Tag Archives: universal life insurance

Increasing Premiums For Universal Life Insurance

Most people who have financial dependents have a genuine need for life insurance. ?But for the majority of those people, a simple term life insurance policy can fulfill that need in a relatively uncomplicated, inexpensive manner. ?A term policy purchased in early to mid adulthood that lasts for 20 or 30 years (with a fixed premium during that time frame) will protect most families throughout the time when they are financially responsible for children and debts like mortgages. ?After the children are grown, and the mortgage is paid off, and especially after retirement, there is much less of a need for significant life insurance death benefits for most people.

For some people with more complex financial situations (such as a family business that they would like to leave to their heirs, for example), permanent life insurance may be a more appropriate choice. ?But such policies are much more expensive than term life insurance, and tend to be more complicated too. ?For people who really only have a genuine need for the protection offered by term life insurance, the investment benefits associated with permanent life insurance can usually be obtained in a more straightforward manner by simply investing the additional premiums that would have been needed to purchase permanent life insurance.

Although permanent life insurance products can be a useful tool for some clients, purchasing them might not be truly the best financial move for many people who might be better served by a basic term life insurance policy and a separate investment program to accumulate money for later in life and/or to pass on to heirs. ?However, the commissions for agents who sell permanent life insurance is significantly higher than the commissions for term life insurance policies, in part because the policies themselves are so much more expensive. ?This can potentially create a conflict of interest if a client is taking policy recommendations from an agent who will receive the commission for whatever policy is ultimately purchased.

In a reminder that Universal Life insurance (a form of permanent life insurance) premiums are not fixed, a recent class action lawsuit in CA ended with a federal judge ruling that Conseco Life Insurance Co. cannot triple premiums for 50,000 policy holders who have had their policies since the late 80s and early 90s. ?The courts got involved because the proposed premium increases were so significant, but the complexities of universal life insurance include a lot of flexibility in terms of premiums. ?If interest rates drop (as was the case for people who bought policies in the 80s, when interest rates were much higher than they are today), future premiums can increase significantly. ?Although the court has ruled that Conseco cannot triple the premiums for those policy holders, there’s no set limit for how much premiums can increase. ?Older policy holders who have had their coverage for decades can find themselves unable to keep their policy in force if premiums rise beyond what they can afford.

Anyone in the market for a life insurance policy should be well aware of the differences between term life insurance and permanent life insurance, and should understand the long term implications of each type of coverage before selecting the best option for their particular situation.

Term Life Insurance Sales Lower In Second Quarter

There was a sharp increase in the number of life insurance policies sold in the first quarter of 2010 when compared with the same time period in 2009. ?And now the second quarter of 2010 has posted another strong increase. ?Compared with the second quarter of 2009, annualized premiums for individual life insurance policies were up 7% in the second quarter of this year.

Whole life, universal life, and variable universal life are all being purchased more this year than last year. ?But term life insurance did not show gains; annualized premiums for term policies dropped 11% in the second quarter of 2010. ?I find this interesting, given that term life insurance tends to be the most appropriate choice for the majority of the population that needs to secure death benefits.

It’s possible that the slowly-rebounding economy is responsible for the shift from term to permanent life insurance products, and for the overall upswing in total annualized premiums. ?For the last couple years, the recession has meant that most of the country has been tightening their budgets. ?Term life insurance policies are a lot less expensive than permanent policies, so for people who needed to buy life insurance during the recession, term products were likely more popular. ?But now that the economy is showing signs of recovering, people may be more apt to purchase higher-cost permanent life insurance policies that grow cash value or include an investment component. ?It will be interesting to see how the numbers play out for the rest of 2010… will term life insurance policy sales bounce back, or will the growth of permanent policies continue?

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.

Universal Life Insurance

A Good Long Term Investment

life-insurance-colo A universal life insurance policy is more flexible and less expensive than a whole life insurance policy, but the interest rates have lower guarantees. Premiums may be increased or decreased by the policyholder within policy limits in order to change the policy as needs change. The amount of life insurance may be increased, subject to evidence of insurability, or decreased subject to minimums set by each Colorado life insurance company. Loans can be taken from the policy once it has gained a cash value, but can reduce the cash surrender value and death benefit. Withdrawals may also be taken but can also reduce the cash surrender value and death benefit.