Bank Owned Life Insurance – Everything to Know

Bank owned life insurance or BOLI is a life insurance policy which is purchased by a bank against the lives of its executives. State insurance law has made it advisable for the bank to have an insurable insurance as the bank suffers loss if the employee deceases. The executive’s consent is required but his/her involvement ceases after the initial signing of the contract. The insurance cash values accumulate at a tax-free basis at the net crediting rate.

Types of Bank Owned Life Insurance

There are mainly three types of bank owned life insurance based on the investment point of view-

  1. General account: These investments are usually not required to be bank eligible. These are the general investments, real estate loans and all other assets that come within the general fund offered by life insurance companies.
  2. Separate account: The underlying investments in this case are typically bank eligible bond funds which are generally designed by well-known fund managers and also managed by them.
  3. Hybrid account: The underlying investments in this type are bank eligible investment pools that are designed by the insurance companies and also managed by them.

The percentage of transparency in the disclosure of the policy’s yield and costs is a chief distinction between the three types of BOLI. The general account yield of the insurance company is indirectly proportionate to the net yield that the bank receives. The insurance carriers reserve the right to pay up any appropriate rate according to their perspective. A desire to be competitively priced could influence the market rate paid on the general account BOLI. This is similar to the concept of interest rates offered by the banks where the banks can adjust rates if they choose. While in the case of separate account and hybrid BOLI, all costs incurred in the underlying investments are entered in the documents and contracts. This ensures greater transparency of costs and interests.

Characteristics of BOLI

It is a typical characteristic of all insurance policies where the older the individual is, the higher the insurance cost. However, this is not necessarily so in case of bank owned life insurance. Calculating the long-term internal rate of return the high insurance costs may be offset with the receipts of the insurance when the employee dies. As many banks and organizations have objected to benefiting from the death of an employee, insurance companies have come up with specialized solutions including a smoothened mortality feature.

Band Owned Life Insurance Basics

Bank owned life insurance explained in a basic level involves the buying of life insurance in a group involving the employees of a particular bank. The group eligible for BOLI is usually at the higher level which may be assistant Vice President and above or based on the salary criteria. The premium of the policy is paid by the bank and the bank owns the cash value and is the sole beneficiary of the insurance amount. This is a non-taxable benefit and is quite basic in form.

International Travel Insurance Protects Life and Pocketbook

Man stabbed in Ecuador
In a recent blog about an unprovoked attack on an American couple in Ecuador, Lisa – one of the victims — writes, “We recently received some good news that I would like to share–Britt does have some insurance coverage that should help cover medical expenses here in the US.”

Yet Lisa goes on to admit, “We cannot be sure what our ultimate financial burden will be right now, but have no doubt that the donations people have made in his name will be needed for his recovery.”

Lisa’s blog documents the medical progress of her fiancĂ©e, Britt Leis, who was violently attacked on a beach in Ecuador. In preparation for their year-long tour of South America, Britt and Lisa sold their American belongings, packed their bags and done their research. The day of the assault they had dressed down, so as not to attract unnecessary attention. Lisa was beat by the assailants and Britt was stabbed 18 times. Authorities have not discovered the motivation behind the attack nor its abrupt end. However, they have asserted that the attackers were intending to kill and not simply to rob Lisa and Britt. Even after undergoing three surgeries in Quito, Britt’s infections were so severe that death became an eminent possibility. Finally, he was medically evacuated to the States only two months after he and Lisa had departed.

The huge cost of medical evacuation
According to msnbc.com, the evacuation alone cost over $55,000. As Lisa mentions, they are currently heavily dependent on the will and generosity of others. However, even this generosity cannot completely erase the stress and difficulty that comes with unpaid medical bills. Thankfully, Britt does have some health insurance in the States. Nevertheless, the bills he accrued while in Ecuador still had to be paid out of pocket.

The inexpensive cost of international travel insurance
Do you want to avoid paying out $55,000 for medical evacuation? I do. And all I have to do to avoid that is to pay out $29 for a month of travel. Yes, that’s right … only $29! If you are older, say about 50, your worldwide travel insurance would only cost about $35.

A good global travel insurance plan can assist you in several ways:
1. Supplement your domestic health insurance policy. Many policies are limited in what they cover when you travel abroad.
2. Inform you about which hospitals and physicians meet your standards and aid you in getting access to them.
3. Provide trip protection against trip cancellation, trip interruption, baggage protection, medical evacuation and other critical services.

Talk to a reliable insurance broker before you travel.

Factors That Users Generally Neglect While Buying International Health Insurance

Although I say it’s my life but I really don’t have a control over it. And why just me, it is the case with everyone around. Life is uncertain and anything can happen at any time. Just for an instance, many cases have been seen where people confront serious health issues while traveling around the world.

But reasons like language barriers, limited information, and expensive healthcare services make it really difficult for the person to locate the hospital for getting treatment for the health problem. So, if you do not wish to put your life in danger while traveling, buy international health insurance before leaving.

These days, almost every leading insurance company has launched multiple health insurance policies for expats and finding the most suitable of all is a challenging task. However, you have to overcome this challenge and it can be possible only when you know what factors should be considered while buying health insurance policy. Here below we have listed a few factors that should be taken into consideration when purchasing insurance policy.

Never Begin with Comparing Premiums

Most of the times, it has been seen that people begin comparing insurance policies based on their premiums. But, this practice is wrong and premium should be the least important criteria of choosing health policies. An international health insurance policy is for your health and you cannot compromise with it just because of money. So, it is advisable to keep your search limited to leading insurance companies even if their premiums are little higher.

Terms & Conditions over Benefits Offered

We all look out for benefits offered under an insurance policy but how often do you take a look at terms and conditions section. Well, if you have been ignoring this terms and conditions section, it’s time to take a look right now.

In most of the claims, discrepancies arise because the person insured is unaware of the clauses in that particular section. So, this time when you buy medical insurance policy, don’t forget to read the terms and conditions section thoroughly.

Study Insurance Company’s History

When insurance companies can study your history, why can’t you do the same? Yes, it is very important to study the history of the company to find out its reputation with other clients. For this purpose, you can take help of websites as well that compare different insurance companies and present customers with an honest review.

Buying insurance policies for your health is an important as well as an intricate task. So, take some time to research and then only buy insurance for yourself.

International Travel Insurance – Prudent Protection For Journeys Abroad

Travels abroad offer the chance to tour the globe’s most exquisite attractions, become acquainted with different ways of life, and generally broaden one’s own perspective. International travels are always a fresh adventure, but unexpected emergencies or events occurring abroad can be far more disruptive and difficult than the same events might be if they occurred back home. International travel insurance is a wonderful way to attain the type of security and reassurance that comes from knowing that an unforeseen medical situation will not result in financial disaster, and that access to appropriate and necessary medical care will not be restricted.

Tourists embarking on risky or unconventional physical endeavors, such as rock climbing, white water rafting or deep sea diving may find that the medical insurance policy which covers such activities at home will not provide coverage if such sports result in injuries while abroad. Travelers spending time in countries with nationalized health care schemes need to know that the inexpensive or even free medical care offered by those systems will likely be available to citizens only, and foreign visitors may be denied treatment or be asked to pay upfront for services. Hospitals and health care providers in other nations may decline to work with a traveler’s regular home insurance company, and demand payment in advance for necessary treatments. It is also possible that a tourist may face a medical situation so serious that proper treatment is unavailable and they must be transported home, which can be a very expensive proposition. It is quite possible that even when a traveler’s regular medical policy provides for routine health care costs while the insured is traveling, payment for an elaborate evacuation due to medical reasons would be refused. It is unexpected situations like those above which underscore the wisdom of purchasing international travel insurance.

Intended to provide compensation for unexpected healthcare and other expenses to travelers while abroad, international travel insurance can be purchased in various types and levels of coverage, the price of which is determined by a number of factors including the duration, destination and other specifics of the trip involved. Coverage for shorter durations is often available for purchase in conjunction with the making of travel reservations. In the alternative, more extensive coverage of a longer term may also be secured. These types of policies are frequently offered by cruise operators, excursion companies, travel agents and large national general insurance firms.

Policies for international travel insurance can be customized based on the characteristics of the traveler to be covered by the policy. Business travelers, vacation trippers, adventure tourists and students are all specific types of customers for which different kinds of policies are written. Circumstances that may be covered by these types of policies include payment of basic medical expenses incurred, accidental injury or death benefits, and possibly even funeral costs for services performed while still abroad. Medical costs incurred during pregnancy may be included in this type of policy, if the travel happens during the insured’s first trimester, and perhaps beyond, if a customized or expanded policy is purchased.

Life Insurance: How Much and What Type To Own?

Do you need 5 times your income? Or do you need 10 times your income?

In my experience, if you ask stupid questions you tend to get stupid answers.

The real question you should be asking yourself is… If I die tomorrow, what do I want financially for the loved ones I will leave behind?

Will your spouse need an income? How much? For how long?

If so, how much money does it take today to provide that amount of income?

What assets do I have to help offset that number?

Are there any debts that must be paid off?

Will your kids need money to pay for college?

Is there a parent or another family member that depends on you?

Do you want to leave money to your church or Alma Mater?

Once you know the answers to the above questions, work with a qualified, unbiased professional like a Fee-Only Certified Financial Planner who can help you determine the correct amount of life insurance you really need.

Don’t use rules of thumb to plan your financial life! Here’s why:

Let’s assume you die tomorrow, and you need to replace your current income of $50,000 for the next 20 years to allow your husband/wife and kids to keep their same lifestyle without having to struggle. If you used the “rule of thumb” of 10 times your income when you bought your life insurance, your surviving spouse and kids will most likely run out of money in 15 years or less. Feel free to email me and I would be happy to send you the hard data.

What Type of Life Insurance Do You Need?

Let’s start off with the basics. There are two main types of life insurance: Term and Permanent.

Both are conceptually easy to understand. Term Life Insurance covers you for a specified period or term, like 20 years for example. Permanent Life Insurance covers you permanently or for your entire life, or at least it’s supposed to. Permanent Life can have many sub-names like whole life, variable life, universal life or single premium life which all work differently.

When you purchase Term insurance, you are only paying for the cost of insurance which is usually very inexpensive. In a Permanent policy, premiums are usually substantially higher than term. Some of the premium goes towards the cost of insurance and the remainder builds in an account called the “cash value.” Cash values typically grow tax deferred.

You have probably heard all the media “hubbub” about which type of life insurance you should purchase. Radio show pundits and magazine articles tell us to only purchase term, or whole life is a bad investment, or own term and investment the difference.

Are those things really true? Is it really that simple? What’s the truth?

Well, honestly the type of life insurance you should purchase depends on many things. Some people only need term but others may need permanent.

Tell me exactly how long you will need life insurance and when you will die, and I can tell you the correct type you should own. But like most other financial planning decisions, we must make some assumptions or best guesses about the future. But it’s very difficult to know when you are 20, 30 or even 40 what your financial life will really be like at age 60.

Here are some truths:

  1. Most permanent policies are junk! But not all.
  2. Any type of life insurance is usually better than NO life insurance.
  3. Most people should buy life insurance for protection only NOT as an investment.
  4. Most people who end up buying the wrong type of life insurance got their advice from an insurance agent, not an objective financial planner.

This issue is way to complex for me to cover every detail in a blog post. My hope here is to get you to understand the basics so you can go hire a professional to help you that isn’t a financial sales person.

You most likely need Term if:

  • You are just starting out
  • Have no discretionary income and/or low net worth
  • It’s very easy to forecast the length of your insurance need (10 years left on a mortgage for example)
  • Have a very limited amount of savings left over for retirement
  • You simply can’t afford permanent insurance, even it were a good deal

When Permanent Life may be a fit:

  • Very strong, predictable cash flow
  • High income earner
  • You have exhausted all possible retirement savings vehicles (401k, Roth, etc.)
  • Will have Estate Planning liquidity issues
  • It’s very hard to predict the age you will no longer need life insurance
  • You just want your life insurance to be there when you die!
  • You have done your research! Not all life insurance policies are equal!
  • You understand all the workings of the policy (expenses, interest rate, etc)

Why does Permanent Life insurance get such a bad rap? I believe most people fear what they don’t understand. And Permanent insurance can be extremely difficult to understand. Also, most Permanent Life policies have too many internal expenses which can make them a terrible deal. But some companies do a pretty good job of keeping internal costs down, therefore increasing the internal rate or return on your “cash value.”

Here is one concept:

Most term polices never pay a death benefit because people out live them or cancel them. Let’s say you compare 2 options: 1.) invest money in a taxable investment OR 2.) buy permanent life insurance where your policy builds cash value. If the cash value of your life insurance net of expenses could earn more than your investment account net of taxes, then you would have more money inside the cash value. OR vice versa. Sounds simple, right? Not exactly!

You want to make sure you are comparing apples to apples. If the cash value grows at a fixed rate, then compare it to fixed income assets in your investment account. If your investment account is invested in stock mutual funds, compare it to a comparable allocation in Variable Life. This is where the media falls short on helping you understand Permanent life insurance. They try to compare fixed rate cash value insurance to the stock market over the long-term. That’s like comparing a Porsche to a Subaru!

But it’s not all about the cash value rate of return. What about the rate of return on the death benefit? Like I mentioned earlier, this issue is far too complex to cover all the points here!

Here is your take away. Term Insurance is right for many Americans. Some types of Permanent policies may be a fit for others. It just depends on the unique situation of the individual. This can be a very confusing area. Seek out unbiased, objective advice from a Fee-Only Certified Financial Planner. www.jasonWqualls.com