growing number of Americans are increasing their life insurance
as employers reduce their contributions to retirement plans
and other benefit programs. About 50% of all households now
believe they need more life insurance, up approximately 10%
since 1998 when LIMRA International, a Connecticut-based research
firm, took the last survey.
Also changing are the kinds of policies being chosen by Americans,
notes Joshua Klein, Kornreich-NIA’s Director of Life
Insurance, an affiliate of The NIA Group. Term and permanent
life insurance were once the only two product types. But increased
consumer knowledge and demand for investment returns, guarantees
and flexibility have resulted in new plan choices that can
be customized to fit one’s specific insurance needs.
Change in Permanent Plans Suits Today’s
While low cost term life insurance, which allows policyholders
to select a specified amount of coverage for a specific, predetermined
amount of time, has continued to be competitively priced,
the world of permanent life insurance has changed dramatically
over recent years.
“Consumers have more choices than ever to match insurance
products to their specific financial, family and estate planning
needs,” notes Klein. “Essentially, permanent life
insurance coverage is good for as long as you live with the
death benefits payable to your beneficiaries at the time of
your death—no matter when that occurs. The higher premiums
on permanent policies support the policies in the later years
and can also provide a form of tax deferred savings known
as the cash value,” he explains.
Klein describes the variations of the permanent life insurance
policies that have emerged over the years as four different
Standard whole life insurance
is the most basic of these options and is where the insurance
company controls the way the cash value portion of the policy
is invested. It is the most conservative type of insurance
protection with the insurance company controlling the way
the cash value is credited, primarily based on long term investments
in bonds and real estate.
Universal life insurance
policies tie the interest rate return on the cash value to
the insurance company’s general account portfolio return
on investments. Interest crediting rates and cash values will
fluctuate with the changing economy and premium payments are
subject to change to maintain the coverage. A universal life
policy provides you with greater flexibility and returns based
on the insurance company’s general investment account
-- with the potential for profit as well as for loss.
Guaranteed no lapse universal life
insurance policies are like traditional universal life
products; however, the investment portion is minimized while
the premium amount, duration of payments and death benefit
are all guaranteed. As long as premiums are paid on a timely
basis these products will pay upon death (some even beyond
the age of 120).
Variable life insurance is a type of permanent coverage that
allows policyholders to invest the cash value portion among
various mutual fund-like sub-accounts. Policyholders have
complete control over their investment options within the
insurance product. The rewards can be great—but, like
in all investing, so is the risk of loss.
Plans with a Purpose
Consumers are using the new range of permanent life insurance
policies to pay for a variety of purposes during life, including
as a source of cash to help finance college tuition and as
a supplemental retirement plan. In the event of an untimely
death, the proceeds provide the survivors with cash for education
expenses or retirement needs.
Some individuals purchase life insurance with a death benefit
specifically designed to offset one’s projected estate
taxes liability. This provides the beneficiaries with the
cash to pay the estate taxes due without having to quickly
sell assets and suffer a great reduction in their inheritance.
Others are using permanent life policies as a form of contribution
to their favorite charity, naming the charitable organization
as the owner and beneficiary of the policy. The donor then
makes annual gifts to the charity to pay the premiums and
deducts these gifts from his annual taxes as an itemized charitable
Selling Your Policy for Cash
Many policyholders may be unaware that they can even sell
their no longer needed life insurance policies. Known as a
“life settlement,” this kind of arrangement allows
the policy owner to sell the policy for a percentage of the
death benefit that is often greater than the cash value. The
buyer becomes the owner and beneficiary of the policy, assumes
payment of the premiums and collects the death benefit of
the policy when the insured dies. “If you are considering
selling your policy, consult with a trustworthy insurance
broker or agent who knows your personal and financial needs,”
For more information on the new life insurance option, including
which plans may be best suited for your needs, contact Josh
Klein at 800-321-2122 or via email at email@example.com.