Life Insurance Review

Jeffery A. Perry

Find the right life insurance plan for you and
your family
©2013 Passare Inc. All Rights Reserved

The fear of death follows from the fear of life.
A man who lives fully is prepared to die at any time.

Mark Twain


What is Life Insurance?
• Contract between you (the insured) and a company
(the insurer).
• You agree to give money to the insurer (buy
insurance)
• When you pass, the company agrees to give money to
your beneficiaries (death benefit-proceeds)
• Legal document
• Many variations can be built into this type of contract
• Pay out in case of a terminal illness
• Make multiple payments over time


How Much Do You Pay?
• Depends on several factors
•
•
•
•

Your age
When you begin the insurance plan
Payout amount
Type of plan


Two Types of Life Insurance
1. Single Life
• Traditional form of life insurance policies.
• Insures one individual and pays the proceeds
upon the death of that person.

2. Survivorship, also known as Second-to-Die
• Relatively new form of policy
• Only pays a death benefit when the last of two or
more named insured’s die
• Provides a low-outlay, cost-efficient source of
cash to fund the estate tax liquidity needs at the
death of both a husband and a wife.


Employer Benefits
• Typically, employer-sponsored life
insurance plans are group term policies
that terminate when you leave the
company.
• In some instances, you may be able to pay
for the policy on your own, but the cost is
usually higher and it is typically a good
idea to explore your options.


Term or Permanent Insurance:
Which is right for you?
Term Insurance
•
•
•
•

Guaranteed payment at death
A safety net for lost income during your lifetime
May or may not have a level premium
Can typically be paid over a range of one to 30
years
• Typically starts out lower than a permanent policy
• Increases annually, or at the end of a specified
term because the insured’s probability of death
increases each year

Term or Permanent Insurance:
Which is right for you?
Whole Life, also known as Permanent
Insurance
• Protection over the entire lifetime of the insured
• A fixed death benefit
• Note: Depending on the policy and company,
other benefits may be attached.
• May or may not have a level premium
• Can typically be paid over a range of one to 30
years
• Typically starts out lower than a permanent policy
• Increases annually, or at the end of a specified
term because the insured’s probability of death
increases each year

Variations of Traditional Whole Life Policy
Vanishing Premium
• Provides protection over the insured’s entire
lifetime
• Requires policy premiums are paid over a
shorter term, typically 7 to 10 years
• Requires higher premiums to build value in
the side fund to carry the policy for the
balance of the insured’s lifetime


Variable Life
• Allows its owner to use the cash value in the
side fund to invest in mutual fund investments
• Shifts investment risk to the policy owner
because the owner is making the mutual fund
investment decisions


Universal Life
• Allows its owner to vary the amount of the annual
premium or even skip a premium
• Adjusts annually, by the insurer, to reflect current
charges for mortality, expense, and investment
performance
• In certain cases, transfers underwriting and
investment risk from the insurance company to
the policy owner
• Owner controls the cash flow both inside the
policy (side fund) and outside (annual premium
payments)

Taxes and Transfer of Ownership
• Life insurance policies that are owned by the
decedent are part of the decedent’s gross estate
for federal estate tax purposes.
• Owning the life insurance policy is a clear incident
of ownership.
• Other incidents of ownership include the:
• Right to change the beneficiary designation on the
policy
• Right to borrow against the life insurance policy

• The presence of any of these rights in the policy is
enough to include the life insurance proceeds in
the decedent’s taxable estate.

Transfer Ownership of Life Insurance
Policies
• Existing insurance policy can be
transferred or gifted to remove the policy
from a person’s estate.
• Transfer is treated as a taxable gift.
• You must live for 3 years after the gift of
the insurance policy to get the policy value
out of your estate for estate tax purposes.


Irrevocable Life Insurance Trust
• It is designed to hold a life insurance
policy during the insured’s lifetime.
• When the insured passes away, the
proceeds are distributed to the family or
other beneficiaries such as a charity or
other entity.


Advantages of an
• The gift of the insurance policy to the trust
gives the insured more control over the
policy than would the outright policy gift.
• The trust, like any trust, can provide for
professional management of the proceeds
by a carefully selected trustee.


Disadvantages of an
• The cost of preparing the trust agreement
and possibly the annual fiduciary income tax
returns and accounting fees.
• The procedure for making the annual
contributions to the trust is complicated and a
record of the “crummey” withdrawal letters
must be maintained.
• If the insured dies within three years of
transferring an existing policy to a trust, the
amount of the policy will be included in the
insured’s gross estate.

Factors to Consider: Which Type of Life Insurance is Best
• The amount of money your family needs to support and maintain what
you leave behind
• Use a life insurance calculator, to make a precise calculation of this
sum.
• Compare different insurance companies’ rates to find the best deal for
you.
• Contact an insurance professional or financial planner to help you
determine how much money your family will need.
• Most insurance professionals will provide a Financial/Capital Needs
Analysis free of cost.
• A good life insurance agent can help you to find the right insurance
company, or get you started with a company they represent.
• An experienced agent will ask for financial information to help you apply
for the appropriate amount of insurance.
• A life insurance agent will also identify various health and lifestyle factors
that determine the costs of life insurance.

• To buy life insurance, you usually need to undergo simple medical
examinations to help determine your insurability and the costs of your
policy

Documents You Need to Purchase Life Insurance
Identity Proof
•
•
•
•
•
•

Passport
PAN Card
Voters Identity Card
Drivers License
Government issued ID
Consular ID card

Address Proof
• Telephone bill
• Bank account statement
• Letter from any recognized public authority

Application
• Medical history (usually past 5-10 years)
• Medications (dosage, frequency, and purpose)
• Visits to doctors (date, diagnosis, medications, doctors’ contact
information)
• Family medical history (usually immediate family)


There’s MORE!
1.
2.

Get a Full Life Insurance Checklist
Glossary of Live Insurance Terms

Download Our FREE
Life Insurance Review - eBook
Get Your FREE eBook


Life Insurance Review

Recomendados

Recomendados

Más contenido relacionado

Más de Passare

Más de Passare (6)

Último

Último (20)

Life Insurance Review