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Frequently Asked Questions
“Should I
buy Term insurance and invest the difference?”
It depends on the type of policy you buy. If you buy whole
life you have no control over the savings part of the policy.
If you buy variable life you manage the investments under
a number of different options. Universal Life gives you
a number of investment options to choose from but they are
all fixed income options. Variable universal life allows
the broadest range of options and offers transparency and
flexibility as well. The tax-sheltered features of the investment
part of life insurance policies are difficult to beat. You
need to pick the policy that offers you the best investment
options given your risk tolerance and investment preferences
and if you do, you'll find that the only place to invest
the difference is in the policy itself.
“What is meant
by a "living benefit"?”
Some life insurance companies offer an accelerated death
benefit provision, called a "living benefit". Under this
option the life company will advance a portion of the death
proceeds, that otherwise would not be payable until death,
if the insured is terminally ill.
“How much
insurance do I need?”
Life insurance is bought for many different reasons. The
question of how much often comes up when an individual is
trying to decide how much is needed for those he leaves
behind in case of premature death.
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To calculate
how much is needed under those circumstances, try the
Simple Insurance Needs calculator. |
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“For how long
should I be covered?”
For as long as you need to or want to have the protection.
For most people this means lifetime.
“How much
does insurance cost?”
It all depends how old and healthy you are and how much
you want to buy. Your sex and whether or not you smoke also
affects the premiums. Most financial advisors feel that
budgeting up to 5% of your income for life insurance is
realistic.
“How
are commissions determined?”
Commissions are usually based on the first year premiums.
In case of a universal life type of policy the commissions
on the insurance part of the premiums are a different percentage
than the commissions on the investment part. Most policies
pay a small "trailer fee" for anywhere from three to ten
years. The "trailer fee" on the investment part of a universal
life policy may be continued considerably longer.
“Are
life insurance proceeds payable at death taxable?”
Yes, death proceeds will be included in the gross estate
if the insured owns the policy at time of death or within
three years of death, no matter who is the beneficiary.
“What are
dividends?”
A return of part of the premium on participating insurance
that is based on the insurer's investment, mortality, and
expense experience. Dividends are not guaranteed. For more
definitions or descriptions go to the "Glossary".
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