life insurance policy.

3. ?But in rare cases, it’s just the ticket. ?I would say that these are very rare cases, but they do happen.

4. ?The right flavor makes all the difference. ?Deciding among the three types of permanent life insurance policies (universal, variable, and whole) will likely require extensive research and/or a meeting with a financial advisor.

5. ?Dumping a policy will cost you. ?It takes many years for the cash value in permanent life insurance policies to build up to a significant amount of money. ?If you cancel a term policy early, you’ve only paid for the life insurance protection you got during the years you had the policy. ?But if you cancel a permanent policy in the first 10 or 15 years, you will likely have paid a lot of money (above and beyond what you would have paid for just having the death benefit of a term policy) and get very little in return. ?A permanent policy is really only appropriate if you know that you’ll stick with the policy for the long term.

Permanent life insurance is a good option for some people. ?But if you choose to purchase it, make sure that your decision is based on independent research or advice from a qualified professional who does not have a vested interest in your decision. ?The premiums – and thus the commissions – are significantly higher on permanent life insurance policies; if the person advising you to opt for a permanent policy is also making a commission based on the policy you buy, you might want to get a second opinion.

Do You Have Enough Life Insurance?

Earlier this year, Louise and I came across this forum thread about a family and their life insurance situation. ?It’s a sobering conversation for sure, but one that inspired us to increase the amount of life insurance we have. ?Before we read that thread, we were content with our relatively small face value term life insurance policies. ?They would be enough to pay off the mortgage with some left over, but we weren’t really looking at the big picture. ?We have a toddler now, and if one of us were to die young, it’s important to us that the surviving parent would be able to focus primarily on raising our son, rather than scrambling to make a living while taking care of him at the same time.

If you have life insurance through your employer, be sure you know how much coverage it provides and how far that would go. ?If you need to add additional life insurance coverage, a basic term policy of 20 or 30 years will probably do the trick. ?Premiums are based on age at issue, so the younger you are when you get your policy, the less you’ll pay for the life of the policy. ?And since life insurance policies are medically underwritten, the healthier you are, the better rate you’ll get. ?The time to make sure that your family is protected is today.

Extreme Sports And Life Insurance

Many Americans get life insurance as a benefit from their employers, but the amount provided is often not enough to really provide for a family. ?For this reason, a lot of people seek out additional life insurance coverage on their own. ?Term life insurance policies are very inexpensive, especially when compared with the cost of things like health insurance and long term care insurance, but those prices can increase dramatically if a person is unhealthy or participates in anything that life insurance companies deem to be risky activities.

As an example, if you’re a very healthy 35 year old, you’ll probably find it relatively easy and inexpensive to secure several hundred thousand dollars worth of term life insurance. ?But if one of your hobbies is rock climbing, the premium on the life insurance policy can easily be tripled or quadrupled by most carriers. ?The standard underwriting action in a case like this is to bump the rate from “preferred best” to “preferred” and then to add an additional annual amount ($2 – $2.50, for example) for every thousand dollars in life insurance coverage. ?So a half million dollar policy can easily increase in premium by more than $1000/year if the applicant participates in “risky” activities.

However, underwriting does vary from one insurance carrier to another, and some are more lenient than others for specific activities and health conditions. ?If you’ve applied for a life insurance policy in Colorado and received a rate increase because of health or lifestyle, there may be other options that would allow you to purchase the same amount of insurance for a lower premium. ?We can compare options for you and help you find the best value for your insurance dollars, and there is never a charge for our services.

Aflac Enhancing Life Insurance Benefits

Aflac is enhancing its life insurance policies in response to consumer interest. ?Most Aflac coverage is purchased by employees through their workplaces, and Aflac is now making it possible for employees to take their life insurance policies with them if they change jobs. ?Many Americans have only the life insurance that they get through their employer (through a program like Aflac, or as an add-on to their group health insurance policy), so the ability to take their policy with them if they change jobs will provide some much-needed security.

Aflac is also adding to their coverage options, with higher face value policies available than they had in the past.

We work with an Aflac representative here in Colorado, who can provide life insurance as well as a range of other products for you and your employees. ?Please contact us if you would like additional information.

Regular Term Life Or Return Of Premium?

If you’re looking at term life insurance, you might be considering a return of premium policy. Return of premium policies are more expensive than traditional term policies, but you get all of your premiums back at the end of the term, assuming you’re still alive.

Determining whether return of premium life insurance is a good choice depends a lot on your own habits, goals, and tolerance for risk. Let’s consider a hypothetical situation of a 35 year old female who is looking for a $1 million, 30 year term policy. Let’s say she can purchase a traditional term policy for $650/year, or a return of premium policy for $1175/year.

If she buys the traditional term policy, she will spend $19,500 on the coverage over the course of 30 years ($650 x 30). This money is gone forever, but it has done its job of purchasing peace of mind for her and her family.

If she buys the return of premium policy, she will spend $35,250 on the coverage ($1175 x 30), but if she is alive at the end of the 30 year term, she will get the entire amount back. This option costs a total of $15,750 more than the traditional term policy, so the trade off between the two policies is what she could have done with that money if she had purchased the traditional policy instead.

Here’s where an investment calculator comes in handy. The return of premium policy will cost $525 more per year than the traditional term policy. We can use an investment calculator to determine what sort of return she would have to get on that money if she invested it on her own, in order to end up with at least a total of $35,250 at the end of 30 years (since that’s the amount she will end up with if she buys the return of premium policy).

There are numerous online investment calculators that you can use. Each person’s situation will be different in terms of taxes (ie, one person might choose to invest the difference between the premiums in a traditional IRA, with tax-deferred growth, while another person might put the money into a taxable brokerage account) so I’m focusing solely on the growth of the money without taking taxes into consideration. Here is an example of a simple calculator that you can use to determine the effective rate of return that the return of premium policy is giving you.? For our hypothetical lady, we can input 30 years, an initial principal of zero dollars, and an annual investment of $525.? We can reduce the tax rate to 0%, but if she is investing her money in a taxable account, that amount will have to be increased.? Then we can move the little blue arrow on the rate of return line until the investment total (in blue at the top of the calculator) gets to at least $35,250.? For our lady, this happens at 4.8%, at which point, her investment would be worth $35,324 after 30 years (if she invested her money in a taxable account, her rate of return would have to be higher to offset the loss to taxes).

So if this lady were to get average returns of more than 4.8% in another investment vehicle, she would be better off getting the traditional term policy.? But if she likes the idea of a guaranteed rate of return and forced savings, she might be better off with the return of premium policy.? The final decision will be up to you, but understanding the numbers behind the premiums will likely make the decision easier.

Why Use Insurance Shoppers?

Why Use Insurance Shoppers to Buy Life Insurance?

about We are independent life insurance brokers, with no allegiance to any particular company. This gives us the freedom to help our customers choose the life insurance that truly fits their financial situation and risk tolerance. We can look at a wide variety of Colorado life insurance companies and get quotes on many types of insurance and different risk classes. By letting us know your health, driving, and family history up front, we can let you know what life underwriting class you will be classified into and get you the right quotes the first time.

We have a relationship with each of the life insurance companies that we represent. This allows us to serve as advocates for our clients, and help them get in touch with the right person when they have a question about their policy.

We have a very good working knowledge of the companies we represent:

  • benefit options
  • stability of the life insurance companies
  • underwriting and health class guidelines for each company in Colorado . Each company has a different set of underwriting guidelines to determine what classification you will be. From preferred plus, ultra preferred, preferred, standard, and many different smoking classes, we will know what company will benefit you the most based on your health history. This can save you a lot of time and frustration getting this figured out before actually applying and jumping through the hoops for each company.

We’re free. We get paid commissions by the insurance companies so the quotes are the same if you use a broker or go directly through the insurance company. Most life insurance in Colorado is done with the help of brokers because there is no disadvantage and there are many advantages to using a knowledgeable broker to guide you in the right direction. You will always get the lowest premium for the same coverage by purchasing your Colorado life insurance through us because we can shop for the life insurance plan that fits your financial situation and tolerance for risk using our expert knowledge of how each company grids pricing, underwriting guidelines, and takes risks with their money. We will also give you more personalized attention, and a balanced perspective about the advantages of choosing one policy over another. We can also act as a liaison between you and the insurance company if you ever have any questions or problems.
The Colorado Division of Insurance polices the pricing of life insurance, so no insurance company or agency is allowed to sell at a price that is any different from the price set by the commission. So we can find the best plan for you at no cost. For years, we have been highly recommended in Colorado as a no hassle agency able to find the best life insurance for your financial plan.

We continue to be there for our customers after their policy is in force. We can always analyze different options as your financial needs change and keep you current. This will always help you know that you are getting the best deal available and that you have the best coverage you can get for your family.

We have designed this interactive web site where our customers can compare prices, get details on various Colorado life insurance policies, download applications on their own, and even apply online. We shop over 75 companies such as American General (AIG), Zurich/Chase, Banner Life, Empire General, First Colony, Transamerica, Lincoln Benefit Life, MONY, Protective, Prudential, Transamerica, Travelers, West Coast Life, United of Omaha, Fidelity & Guaranty, and many more. Get as far as you like by yourself until you would like our assistance. We will always be there to answer questions or help with applications if needed. but we have the web site in order to provide a no-pressure setting for clients to compare options that are available for them. Colorado Life Insurance disclaimer