Dividend Paying Whole Life Insurance – Understanding What Sets it Apart

Whole Life Insurance, Universal Life, Variable Life, Term…with such an array of life insurance options available, it’s easy to get lost in the confusion of what type of insurance is best for your life circumstances. Let’s start by looking at the pros and cons of each type of life insurance policy.

Term Life Insurance
The biggest upside of term insurance is that you get life insurance at very inexpensive rates, at least in the beginning. Term life insurance is very cheap if you buy it young. And for the first years of your policy it will remain inexpensive. But as you age, and as your actuarial factors change, your premiums will increase–sometimes dramatically.

Most people either drop or convert their policy to permanent life insurance when this happens. In fact, a 1993 Penn State University study found that only 1% of all term life policies were ever paid out. In truth, term life insurance is really designed for one benefit–to provide a cash settlement for your family in the event of your death. This is why term life insurance is often referred to as renting life insurance versus owning. It can be a great buffer against unforeseen tragedies, and can, in the short term, provide necessary, inexpensive coverage. But as a long-term solution, it doesn’t hold up.

Universal Life and Variable Universal Life
Universal life coverages combine the benefits of whole life insurance with some other flexible features. Like whole life policies, universal life allows you to accumulate cash on a tax-deferred basis. The cash you contribute will be invested by your insurance company and the profit from those investments are applied to the cash values of your policy tax-free. Investments are handled by the insurance company and are usually in bonds and money market funds. Investment profits can sometimes be applied toward premiums; the flipside of that being that in years of poor investment performance, your premiums could increase.

Variable Universal Life is universal life but it allows you to invest your cash values in the stock market. Essentially it puts you in control; you’ll choose where your cash values are invested and all earnings within the policy are tax free. Because the stock market historically outperforms other investments, the potential for greater returns is significant.

But the stock market is volatile and cash values within this type of policy can fluctuate up or down depending on how the markets are performing. Many of these policies are sold using illustrated returns that are truly not indicative of what actually happens. In 2008, when markets were at all-time lows, sales of both universal life and variable universal life insurance dropped off considerably while people sought safer investments and either the guarantees of whole life or the cheap cost of term life insurance.

Additionally, the cost of these types of insurance is expensive and they do not offer the best protection or guarantees in the long term. The internal cost of the life insurance within these policies is often very steep and can offset the investment gains.

Whole Life Insurance and the Dividend-Paying Difference
Whole life insurance is also called permanent life insurance. You can also say it’s, “What you see is what you get.” That is, what’s illustrated in the contract is guaranteed to happen. You pay a set premium for the duration of the policy and upon your death, your beneficiaries will receive the exact amount of your policy’s stated death benefits. Like other cash accumulating life policies, the cash values within your whole life policy grow tax free.

But even whole life policies can vary in what they offer. Dividend-paying whole life insurance, for instance, provides the safety and security of whole life, while also providing performance-based dividends. A dividend paying whole life policy will pay dividends to its policyholders based on the company’s annual profits. Like universal life policies, the company makes investments for policyholders, using the paid premiums. But there are some important differences.

With dividend paying whole life policies, investments are made in very safe financial instruments such as bonds, and they also diversify by industry, maturity & geography. This keeps costs and risks very low, and profits very steady.

As the cash values of a dividend paying whole life policy accumulate, policyholders are able, and even encouraged, to borrow money from the account for personal financing. This is often called self-banking or the Infinite Banking System. The Infinite Banking system’s whole life policy is structured to maximize liquid cash values instead of concentrating on the death benefit. Which means you can enjoy your money now and still leave a financial legacy for your heirs.

What the Infinite Banking System does is make you the bank. You will save with your bank (premiums), you will borrow from your bank (tax free), and when you pay interest on your personal loans, you’ll be paying yourself. So instead of paying out interest to a bank or other financial institution, you make money on yourself. The dividend-paying whole life insurance policy provides the financial structure to make this concept possible.

There are numerous other benefits associated with dividend-paying whole life and the Infinite Banking Concept. Cash values within your policy accumulate free of tax. Distributions from your cash value via personal loans are also tax free. Withdrawals from the policy can be made tax-free up to your basis, or the amount you have contributed to the policy. Additionally, the death benefit proceeds pass to your heirs income tax-free.

The Company You Keep…
With these types of insurance policies, it is wisest to choose a mutual company as opposed to a company traded on the stock market. In a mutual company, the policyholders are the owners. So, the policyholders will be the first in line to benefit from strong company performance.

A stock company, on the other hand, is owned by its stockholders. It will be run by a board of directors who are trying to get the best return on investment for their stockholders, not their policy owners. This can make a huge difference in investment profits and dividend earnings.

Safeguard One’s Retirement With a Whole Life Insurance Policy

Whole life insurance is one of the best investments that everyone should take into consideration. Many people put their hard-earned money into many investment schemes and tend to overlook the importance of getting an insurance policy for themselves and their family. This is one investment that is sure to bring good returns and yet there are not many who invest in it. Investing in whole life insurance is actually a good option especially when your retirement is in the horizon.

One of the reasons why whole life insurance is an attractive investment is the fact that insured people do enjoy many tax benefits depending upon the law of the land they live in. Preferential tax treatments are awarded to whole life insurance policies under the internal revenue code. This basically dictates that the funds coming from death claims will not be subjected to income tax.

As mentioned earlier, death claims paid to beneficiaries under an insurance policy are not subject to tax. The same goes for any increase in cash value that an insurance policy may accumulate during its existence. The withdrawals and loan proceeds from the insurance are also tax-free for as long as that the insurance policy is in force. It is only when the policy is surrendered that taxes are imposed. This is why it is advisable for the whole life insurance policy to not be cashed in before its maturity or before the insured reaches the age of 60.

The premium rates for these policies are based on death benefits at age 100 or 120 which make them quite low and affordable. Interests on the paid premium are then credited to the plan as added cash value, which form the basis for the insurance company, to pay dividends or be used to increase the value of the insurance at the option of the insured.

As an additional service of the company, estimates on the values of the insurance based on one’s data like age, health condition and other factors can be done for any interested parties. The amount of the premium based on the data supplied is then calculated and the amount of interest that would be earned through premium payments are also provided to the insurer for his or her consideration.

The advantage of a this policy used as an investment is that the accumulated cash value earns interest at a fixed rate and the cash dividends paid by the company are added into the value of the policy itself. The added value on the insurance is not subject to garnishment by creditors and is also protected in many states as long as its classification is maintained as a “whole life insurance”. The insurer must make sure that the insurance is not modified as an endowment contract, in which case there is a 10% tax penalty for cash withdrawals made by the insured before his 60th Birthday.

So should you consider it? By all means, yes. It isn’t just for the money that the policy would eventually earn. It is also for your family’s security in the future.

Top Reasons International Health Insurance Claims Are Declined

Receiving medical care is a stressful enough time in anybody’s life; but imagine needing treatment whilst living overseas but your health insurance company says that the claim is not covered and that they will not pay.

NowCompare, an international insurance comparison website has looked at claims made by expatriates from around the World to see what are the most frequently denied claims.

Policy limitations: The top reason for a claim denial within the global community is not that the claim itself is excluded but the amount the claim is for is not covered by the health insurance policy.

Expatriates are often subject to higher medical costs when they are living outside of their country of citizenship and should make sure that they have an appropriate insurance plan in place to cater for these costs. Arranging a local plan may not be sufficient for an expat and they should look to invest in an international private medical insurance coverage for themselves.

Pre-existing Medical Conditions: A pre-existing medical condition is a condition that you had prior to buying your health insurance and more often than not, international health insurance companies from around the World will not cover these at all.

This can be a confusing exclusion on many insurance plans as the definition can change from company to company. Make sure you are open and honest about your previous medical history and if in doubt, ask! Whether it is covered or not, you need to know what risks you are exposed to whilst living overseas.

Medical Necessity: Health insurance companies will often question whether medical treatment is required or not or even if the care will have any bearing on the wellbeing of the patient. Many insurance policy wordings will have exclusion relating to cosmetic treatment, holistic treatment or may blanket exclude anything they deem unnecessary with the term “medical necessity.”

Medical necessity is debatable and if the insurance company declines your claim on this basis and you feel it is unfair, don’t give up; It is sometimes a case of the insurance company having not been informed of how necessary the treat actually was. Ask the treating doctor to explain it clearer in a way that relates to your overall wellbeing and the symptoms you were suffering from.

Health insurance companies often have a bad reputation for wanting to get out of paying a claim. On the whole, this is underserved and the companies can be reasonable and will authorize payment if there is cover in place. One simple rule is communication; if you are concerned about anything discuss it with the company prior to buying the insurance. If you need treatment, advise them beforehand and they will be able to confirm the coverage under the policy or even guarantee it directly with the medical facility.

Cheap Life Insurance Quote – Why Is It Required?

Life Insurance is a kind of business contract between the insurance company and the person in requirement for the insurance. Some insurance companies also offer partnership in the company profits to the policy bearer. This type of insurance is especially beneficial in families where only a single family member earns.

You can not predict the untimely death of your loved one or the sole financial supporter of the family? Neither can you do something to prevent an accident or any critical situation. At this time the life insurance plan offers you financial support. Moreover there are cheap life insurance quotes that are available in the market to provide you with an estimate of your investments beforehand.

According to the policy to attain the insurance benefits the policy bearer agrees to pay a certain amount of money monthly or annually as per their convenience. In case of accident the company also pays if the person suffers serious permanent physical disability such as loss of limbs or if other body functions do not work like sight, hearing etc. Also if a person dies by putting himself in risk such as parachuting, paragliding, traveling in aero-plane, taking part in military war, the company does not cover such conditions.

Today the market has various Life Insurance brands in the national, international and universal market. So we need to do a lot of research before choosing a single plan. The online tool that helps you in assessing this is a cheap life insurance quote.

Make it a point to check if the policy covers all the funeral and catering expenses including financially supporting the family in future. Carefully go through the agreement and policy papers and also the terms and conditions before becoming a member of the insurance plan.

Do not ignore your budget and affordability, after all the best plan for you will be the one you can easily afford. A cheap life insurance quote enables the insured to plan the budget as these quotes provide a snapshot of your investment requirements for any insurance policy. Avoid running after brands and attractive advertisement instead you can even opt for local but reliable small insurance companies that too are flooding in the markets.

Try a cheap life insurance quote and go for the best policy on offer. In case of insurance claim at the time of the insurer’s death the family of the insurer needs to produce a legal death certificate. The money is paid to the beneficiaries as mentioned by the insurer in the detail form and agreement papers.

The company is cautious due to many false insurance claims, false accidental deaths and false illness. In spite of the fact that such actions are a punishable offense, a number of people do it in order to make quick money and become rich. Life Insurance not only guarantees support after your death but these days there are insurances for pets as well. Life is precious not only for us but also for the people in our lives who love us.

Which Cash Value Life Insurance Policy Is Better? How To Compare

When considering the purchase of permanent life insurance (i.e. whole life insurance, universal), what methods should consumers use as a basis for comparison? Because permanent life insurance creates equity, one cannot look at the initial premium cost alone. Because whole life insurance, offered primarily by mutual insurers, and universal life insurance, offered primarily through stock insurers, create cash value in different ways, looking at whose cash value is higher ‘in a vacuum’ is also not advised. So how can you compare easily?

(1) Let the Agent do the work
One option is to tell the agent you’re working with to create illustrations (projections of values) by eliminating all but one variable.

Ask them to have each company’s product illustration have the same premium figure paid for the same period of time. Pick a point in the future and see which cash value is higher. If all of the other variables are the same (i.e. underwriting class, interest or dividend rate, face amount), the policy that generates the higher cash value is the more competitive contract

Cash Value
Ask the agent to solve for a desired income stream or cash value accumulation at a specified point in time (i.e. a certain age). For example, tell the agent you want to see policies that can generate $500,000 of cash value at age 70 with the same death benefit and same underwriting class. The computer systems can do this. If all other variables are the same, the policy with the lower premium is more competitive.

The disadvantage of having the agent run these ‘special requests’ is that you’re probably tipping them that you’re ‘shopping the market’ and, therefore, they may become defensive and try to talk you out of something that you want to do. However, if a trusting relationship has been established, they shouldn’t have an issue with this type of request.

(2) Internal Rate of Return (IRR)
Ask the agent to include the IRR report on the life insurance quotes. The internal rate of return on either cash value or death benefit, simply shows a rate of return on the premium dollars spent. At any point in time, the IRR report will show a percentage rate of return (i.e. 5%) on the ratio of premium spent to cash value accumulated or premium spent to death benefit. Asking for the IRR report will show that you’re concerned about performance, and not necessarily shopping. The policy with the greater IRR is the more competitive contract.

Once you’ve determined the competitiveness of the insurance policy you’re considering, there are other factors to consider before determining the best value. First, and foremost, is how is the IRR generated…on a guaranteed or non-guaranteed basis. If policy ‘A’ has an IRR of 3.5 on a guaranteed basis and policy ‘B’ has an IRR of 4.25% on a non-guaranteed basis which do you choose? Next is the strength of the company. Finally, is the relationship (or lack thereof) you want to have with an agent.

All of these factors should go into determining which policy and product is the best value for you.