7 Ways to Utilize Your Life Insurance Policy’s Cash Value

Permanent life insurance policies—like universal, variable and whole life—offer more than a death benefit. Some include cash value, which is a pool of money you can use while still alive. 

If you’ve had a policy for years, the cash value could be considerable. “The accumulation could be more than you put in, and this opens up all kinds of options,” says Jonathan Howard, a certified financial planner with SeaCure Advisors in Lexington, Ky. 

The cash value in permanent life insurance is your money, to be tapped as needed, but your options for doing so will depend on the type of policy and the carrier. Before doing anything, ask the insurer how much you can safely withdraw per year based on the cash value balance and policy terms. If you withdraw too much too early, the policy’s cash value could run out, forcing you to start paying more in premiums or have the coverage lapse.

If you no longer need coverage, it might be tempting to stop the policy and cash out all at once, but consider the tax ramifications, says Luke Chapman, a partner with Precision Wealth Partners in New Castle, Del. Any cash value growth above what you paid in premiums is taxed as ordinary income when withdrawn. For example, if you paid in $20,000, have $100,000 in cash value and withdraw the difference, the $80,000 of growth is taxable.

There are better ways to put that cash value to work that won’t ramp up your tax bill.

1 of 7

Live Off of It

A man stacking coins.A man stacking coins.

A more tax-effective option is to withdraw only what you need each year. Howard recommends keeping some money for an emergency fund, perhaps 12 months of expenses, with the rest used to supplement your retirement income. Withdrawals draw down the tax-free premium payments first; taxes are owed only after you start withdrawing the gains.

2 of 7

Borrow Money

A person ready to sign some documents to take out a loan. A person ready to sign some documents to take out a loan.

You can also tap the cash value through a policy loan. You won’t owe taxes for withdrawing gains this way. Plus, you’ll have the option to repay the money, whereas you can’t reverse withdrawals. If the money is not repaid, the death benefit will cover the loan balance when you pass away.

The insurer will charge interest for the loan. “The interest rate is determined by the policy contract and is carrier specific,” says Howard. “It’s typically 4% to 8% a year.” Policy loan rates don’t usually change with market conditions, he says, so don’t expect a deal today just because overall interest rates are low. Your remaining cash value can be used to pay the interest.

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Exchange It for an Annuity

Concept art with several people looking at charts and graphs. Concept art with several people looking at charts and graphs.

The IRS lets you swap your permanent life insurance for an annuity through a 1035 exchange, which is a tax-free transfer of one contract for another. This move can generate more retirement income. “Let’s say the max payout stream from a cash value insurance policy is $10,000 a year. Converting to an annuity might generate $12,500,” Chapman says. An annuity could also guarantee the payments will last your entire life, but you will be canceling your life insurance policy, a move that can’t be reversed.

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Convert to a New Policy to Pay for Long-Term Care

A nurse helps a woman at a nursing home.A nurse helps a woman at a nursing home.

If you’d like coverage for long-term care, consider converting your life insurance into another policy with a long-term care rider (if yours doesn’t have it already). You keep your life insurance, but part of the death benefit can be used to pay for long-term care expenses.

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Use It as Collateral

A couple sitting in front of a house.A couple sitting in front of a house.

The cash value is an asset that increases your chances of qualifying for a loan or mortgage from a lender. It can even serve as the loan’s collateral, but Chapman warns to structure the deal carefully, as there can be tax consequences. Always ask an insurance expert before using cash value this way.

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Tap It to Pay for the Policy

Concept art showing a life insurance policy document and calculator.Concept art showing a life insurance policy document and calculator.

The cash value can also be used to cover your life insurance premiums.

7 of 7

Leave It Alone

A couple who are declining something while speaking with a man on a laptop. A couple who are declining something while speaking with a man on a laptop.

You aren’t forced to do anything with your cash value. Left alone, the cash value will continue to accumulate, leaving a larger inheritance for your heirs, as withdrawals and loans reduce the final death benefit.

Source: kiplinger.com

A Simple Financial Spring Cleaning Checklist

Spring is the perfect time to complete a financial clean-up. Here we share a few financial areas of your life that may need some sprucing up. No mop required!

1. Banking

The banking industry is quite competitive. If you’re not getting any perks from your credit card company or bank, it’s time to make a switch.

Credit Cards

Credit card companies today offer everything from travel rewards to gift cards to cash back. Many cards even offer perks without requiring an annual fee. If you pay your credit card balance faithfully each month and are only rewarded with a good credit score, it may be time to shop around for a new card. Keep in mind that when you apply for a new credit card, your credit report takes a hit, so take your time researching and don’t apply for multiple cards.

Bank Accounts

Are you still paying minimum balance fees, monthly checking, or savings account fees? How about ATM or overdraft fees? Don’t! There are too many bank options these days competing for your business to still be paying multiple fees.

What about interest rates? Is your money making money? The Federal Reserve recently raised interest rates, but the average savings account rate is still only 0.06%. If you’re not making at least that, it may be time to think about switching.

Do you bank with a brick-and-mortar bank? How often do you actually go into one of their branches? If you think you can go without having an actual bank to walk into, consider switching to an online bank. Not only do online banks have minimal fees, they boast some of the highest interest rates around.

E-Statements and Auto-Pay

Save a tree and lower your risk of identity theft by switching to receiving online statements only. If you prefer to have a paper copy, make sure you shred the statements before tossing them out.

Consider switching to auto-pay whenever the option is offered. American households tend to have many different bills to pay all due at different times; it’s easy to accidentally overlook one. If you switch to an auto-pay billing option, payments are deducted automatically when they are due, so it’s one less thing to worry about. Just be sure to occasionally review your statements to ensure the right amounts are being deducted.

2. Taxes

You most likely have already filed your taxes. Did you have to pay in or did you get a refund? If the outcome was not what you expected, it’s time to double-check your withholding allowance on your paychecks.

We all want to lower our tax bill. Deductions can help, however, unless you pay to work closely with an accountant, how do you know what qualifies as a deduction?

Some common tax deductions include:

  • Dependent child credits,
  • Mortgage interest and real estate taxes,
  • Health insurance premiums,
  • Student loan interest.

Take a look at this article for some perhaps surprising tax deductions you should consider for next year: 9 Things You Didn’t Know Were Tax Deductions.

3. Budget

When is the last time you sat down and wrote out a monthly budget? Do you know your debt-to-income ratio?

A few years ago when I was in the market to buy a house, I opened an Excel spreadsheet and calculated what I spent on average each month compared to the income I bring in. Thankfully, Intuit recently introduce a new app, Turbo, which does this for you with ease. Generally, you want to aim to keep your debt-to-income ratio below 36% and mine was 53%. I had to make some changes. I tightened my budget (mainly by canceling cable TV and renegotiating my Internet bill) and paid off my auto loan. My ratio today is still a bit high, but it’s getting better.

Going through the memberships and subscriptions you currently pay is a great way to quickly lower your debt-to-income ratio. Chances are you’ll find you are paying a monthly fee for something you seldom use, or at least can live without. Do you need both Netflix and Hulu? Both Spotify and iTunes Music? Both Blue Apron and Hello Fresh? Probably not.

Print off the last two to three months of your credit card and bank account statements and go line-by-line to figure out a way you can save some money. Additionally, if you have a Mint account, log in and check out the Trends tab. You can view your spending and see where the majority of your money is going. You may be shocked at how much you spend within a certain category. It’s easy to just hand over your credit card, but actually seeing a graph of how much you spend can be a much needed wake-up call.

Spending by Category _ Mint

4. Retirement

It doesn’t matter how old you are, you need to plan ahead for retirement.

If your employer offers a 401(k), take advantage of it. This is the easiest way to save for retirement (not to mention it lowers your taxable income.) If they offer to match a certain percentage, even better. Aim to increase your contributions each time you get a pay raise, this way you won’t even miss the money.

Do you have more than one 401(k) or IRA? Consider consolidating.

Consolidating retirement accounts that share the same tax treatment can be beneficial for two reasons:

1. Keeping all your money in one place makes it more simple and manageable.

2. Having only one account reduces the amount of fees you’re paying.

A retirement rollover is the best way to move money from one account to another. It’s important to do so correctly to avoid fees. Check out this article for more information: How to Handle Retirement Rollovers Correctly.

For those of you whom have established retirement accounts, when was the last time you rebalanced your investment portfolio? Never?

Typically, the younger you are, the more risk you can handle in your investments because you have more time to make up for any losses. The closer you get to retirement age, the more conservative you should be. Financial planning experts recommend that you rebalance your portfolio once or twice a year, but check up on it frequently to make sure you’re in line with your target.

As you’re thinking about your retirement planning, also think about your beneficiaries. How long ago did you open your retirement accounts? Are your parents still listed as your beneficiaries on your 401(k) from your first job? Or maybe an ex-spouse is still designated? Review your beneficiaries as it may be time for an update.

5. Legacy Planning

Just because Spring is all about rebirth, doesn’t mean we should avoid the subject of death. There are three important aspects of legacy planning that should be dealt with sooner rather than later:

1. Writing a will

2. Authorizing power of attorney

3. Buying life insurance

Wills

If you don’t want the state to decide where your assets go when you die or, more importantly, who will be in charge of your children and funds owed to them, then you better draw up a will. Another, often forgotten, reason to have a will is to ensure no tension occurs within your family after you are gone. Without a will, you may have relatives arguing over your possessions and everyone may want input on what should happen to your assets.

If you have a complicated estate, such as business interests, trusts, multiple investment properties, etc., then you should probably hire a lawyer to help with your will. However, if your estate is a bit more simple (e.g.: married with kids and you own a house) you can draw up your will right online, if you’d like. You’ll need to print it off and get it witnessed and notarized, but it’ll be much cheaper than hiring a lawyer.

Power of Attorney

There are two kinds of power of attorney: financial and medical.

A financial power of attorney is most often just simply referred to as a power of attorney (POA) and this is a document that states a person or organization you name to act on your behalf in regards to handling financial and business transactions.

A medical power of attorney is a document that states a person you name who has the authority to make medical decisions for you if you are unable to do so, for example if you’re unconscious or mentally incapable.

Most people assume only elderly individuals need to have these POA documents in place, but you don’t need to be 80 years old to get into a car accident and become unconscious. If you become mentally or physically incompetent, your designated POA agents can make decisions on your behalf instead of it being left up to strangers who wouldn’t know your wishes, such as doctors and judges.

If you’re over 18 and considered of sound mind, you can draw up both types of POA documents. Hiring a lawyer is an option, but, like wills, you can create these documents online for a fee. Be sure to discuss with your agents of choice before drawing up the documents and make sure they understand your wishes and their responsibilities.

Life Insurance

Life insurance isn’t the happiest financial product to think about. However, while many Americans admit life insurance is important, many households are underinsured. People are telling themselves “It won’t happen to me,” meanwhile they really should be asking “What if?”

If you have young children, life insurance is a must. How would your loved ones be affected if your income were to suddenly disappear? Stop postponing and get a term life insurance quote today. Life insurance is more affordable than you think and because the process is mainly digital, it’s also become much more convenient to buy.

If you already have life insurance, good for you! But don’t forget to review your policies periodically after life changes such as a new baby, marriage or divorce, or changing jobs. Your coverage needs may have changed, not to mention beneficiaries may need updating.

Although many of these financial spring cleaning to-dos may take a bit of time to complete, you’ll feel accomplished and will ultimately be in a better financial place. Do you have any financial spring cleaning tips to share? Leave a message in the comments section.

Natasha Cornelius is a content manager and editor for Quotacy. She has worked in the life insurance industry since 2010, and has been making life insurance easier to understand with her writing since 2014. A long-time Mint user, Natasha loves making frugal fun by creating new DIY projects. Connect with her on LinkedIn.

From the Mint team:

What’s Turbo and why are we talking about it?

Turbo is part of the Intuit family of products, just like us. We work with Turbo, TurboTax and Quickbooks to get all our customers on the right track financially. While Mint provides free credit scores to our customers, Turbo combines the same score, plus other information like verified IRS filed income and debt to income ratio to create a broader financial health profile. Try out our sister app to see where you truly stand financially – beyond the credit score.

Mint may be compensated by some of the links that appear in this article. Our partners do not endorse, review or approve the content. Any links to Mint Partners were added after the creation of the posting.  Mint Partners had no influence on the creation, direction or focus of this article unless otherwise specifically stated.

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Part 1 of 3: Life Insurance Buyers’ Common Q&As

Understanding your policy’s death benefit.

Q: How long does it take my beneficiaries to get my life insurance death benefit?

Once the death benefit claim form and a copy of the death certificate have been received by the carrier, beneficiaries typically receive the death benefit check in two weeks.

However, if the insured dies within the contest-ability period (which is typically two years) the death benefit may take longer because the life insurance company has the option to investigate the claim if they choose do to so.

Q: How do I know my beneficiaries will get paid the death benefit?

Life insurance companies are not in the business to rip people off.  As long as your policy is inforce at the time of your death (in other words, the premiums were paid up-to-date) your beneficiaries will receive the death benefit payout.  There are only a few exceptions to this, which we discuss in detail below.

Q: Are there any situations in which my life insurance policy won’t pay out?

There are three instances in which a life insurance company can choose to deny or reduce a term life insurance policy’s death benefit.

One: Contest-ability Period

Life insurance policies include what is called an Incontestability Clause.  This clause states that the life insurance company has a specific period of time (typically two years) to dispute the validity of the insured’s statements made on an application.  So, if you die within the contest-ability period, the life insurance company has the right to investigate the details of your medical history to ensure you did not misrepresent yourself on the application.

For example, stating that you did not smoke cigarettes when, in fact, you did up until the day you died.  In a situation like this, insurance companies have the right to withhold some of the death benefit from your beneficiaries or even deny the claim altogether.

Two: Suicide Clause

Another situation in which the life insurance company has the right to deny a death benefit is if the insured commits suicide within a certain period of time, again typically within two years.  In this situation, however, the life insurance company will return all premiums that have been paid to date to the family.

Three: Homicide

The last situation in which an insurance company may not pay a death benefit is if the insured was murdered.  If the insured was murdered, the life insurance company will typically call the police department involved and inquire as to whether or not the beneficiary of the policy is a suspect.

If the beneficiary is a suspect, the life insurance company will hold payment until the charges are dropped or the beneficiary is deemed not guilty of the crime.

Q: Will my term life insurance death benefit payout be taxed?

Term life insurance is the least complicated type of life insurance and in most cases your beneficiaries will not have to pay federal or state income taxes on the death benefit they receive.  Since the policy premiums are paid using after-tax dollars, Uncle Sam already got his cut.

There are two main exceptions to this rule:

  • Estate taxes
  • Gift taxes

If you own your own policy, the death benefit proceeds become part of your taxable estate.  If your estate exceeds the exclusion amount, which is over $5 million dollars, it can get taxed.  For most people, this isn’t an issue.

The second exception is what is known as “The Goodman Triangle.”  If the policy owner, insured, and beneficiary are three different people, the death benefit could count as a taxable gift to the beneficiary.

Q: How can I be sure my policy’s life insurance carrier will still be around when I die?

All major life insurance companies have financial strength ratings.  There are multiple agencies each with their own rating scales and standards that assess the long-term financial stability of these insurance companies.  These ratings typically follow the school-like A through F scale.  The higher the rating, the more stable the company is and the more likely the company will be able to pay future claims.

When you are looking to purchase life insurance, whatever means you are using to buy it through should tell you the insurance company’s rating.  Any company with an A rating or better is considered financially stable and you should not worry about any future claims not being paid out.

Natasha Cornelius is the content manager and editor for Quotacy.  She has worked in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014.  A long-time Mint user, Natasha lives in Bozeman, Montana where she loves to garden, DIY anything she can, and explore beautiful Big Sky country.  Connect with her on LinkedIn.

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Do I Need Life Insurance?

Do you remember what it’s like being a kid with no financial responsibilities? Neither do I. It seems like we have been adulting forever. If life insurance isn’t quintessential adulthood, I don’t know what is. As you are reading and researching life insurance, one of the biggest questions you ask yourself is “Do I even need life insurance?”

Ask yourself this question: Does someone rely on me financially? If the answer is yes, then you likely need life insurance. Let’s discuss a few different types of people and their need for life insurance.

Single? You probably don’t need it.

If you are single and have no children, you probably don’t need life insurance. However, if you’re an ultra-planner or want to have a family sooner rather than later, locking in those low rates while you’re young and healthy can be a wise move.

Here are a few situations in which buying life insurance would be recommended even if you’re single:

  • Co-signed loans

Maybe your grandparents are co-signers on your private student loans or your parents co-signed on your mortgage. If you die before the balance is paid, the creditors can go after your co-signers. Life insurance can pay for these debts.

  • Caring for relatives

If you are caring for siblings or aging relatives you should consider life insurance to ensure that your loved ones are still provided for even if you are no longer around.

Have dependent children? You definitely need it.

Those with children have the greatest need for life insurance. Children rely on you for food, clothing, shelter, medicine, and everything else. If you die, life insurance can continue to fund these things, and it can also pay for hopes and dreams such as college tuition or a wedding.

Let’s take a closer look at specific parental situations:

  • Dual income families

If your household has two incomes contributing to standard of living, the sudden loss of a parent can cause financial upheaval if there is no life insurance to replace the lost income. One parent is now responsible to provide what two incomes previously did. For example, the proceeds from a life insurance policy can pay off the mortgage ensuring the children do not have to be uprooted from their home or school district.

  • Single parents

Let’s face it, the loss of a single parent to a child would be devastating. When married couples purchase life insurance, they often plan with the possibility that one spouse will remain to care for the children. Single parents do not have this luxury and absolutely need life insurance.

  • Stay-at-home parents

When you think of life insurance, you may only think a breadwinner needs coverage and not a stay-at-home parent – this could not be further from the truth. Imagine everything a stay-at-home parent does: babysits, cleans, cooks, transports, grocery shops… the list goes on. According to Salary.com, a stay-at-home mom is worth approximately $112,962. If the stay-at-home parent were to die unexpectedly, life insurance can pay for someone to help with these tasks.

Married? You most likely need it.

You don’t need to have children to rely on your significant other’s income. You’re building a life together and doing so requires money. You are likely both contributing to rent or a mortgage, car payments, utilities, and credit card bills. What happens if one of you were to die prematurely? The death benefit from a term life insurance policy can help pay for those expenses and cover the cost of a funeral.

It’s not uncommon today for couples to be in a committed relationship but postpone marriage. While it’s a little easier to own life insurance on your significant other if you are married, non-married couples can still purchase life insurance on one another as long as they can prove insurable interest.

Insurable interest is when a person can expect to suffer financial loss upon the death of another specific person. Having both names on a mortgage loan, both named on a lease, or owning a business together are just a few examples of how you can prove insurable interest.

The two types of life insurance

There are two main types of life insurance: term life insurance and permanent life insurance.

Term insurance:

  • Basic, inexpensive life insurance
  • Temporary – lasts a certain length of time (typically 10, 20, or 30 years)
  • Ideal for most people

Permanent insurance:

  •  Lasts a lifetime
  • Accumulates cash value
  • Much more costly than term insurance
  • Not necessary for most people

For most individuals, term life insurance is suitable coverage. It is designed to last only during the years in which you have the greatest need for it. Permanent life insurance can be beneficial for more complicated situations such as managing wealth for large estates.

The key benefits

Buying life insurance means you hand over some of your hard earned dollars to an insurance company – so what do you get in return?

  • Your life insurance policy will provide significant funds to your loved ones when they need it most, allowing them to grieve without the added financial stress.
  • The death benefit is typically considerably greater than the premiums you paid.
  • The proceeds are generally safe from creditors. Even if you die with debt, creditors cannot go after the life insurance proceeds paid.
  • Life insurance proceeds are typically not taxed by the federal government.
  • Peace of mind in knowing your loved ones will be financially protected if you are taken from them too soon.

Natasha Cornelius is the content manager and editor for Quotacy. She has worked in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014. A long-time Mint user, Natasha lives in Bozeman, Montana where she loves to garden, DIY anything she can, and explore beautiful Big Sky country. Connect with her on LinkedIn.

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How Do I Fit Life Insurance into My Budget?

Budgeting for life insurance might not be as exciting as budgeting for a new car or a fun trip, but it is much easier. Many people think about life insurance, but then decide to put it on the back burner because they think it’s expensive. Well guess what? Life insurance is actually very affordable.

Life insurance is really about protecting your loved ones from financial disaster if you should pass away. Think of it as income replacement.

Plan for what you need

Most people overestimate the cost of life insurance by 3-4 times. Life insurance is less expensive than you think. On average, you can get a $500,000 policy for $50 per month! We recommend getting coverage that is at least 5-10 times your income, but most importantly you should buy what you can comfortably afford. Having $100,000 in coverage is a million times better than having nothing at all.

Here’s what you need to cover:

  • Personal debt (car, student loans, credit cards)
  • Mortgage
  • Funeral expenses
  • Monthly income your family will need (future college tuition for children, groceries, monthly bills)

How to save money on life insurance

There is no such thing as a coupon for discounts on life insurance, but there are other ways you can save money.

  • Buy term. Term life insurance is the most affordable coverage you can own. Permanent insurance can cost 10 times more than term life insurance.
  • Pay annually. Insurance companies add fees for the extra administrative work needed to provide you that convenience of paying monthly or quarterly. Paying annually typically saves you around 5%.
  • Compare quotes. Life insurance pricing isn’t the same across the board with insurance companies. Different carriers evaluate your application on their specific guidelines, so you may save money by choosing a company that is more lenient toward your health situation. When you compare quotes using a tool like Quotacy, you are provided with competitive prices from all the top life insurance carriers.
  • Take another look. You may be overpaying especially if you purchased life insurance directly through an agent that only represents one insurance company. Chances are you may be able to get a lower rate just by comparison shopping different companies.
  • Unbundle your coverage. Bundling your life insurance with home and auto insurance is typically more expensive.

Put the cost of life insurance into perspective

We insure our health, cars, home, valuables, and even our phones, but most of us don’t realize that life insurance is cheaper to insure than most of these. In life we face financial challenges. We budget for daycare, student loans, phone bills, car payments and much more. Life insurance may not feel like a necessity when we are on a tight budget, but when you realize that you can get your family covered for pennies on the dollar, it’s easy to make that decision. If you feel the financial struggle now, what happens to your family if you die? Make sure your family is protected.

Fitting life insurance into a budget

Let’s look at three easy changes that you can make to fit life insurance into your budget. I’ve even made them myself!

1: Practice BYO (Bring Your Own)

Do you go through the Starbucks drive-thru or out to lunch on a daily basis? What about those happy hours and brunching on the weekend? I get it. It may take baby steps to start making your own coffee, packing your own lunch, and cutting back on eating out in general. But you’ll be surprised at how quickly the savings adds up.

My girlfriends and I alternate between throwing our own happy hours or brunches on the weekends. There’s no pressure to get all dolled up, and we make it easy by having everyone pitch in and bring their favorite drink or dish. Sure, I still go out and have fun, I just do it a little less often.

2: Conduct a subscription audit

These days with all the apps we have our fingertips and that fine line between need and want, it’s easy to let the number of subscriptions we have get out of hand. So many of these subscriptions are auto withdrawn, so when you look at your bank account it’s hard to decipher what you are even paying for anymore. Chances are you don’t need to pay for Hulu, cable, and Netflix, or Pandora, Spotify, and iTunes Radio. Give up a few and your bank account will thank you.

I’m the queen of subscriptions. But after my budget boyfriend became my budget husband, I was encouraged to give up a few subscriptions in order to save for our future. I thought $10 per month was no big deal, but when I added everything up, it became a real chunk of change. I encourage you to go through your subscriptions and decide what you really need.

3: Get creative with date nights

Going out for a date night gets expensive. Even if you just go out for dinner and a movie, that night adds up quickly. A dinner for two can quickly reach $50 or more, especially when you add in drinks. Have you been to a movie lately? Evening tickets are averaging $12-$14 each! And of course you want that delicious, buttery popcorn to go along with that show. It’s easy to spend $100 for a simple night out.

I’m a lover of date nights, but when my husband and I made it a weekly thing, it became a large monthly expense. While we enjoy a dinner and a movie, sometimes we make it a daytime activity. A lunch and a matinee can cost almost half the price of an evening out. Or, we choose a movie on Netflix and make a dinner at home.

We also decided to spice things up by finding activities we both enjoy and took up tennis lessons. Now we love taking our dates to the tennis court and loser has to make dinner at home. Fortunately my game is better than his, so I rarely have to cook. Not only do we save money by not going out, we also get a good sweat session in.

How to shop around for life insurance coverage

Admittedly, you’ll be shopping for the lowest price. Make sure the prices you see are from well-known brands with high financial strength ratings (A rated or better). These companies have been around a century or more and will be here for a long time to come.

Let’s say you’re looking for a $500,000, 20 year term policy. To stay competitive, insurance companies all have around the same price for the same policy, maybe just within a few cents of each other, so at first look they all appear to be about the same. Starting prices are based on your gender, your age, what state you live in, and whether or not you smoke cigarettes.

From there, pricing starts to change based on specific niches that insurance carriers have created for certain medical conditions and lifestyle habits. For instance, if you enjoy an occasional cigar during your monthly golf game, many carriers will consider you to be a smoker at a higher price, while a few companies see that as less of a big deal and will classify you a non-smoker at lower prices.

Here’s another example. Even if you are the epitome of health, but one of your parents wasn’t, prices can be higher because of the genetic risk they passed onto you. Let’s say your father died of cancer before we was 50. Your low rate won’t be affected with one or two carriers, but with all the rest your price will be higher.

A good place to start your shopping is at Quotacy. When you use Quotacy’s life insurance quoting tool you’ll see how easy it is to find and compare prices between the top carriers. You’ll be able to find the right price for you.

Jeanna Simonson is a writer and the Ambassador of Buzz at Quotacy. She has been researching and writing educational articles on the importance of life insurance since 2015. When not writing for Quotacy, you can find her scoping out the newest fitness and beauty trends for her own personal blog, traveling and spending time with her husband and fur babies. Connect with her on LinkedIn.

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Financial Planning Investing Life Insurance

How to Buy Term Life Coverage Online

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If you want to buy term life insurance, you’ve got a few options. You could work with an agent in your area if you’d prefer a face-to-face interaction, or you can buy online if you prefer the convenience of an electronic process.

However, not all online life insurance agencies are created equal. If you’re shopping around for term life quotes, it’s important to understand what to look for to help you get the best value.

What to expect when you’re applying for coverage

Anyone who has gone through a life insurance application in the past could tell you that life insurance carriers are some of the most thorough and careful companies in the world. This is because life insurance policies are priced based on the applicant’s risk of death.

However, the process of applying has come a long way, and it’s actually gotten pretty simple – especially online. Nowadays, most of the heavy lifting is done behind the scenes.

If you add a good agency into the mix, applying for life insurance is practically painless, since it will handle almost everything that doesn’t require your signature or further clarification from you.

Generally, buying a life insurance policy will take between two and six weeks, and the process tends to follow a consistent format.

Step 1: Submit an application

When you find a price you like, you can choose a carrier to submit a formal application with. Choosing a carrier to apply with isn’t a binding decision, and you’re always free to back out of an application to go a different direction.

Step 2: Take a medical exam

Life insurance carriers will require you to take a medical exam see how healthy you are. This is free for you and the examiner will even come to your home or office to make things convenient.

Step 3: Wait for your medical records

The carrier will order a copy of your medical records from your doctor, which could take anywhere between hours and weeks, depending on how well-organized your doctor keeps their records.

Step 4: Tie up loose ends

After the exam is completed, medical records have been received, and any other questions the carrier needs answered are out of the way, your application will be reviewed. Once you get the final OK from the carrier, your policy will be approved, and you’ll be on your way to getting coverage!

Let’s look at each of these steps in a little more detail.

Submitting your application

Starting your life insurance journey will often begin with getting a quote, which will show you prospective prices based on a few key factors, like the amount of coverage you’d need, how long you want it to last, and a few health and lifestyle questions.

Interested? Check out a few prices. Quotacy has an online quoting tool you can use – no commitment required.

Taking the medical exam

After applying for coverage, the life insurance carrier will require you to take a quick medical exam in order to be approved for coverage. Because life insurance pricing is based on your mortality risk, the carrier needs to verify your current medical situation.

The medical exam is a free mini-physical performed by an examiner and scheduled by the carrier. It can happen anywhere, even in your home or office, whenever you can spare half an hour.

Preparing for your exam

The measurements that are taken during the exam are extremely important, and being prepared is your best bet to ensure a good outcome. In the time before your exam, you should remember to:

Waiting for your medical records

Before your life insurance application is approved, insurance carriers order copies of your medical and driving records to help them get a better idea of any insurability risks you might have. Just like with the medical exam, the carrier orders these records behind the scenes on their own dime.

Because the laws protecting a patient’s medical records are extremely strict, you will need to sign a form authorizing your doctor to release your records to the insurance company and agency you’re working with.

At this point, all you’ll need to do is sit and wait for the records to arrive. Depending on how efficient your doctor is at sending them along, waiting for this step to be completed can either happen overnight or take a few weeks.

Answering additional questions

In addition to everything else that happens during your application, the carrier will sometimes have follow-up questions for you which will help them get to know you a bit better. These questions can be about anything from medical conditions to your hobbies to your travel plans.

A lot of the time, the questions a carrier asks can be pretty scary to someone trying to protect their family. Many clients see a questionnaire about their sleep apnea, or their diabetes, or their battle with cancer, and assume that the carrier will decline them on the spot.

It’s important to keep in mind that even though there are many factors that can affect your rate during this time, you’ll likely be able to get coverage. The whole reason that insurance carriers have flexible prices is because they want to offer coverage to as many people as possible, regardless of the circumstances.

Here’s a quick list of example questions you could see during an application, depending on your circumstances.

If you have a medical condition:

If you have a risky hobby, like hang gliding or rock climbing:

This isn’t a comprehensive list, by any means, but hopefully it will give you an idea of what the carrier is looking for.

Waiting for approval

Once the carrier has everything they need, your application will enter the approval process. This is when the carrier’s underwriters will review everything they’ve collected as a whole, and evaluate where the final price of your insurance policy should be set.

If you’re approved for coverage, you’ll be sent a packet containing your policy itself as well as a few documents that you’ll need to sign and return so the carrier can finalize your coverage. This step is also when the carrier will collect your payment information so that they can set up your billing on their end.

Depending on the carrier you apply with, you will either be sent digital forms or a physical policy booklet. Regardless of the format, you should store your policy securely and have a plan in place to help your family find it in the event of your death, so they can claim your death benefit.

After a bit more processing by the carrier to wrap up any loose ends, you’ll receive a notification that your policy is inforce. That means that everything’s in place on the carrier’s end of things, and your coverage has been activated! All that’s left for you to do is make your premium payments according to your payment plan, and your family will be covered.

Eric Lindholm is a writer for Quotacy, and he’s personally guided hundreds of people through their own life insurance journeys since joining in 2016. Eric lives in the Twin Cities, Minnesota, where he’s busy paying off his student loans and making the most of his time as a 20-something. You can connect with him and see what he’s up to at EricLindholm.biz.

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Financial Planning Investing Life Insurance

Part 3 of 3: Life Insurance Buyers’ Common Q&As

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Replacing your policy

I currently have a life insurance policy – could I get a better price elsewhere?

The short answer is yes – it is possible to get a better price. The long answer is that it depends on quite a few factors, and there’s no guarantee that your price will drop with a second application.

One of the biggest things to keep in mind is your age. The older you are, the higher your chances of dying naturally, which will slowly increase the baseline price of a policy. Applying for a policy at 45 will be more expensive than applying at 35, all other things being equal.

When in doubt, work with a life insurance agency. They’ll be able to give you some insight into how much your price could drop if you switch to another carrier.

If my health has improved since I got my last policy, can I reapply for a better price?

Depending on how your health has improved and the amount of time that has passed since your previous application, you could see significant price drops.

For example, smoking is one of the priciest things that you can do with regard to a life insurance application, and typically, you need to have kicked the habit at least one year ago before life insurance carriers are willing to look past your tobacco history.

My last agent sold me a policy from the company he worked for. Can I get a better price if I shop around?

If your agent was captive, meaning they only represented one insurance company, the first thing that you should do is get a quote from an independent source that represents many. Because carriers jockey for position to undercut their competitors’ prices in certain situations, it’s possible that another carrier beats your current carrier in price.

Sometimes the difference in price will be pretty obvious from the get-go. If you can’t find a dramatic difference in price, it’s often wise to talk to an independent agent or online company and tell them the facts about your case. An experienced agency can help point you in the right direction by shopping your case around for preliminary price checks with various carriers.

Natasha Cornelius is the content manager and editor for Quotacy. She has worked in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014. A long-time Mint user, Natasha lives in Bozeman, Montana where she loves to garden, DIY anything she can, and explore beautiful Big Sky country. Connect with her on LinkedIn.

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Financial Planning Investing Life Insurance

Part 2 of 3: Life Insurance Buyers’ Common Q&As

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Reviewing your policy

How often should I review my policy?

We suggest reviewing your life insurance policy once per year to make sure you have enough coverage.  Most importantly, you should review it anytime your life and circumstances change.

What should I look for during my policy review?

When reviewing your policy you should look for anything that may need updating. Examples include your name, address, phone number, billing information, and beneficiary.

When should I update my beneficiaries?

Make sure you keep your beneficiary designations up to date.  There are certain circumstances that will warrant a beneficiary change. These include:

When should I apply for a new policy for more coverage?

Just as life is ever changing, so are your life insurance needs.  You may have purchased a small insurance policy when you were fresh out of college to cover your student loans.  A few years have passed and now your lifestyle has changed.  Here are some common circumstances in which you may want to increase your life insurance coverage:

Natasha Cornelius is the content manager and editor for Quotacy.  She has worked in the life insurance industry since 2010 and has been making life insurance easier to understand with her writing since 2014.  A long-time Mint user, Natasha lives in Bozeman, Montana where she loves to garden, DIY anything she can, and explore beautiful Big Sky country.  Connect with her on LinkedIn.

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Financial Planning Investing Life Insurance Travel

Moving Abroad? The Importance of a Life Insurance Review

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Life insurance is never a pleasant topic of conversation – let’s face it, none of us relish having to contemplate our own mortality – but if you have any dependents or financial commitments such as a mortgage, it is an absolute must-have. When we talk about dependents, that doesn’t only mean your children – if there is anyone who would be negatively affected financially if you were to pass away, life insurance is a necessity. That includes a husband or wife, a partner you cohabit with and possibly elderly parents.

The Basics About Life Insurance

Life insurance is a means of protecting your loved ones financially after your death. It compensates them for the loss of your income by paying them a lump sum (or regular payments) to mitigate the financial impact of your passing away. The cover you have in place should take into account all your regular outgoings, particularly those with large debts such as a mortgage, but also day-to-day expenses, education costs, childcare requirements and other loans.

Why You Should Review Your Policy

Any major life event will affect your life insurance requirements and necessitates a review of your policies to adjust cover to take account of your new situation. Such events include the birth or adoption of a child, a marriage, a divorce, the purchase of a property or business and even the taking up of a new potentially dangerous hobby such as skiing. However, perhaps the most important time to review your life insurance cover is when you move out of the country.

If you are about to become an expat, chances are you have a to-do list as long as your arm. It inevitably includes informing everyone of your change of address, liaising with moving companies and packing – but does a review of your life insurance requirements appear on the list? In the chaos of an international move, this is one area that often gets overlooked, but failing to address the issue can have devastating consequences. If you have already moved abroad but have failed to review your life insurance, you need to do this without delay.

The reason is that life insurance premiums are worked out taking into account a whole host of factors including age, health and where you live. Any changes to any of these factors could alter the premium, and omitting to notify your insurer of them could render a policy null and void.

Keep your loved ones protected in the event of your passing.

You May Need New Coverage

Becoming an expatriate can actually invalidate your coverage altogether, especially if you are moving from a low-risk country to somewhere considered to be high risk. Insurers will, unfortunately, use any excuse not to pay out, so it is essential to contact your insurer or broker and ask them to check your policy. If you are covered in your new country of residence, you should ensure that you get written confirmation of this from your insurer, just to avoid any room for error.

In fact, the chances are that you will not be covered and will need to alter your policy or take out a new one altogether. Life insurance coverage can be very reasonably priced, but it is important that it takes into account your unique circumstances, and this can make it complicated to set up. This is particularly true for expats, who are more likely to have additional considerations to bear in mind including mortgages on dual properties, high school fees and the repatriation costs of your loved ones in the event of your death. If you are divorced, you may also have obligations from a former marriage to take into account. A professional financial advisor will be invaluable in guiding you through the life insurance minefield, reviewing your requirements and exploring the options available to you.

In Conclusion …

It is also worth remembering that a move abroad will mean a change of domicile and of jurisdiction, which will have an effect on the laws governing succession in the event of your death. This could significantly affect the amount payable on your estate in inheritance tax, and life insurance coverage should be adjusted accordingly to take into account your obligations and to cover taxes due to save your loved ones from having to pay these. Your death would be difficult enough for them to deal with, let alone finding themselves in a financially precarious situation. Depending on where you move to, there could be tax-effective steps you can take to safeguard your estate.

A professional financial advisor in your new country of residence will be invaluable in helping you structure your life insurance in the most cost-effective way possible.

Infinity Financial Solutions is a leading provider of financial services to the expatriate community across Asia and beyond. With offices in six regional centres, a staff team of 15 different nationalities and clients from over 80 different countries, the company is genuinely international in its focus. Infinity provide individually tailored financial planning to protect, build and maximize the wealth of their clients.

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Building Credit Life Insurance

7 Questions to Ask a Life Insurance Agent

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A life insurance agent can make the process of buying life insurance much easier. They can find you the best deals and ensure you’re completely covered. This is important, as close to a third of all Americans admit to lacking confidence about the insurance application process and can’t answer many basic questions about their needs and the coverage they seek.

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But what sort of questions should you be asking your life insurance agent and what answers can you expect in reply?

Who is Offering the Insurance?

Does your life insurance agent work on behalf of a single company or multiple companies? What are the names of those companies, and can you verify their legitimacy using a simple Google search?

No two insurance companies are the same. Many policyholders focus their attention solely on the price of the policy and the coverage it provides. But the company’s history of payouts and its reputation also comes into it. A cheap life insurance policy is pointless if the company has a reputation for not paying out.

Fortunately, it has never been easier to determine the legitimacy of an insurance company and a simple online search is all you need.

What Are the Guarantees?

The numbers you need to focus on the most are the guaranteed ones. This tells you how much a permanent policy will pay regardless of market changes. The projected figures are subject to change, but the guaranteed figures will provide you with some stability and assurances over the term of the policy.

Will It Adjust for Inflation?

It’s important to make sure the grant you receive will be paid after adjusting for inflation, because what seems like a lot of cash today may be worth much less in the future after years or decades of inflation.

$250,000 can seem like a huge sum of money today. If anything happens to your spouse and they are the breadwinner, this money can help to clear the mortgage and bolster your savings, securing you for years to come and allowing you to prepare for a future without them.

In forty years, however, $250,000 may count for very little. As an example, let’s imagine that you took out an insurance policy for your spouse in 1980 and they have just passed away. That policy was $100,000 at the time and this was a huge sum, enough to buy you two houses or 13 cars based on the national average rate.

Today, after accounting for inflation, that sum would be over $315,000, which is also a lot of money (although not quite enough for two houses). However, if the policy didn’t adjust for inflation, you’d get $100,000, which simply isn’t enough to cover an individual for life, especially if they have just lost most of their household income and still have a big mortgage to repay.

What Happens in the Future?

What happens to your policy as you age, can you switch your term policy to a permanent one, what options do you have, and can you save any more doing this? The older you are, the more you will pay, and by quite a considerable amount.

What costs you $100 a year when you’re in your forties could cost you $500 a month when you’re in your seventies. You’re a higher risk, and because life insurance is based on probability, you will be expected to pay a lot more.

Are You Covered if You Become Ill or Disabled?

Life insurance is designed to support your family in the event of your demise. However, you have your own wellbeing to think about as well. What happens if you become disabled or fall ill—what happens if you can no longer work and have growing medical bills to worry about?

This could place a big financial burden on your household and it’s something that you need to prepare for. Ask your life insurance agent if you will be covered in the event that you fall ill or become disabled. And, if so, what will that cover provide?

Many life insurance policies offer some kind of disability or illness cover, but this can vary greatly from policy to policy. More importantly, life insurance companies have their own definitions of what constitutes “disabled”. For some, it’s the inability to perform specific actions; for others, it’s about being unable to perform any actions at all.

What Happens if I Can’t Pay the Premium?

Life insurance providers are not as forgiving as banks and creditors when it comes to missed payments. They won’t chase you down, give you multiple chances, and then offer payment plans and other assistance programs to get those payments started again. In many ways, the ideal outcome for a life insurance company is if you meet the payments for twenty years and then stop. 

That way, they have secured a sizeable profit without the risk of a payout. And if you need to resign, you’re now much older and will, therefore, have higher premiums to repay. 

Discuss this potential issue with your life insurance agent in advance. Ask about grace periods and automatic premium loans; the former will give you a break to allow you to find your feet again, the latter will allow you to borrow against the policy.

What if Your Health Improves?

If your health gets gradually worse, your policy shouldn’t change and that’s a good thing, otherwise, life insurance would be pretty pointless. However, if you’re not in the best of health when you take out the policy, but this soon improves, there’s a chance you could get a discount.

Ask your life insurance agent what your options are in the future if your health or your situation changes. You could get a new underwriting if you lose weight, stop smoking, stop drinking or remove some other negative trait that initially increased your premiums.

Summary: Keep the Questions Coming

Life insurance agents are there to answer questions and support you in whatever way they can. Obviously, they benefit more if you don’t take up too much of their time, agree with the first policy they offer you and quickly sign on the dotted line. But you’re not there to make their life easier, you’re there to make a commitment that will impact you for years to come, one that will continue to provide for your family after you’re gone.

It’s important, therefore, to take your time and get everything off your mind. Don’t worry about sounding stupid and asking a question you feel you should know the answer to. You’d be surprised at how little the general population knows about life insurance and how common the most basic of questions are.

The most important thing is that you get the answers you seek and the policy you need. If that means asking a string of questions and making a life insurance agent wish they’d never met you, so be it!

Source: pocketyourdollars.com