Garden State Life Insurance Blog

I'm 53, What Type of Life Insurance Do I Need?

2008-07-18T15:22:00.003-05:00

This type of question is common. The generic answer that most give with respect to age and life insurance is that younger people need term life insurance and older people need whole life insurance.

Your age doesn't necessarily dictate what type of life insurance that you need. People into their seventies can qualify for both. Once you are eighty years old or older you are pretty much limited to some type of permanent life insurance, whole life or universal life, but it usually becomes so prohibitively expensive that most people can't afford it except in certain estate and tax planning situations.

The type of life insurance product that you buy should be based on your financial needs and goals. If you have a family that relies on your income, you should probably have some type of large face amount term life insurance product that can replace that income until you build up enough savings to essentially self insure yourself or can start drawing retirement benefits.

If you have a mortgage, then a term life insurance product may make more sense at any age. A lower priced term policy definitely makes sense to match the term of the loan. The fact that term life insurance premiums are lower than whole life insurance premiums will allow you to apply as much money towards your debt.

If you don't have a lot of savings and you want to make sure your funeral costs and final expenses are taken care of then a whole life insurance product may make sense at any age. That way you'll have the insurance in place no matter if you die in 5 years or 50 years. If at any point in time you feel like you have the appropriate amount of savings in place, then you can drop the coverage or buy something more appropriate.

Michael, Garden State Life Insurance

Life Insurance for Senior Parents

2008-07-01T10:26:00.003-05:00

As their parents get older many adults start to wonder if they should purchase life insurance on their parents lives. This usually occurs in situations where the parent has very little savings and also very little ability or desire to purchase the insurance on their own. Hopefully this article can answer a few common questions on the subject.

Is it available?

Yes. You can easily find term life insurance policies for people in their seventies and whole life insurance policies into the eighties.

Can I pay for it?

Your senior parents will have to participate in the process by signing the application and agreeing to all of the underwriting requirements of the company, but you can set it up so that you pay the premiums, control the policy and name yourself as beneficiary.

Why might I need it?

Usually the reason why most people seek life insurance for their parents is to cover funeral and final expenses. All of these expenses can be rough on you, especially if you have very little savings yourself. The proceeds from life insurance can also be used to make sure that your parents property or personal items of value are not lost to creditors if your parents had liens against them.

Michael, Garden State Life Insurance

Do I Have to Notify My Life Insurance Company if My Health Changes?

2008-06-26T11:31:00.002-05:00

So you have applied for life insurance, your policy has been issued, and you've paid your first premium. Several months later you discover that you have a health problem that you weren't aware of before the life insurance was inforce. What now? Does your new health status affect your coverage or your rates?

The answer is no. The life insurance company makes its decision to give you a policy and charge you a certain rate based on your health and financial status prior to the policy. Anything that occurs after the policy is issued and paid for will not affect your coverage status. The decision is made solely based on the past and present.

Several things to keep in mind. If your health status changes or your answers to your application questions change after you apply but before the policy is issued and paid for then it is your responsibility to notify the insurance company of the change. When you sign your application you agree that you are responsible for any changes that occur in your health status prior to the policy being put inforce. If you fail to notify the company of any changes prior to the policy coverage beginning then it will be treated the same as a misrepresentation and your future claims could be denied.

Also, if the insurance company discovers any additional information that pertains to your insurability after the insurance coverage has started the company can still rescind the policy. This pertains to things that happened in the past that the insurance company didn't discover until after they issued the policy. An example might be that one of your doctors was very slow in sending a medical record that had information that was material to the insurance companies decision. While they found out about it after coverage began, the medical record pertains to something that happened prior to the policy.

Michael, Garden State Life Insurance

Consider This Before you Sell Your Life Insurance Policy

2008-06-24T10:03:00.004-05:00

In my last post I talked about using a life settlement to sell your life insurance policy to an investor. In this post I'll give you a few things to consider before you sell your policy.

Competition and Fees

If you decide to sell your policy you need to talk to several brokers. The amount you will get for your policy and the fees that will be charged will vary from company to company. While this industry has grown, forcing the settlement companies to be more competitive, the best deal is not going to just fall into your lap.

Will you need life insurance?

While the early cash payout sounds good, you need to make sure that you don't need the life insurance and most likely will never need life insurance in the future. It may be very difficult to get another policy if you change your mind in the future. For one thing you will be older and possibly have worse health, which will lead to higher rates or may make you uninsurable. Also, most life insurance companies collectively will only allow someone to have a certain amount of life insurance. Life insurance companies get nervous when one life has a lot of life insurance coverage. If you were already at or near the maximum amount of insurance that most carriers will allow with the policy you sold then it will be difficult to buy another policy.

Income Taxes

Life insurance death benefits are paid tax free to the beneficiary when you die. In most situations life settlement payouts are considered ordinary income and will be taxed as ordinary income. So when you are comparing your options of keeping the policy versus selling it be sure and reduce your settlement for the taxes you will have to pay. As always, when dealing with taxable events, I would recommend you talk to a tax accountant that has experience with people in your situation. Getting professional tax advice on this topic is becoming increasingly more important as several states have recently passed laws addressing life insurance settlements.

Larry King's Problem

Larry King is the most public example of life settlements gone bad. Larry King sold a couple of very large life insurance policies in 2004 for over $1,000,000. It seemed like a good deal at the time, but now he is involved in a lawsuit with the company that set up his settlements. The basics of his argument was that he was mislead and that he should have gotten more for his policies and that he was mislead about several details of the process. For more details please read, Larry King Sues Over Life Settlement Deals. This does not necessarily mean that all life settlements are bad, but it just brings to light the information that you need to gather before you sell your policy to a life settlement company.

Michael, Garden State Life Insurance

Can I Sell My Life Insurance?

2008-06-17T09:28:00.003-05:00

As fears about the economy worsen and financial liquidity is becoming harder to come by for some, I have started to hear this question more and more lately. In a recent article I addressed the question, can I borrow against my life insurance policy? In this post I'll look at some of the options in regards to whether a life insurance policy can be sold.

There are companies that purchase life insurance policies. They are commonly referred to as life settlement companies. A life settlement company will usually pay the policyholder a flat amount for the insurance policy. In return the settlement company will begin making the premium payments and collect the death benefit when the insured dies. The amount the life settlement company is willing to pay is based on the size of the policy, your age, and your current health status. Since the life settlement company is making the premium payments, they actually profit more the earlier that you die. This means that the older or more unhealthy you are, the higher percentage of your policy's face amount you are likely to receive.

The life settlement industry actually has its roots in viatical settlements. A viatical settlement was created for terminally ill people to be able to access their death benefits before they died in order to improve their care. Since their death had such a high probability of occurring and occurring soon, they could actually receive a very high percentage of their face amount. As the market for these types of settlements began to get more competitive, the industry started to look at policyholders who were not terminally ill but just older and no longer needing their insurance. This gave long time policyholders another option besides just lapsing the policy for the cash surrender value or maybe even nothing when the life insurance no longer met their needs.

Therefore if you are relatively young and healthy and are 4 years into a 10 year term product, then you will probably not be able to sell your policy. If you are older than 50 and have a large permanent life insurance policy, then there will probably be a pretty strong market for your policy.

In my next post I'll try to address some of the issues and things to look for when selling your life insurance policy.

Michael, Garden State Life Insurance

Where's the Life Insurance? Finding a lost Life Insurance Policy

2008-06-10T15:01:00.004-05:00

This is a common problem for families when a loved one is lost. They either know or suspect that the family member that died had life insurance, but they don't know where the policy is or what company the policy was with. Assuming you've checked through the decedent's files, important papers, safe, etc., here are some steps to finding the lost policy:

1) Look for payment records

Even if a loved one has hidden his policy in a secret place, usually his bank statements are just sitting in a file cabinet somewhere. Usually life insurance requires monthly or annual premium payments so you should be able to check his bank statements, credit card statements, or his checkbook records to see if there are regular payments to an insurance company. You also may want to check his pay stubs to see if he had life insurance through his employer. In many cases employer life insurance plans do not actually send out a paper policy so that may be the reason that you cannot find one.

This technique can also be helpful if you have the policy, but the company no longer exists. The original company that issued the policy may be gone, but the company that he has been paying premiums to is probably the company that bought the business and is currently administering the policy.

2) Check with MIB

MIB is an organization that is owned by its member insurance companies. At its core MIB allows insurance companies to share information with each other. MIB has a Policy Locater Service that allows you to search the entire database to see if a particular person has a applied for life insurance in the past twelve years. It doesn't actually find the policy, but application activity usually coincides with a policy. This service costs $75.

Once you know they have a policy with a particular company you should be able to contact that company directly and obtain the proper claim forms. Most life insurance companies have websites with the appropriate contact information so a simple web search should point you in the right direction.

If you have any other tips, then please post them to the comments section.

Michael, Garden State Life Insurance

Can I Borrow From My Life Insurance Policy?

2008-06-02T10:32:00.005-05:00

As fears about the economy worsen and it becomes more difficult to find loans from more traditional sources, I have started to hear this question more and more lately.

As a general rule you may borrow against the cash value that has built up in your life insurance policy. The cash value is the portion of your premiums that are leftover after the insurance company takes out enough to cover the risk of your death and recoup some of its expenses. When a life insurance product has a guaranteed interest rate then the annual cash values are usually listed in the policy from the beginning. For a universal life insurance product the cash value growth will vary based on either the current rate the insurance company is crediting or be tied to the performance of the stock market.

Just like any loan, you will have to pay it back and you will have to pay interest on the outstanding loan balance. The only advantages that borrowing from your life insurance policy versus a traditional loan from a bank offers are that the interest rate is usually lower and there is not an approval process. Your credit worthiness at the time you take out the loan is not an issue. If your policy allows you to borrow against the cash value, then it is usually specified in the contract. If you die before you pay back the loan, then the loan balance will be deducted from the death benefit before it is paid to the beneficiaries.

You may not borrow against the face amount of the policy. The only time a life insurance company will pay life insurance benefits out before death occurs is if the policy has some sort of terminal illness provision that allows an insured with a terminal illness to access a portion of the death benefit before they die.

Michael, Garden State Life Insurance

Life Insurance Agents. Getting What You Pay For?

2008-05-29T15:22:00.006-05:00

Another blog that I regularly read had two excellent back to back posts the other day. The blog is called Ed Hinerman On Life Insurance and the articles were titled Is Your Life Insurance Agent Telling The Truth? The Magic Bullet! and When It’s Time To See A Specialist!. The basic point that I drew from his two articles was that when choosing an agent you need to be sure that they not only have your interest at heart, but also know what they are doing.

There are definitely situations where a person doesn't have any health conditions or other issues and they can go into any company and qualify for the best rate. In those situations it probably doesn't take an agent very long to find the company with the lowest rate. This type of person may even be a perfect candidate for an online quote engine for larger amounts of insurance or a simplified issue process like Garden State Life offers for smaller amounts of life insurance.

But what if you have specific health issues? I agree with Ed's stance that many agents and quote services are still going to try and quote you prices they think you want to see but may never qualify for. In this instance you need a high-powered agent with knowledge and experience about your particular situation. As Ed discusses in his articles, you need an agent that has connections with the underwriting departments and can get a pretty good idea which company is going to give you the best rate before you go through the hassle of going through the underwriting process with company after company.

Sadly the insurance company and indirectly you are going to probably pay the same commission for both types of agents so you might as well get what you paid for. I'm also not sure how you can sniff out what type of agent you are working with until after you have worked with them unless you have gotten a referral from someone else. I have had success with Dave Ramsey Endorsed Local Providers in the past for other industries (long term care and real estate), but I'm not sure he has endorsed local life insurance agents given his relationship with Zander Insurance Group.

Michael, Garden State Life Insurance

Life Insurance from your Employer FAQ

2008-05-27T10:39:00.007-05:00

Here are a couple of common questions and answers about life insurance provided by employers as part of their employee benefits and compensation.

Should I have my own policy?

The simple answer is "yes", but only if you need life insurance. After you have determined that your situation requires a life insurance policy, then you should make sure that you have your own separate policy. First of all, the amount that most employers provide is usually only 1 or 2 times your annual salary. For most people that would not be enough, as most financial experts recommend that you have seven to ten times your annual income in life insurance to replace your lost income.

Another issue is portability. If you leave the company, then in most instances you will leave the life insurance policy behind. You don't want to risk your new employer not providing life insurance benefits, and you also don't want to risk not being able to qualify for your own policy in the future (Link to a real life example).

Should I purchase additional life insurance from my employer?

Many companies give their employees the option to sign up for additional life insurance during their benefits registration period. The premiums are usually deducted automatically from your paycheck. Many companies also allow you to purchase life insurance for your spouse in the same manner.

These supplemental life insurance policies from your employer have the same issues that I mention above. Many times, the amounts are lower than you may need and portability is often an issue. Depending on the way the policy is setup with the life insurance company, you may be able to take this type of policy with you so read the fine print. You also need to make sure that if you leave your company and your policy is portable, that you continue to pay the premiums on your own. When you leave the company, the automatic payroll deductions will stop and you will be responsible for making sure that the insurance premiums are paid.

Also, with these supplemental policies, price is also an issue. I would recommend that you compare the rates to a policy on the open market as you will probably be able to find a cheaper rate. Supplemental employer life insurance does come in handy if that is the only life insurance for which you or your spouse qualify, as qualification is usually automatic up to a certain amount.

Edit: I came across a similar article today on My Money Blog that addresses the same issue and even has a few numbers and a graph to go with the analysis. All you math nerds enjoy. One thing I'll add is that even if the employer sponsored plan is cheaper than the best individual plan you can find it still may be worth the extra expense to have your own policy that is not reliant on your employment situation. Any type of life insurance protection that has the possibility for gaps in coverage is not fully removing that risk from your financial future that the life insurance is supposed to accomplish.

I've also heard of a few horror stories where employers were deducting the money, but the insurance company was not getting the money passed through. Therefore the employees thought they had life insurance, but the insurance company didn't have a policy for them. Make sure the insurance company is getting paid and has record of your policy.

Michael, Garden State Life Insurance

I'm Dying! Why Can't I get Life Insurance?

2008-05-22T14:02:00.004-05:00

It's a logical question to ask. Why won't a life insurance company sell me a policy when I need it the most? In order to answer this question, let's look at an example.

Let's say you make $50,000 a year and you have $1,000 saved up in the bank. You are reasonably healthy and so a life insurance company can charge you $40 per month for a $200,000 life insurance policy. You would probably rather spend the money on something much cooler than life insurance, but you can afford the $40 per month without too much sacrifice. If something were to happen to you and you didn't have life insurance, then your family would only have $1,000 in the bank to live on and they wouldn't have your income anymore. Now the life insurance company does have the $200,000. That's because they have collected $40 per month from similar people that didn't die so that they could afford to pay the $200,000 to the heirs of the one who did die.

Now let's assume that a life insurance company wanted to sell a $200,000 life insurance policy to someone who was terminally ill. They would have to charge a crazy number like $50,000 per month because there is a high probability that they are going to have to pay out the $200,000 very soon. The insurance company would have to collect $50,000 per month from a lot of similar people realizing that only a few would survive.

The more unhealthy a group of people is the more a life insurance company has to charge each member of that group. That's why I always encourage people to purchase their life insurance as soon as they need it versus waiting until something bad happens.

Michael, Garden State Life Insurance

What is a Life Insurance Beneficiary?

2008-05-12T10:32:00.003-05:00

A life insurance beneficiary is essentially the person or persons that receive the benefit when the insured dies. For example, if you have a $100,000 life insurance policy, then the person you name as your beneficiary will receive the $100,000 when you die.

If a beneficiary is not named on your policy, then the money is paid to your estate. The money will be distributed according to how the rest of the estate is to be divided according to your will.

You will usually name your beneficiary on your application for life insurance. You can change it in the future by contacting your life insurance company or your life insurance agent. You also have the option of naming more than one beneficiary and can even give each beneficiary a specified percentage of the benefit. For instance you could leave 20% to each of 4 children and 5% to each of 4 grandchildren.

There are several benefits to naming your beneficiaries in your policy versus just leaving the policy to your estate:

1) Speed. In most instances, life insurance companies will pay the life insurance to the beneficiaries as soon as a claim is filed. Often times estate situations can take a while to resolve if there is a lot of property involved or disputes involving the estate.

2) Taxes. Life insurance benefits are usually paid to the individual beneficiaries without any taxes being owed by the beneficiaries. In some situations estate taxes are paid based on the size of the total estate before those benefits are paid out to those named in the will. Life insurance would just add to the estate and require more estate taxes to be paid.

3) Debts. If the insured dies with outstanding debts, then their life insurance beneficiaries receive the benefits and creditors do not have access to the money. If the money is left to an estate, then often times creditors and bill collectors will need to be paid before the estate is paid out to those named in the will.

As always, I recommend that you seek the advice of a trusted tax professional on issues involving income taxes and an estate attorney on issues involving wills. Please see my disclaimer at the bottom of the page for more information.

Can I Buy Life Insurance for Someone Else?

2008-04-30T10:03:00.004-05:00

Can I buy life insurance for someone else? Or here is the one that really scares people. Can someone else buy life insurance on me and then collect the money if I die? I hear people asking these questions all the time and wanted to address both issues.

Can I buy life insurance for someone else?

The simple answer is, "yes". You are allowed to pay the premiums and collect the benefits on a life insurance policy that insures a life that is not your own. For example, many people have life insurance on their children. Another example is that companies sometimes buy life insurance on their key employees so that they can recover from the negative financial effect that losing that employee might cause.

There are two things that you need to consider. One, you are going to need to have the consent and participation of the person whose life is being insured. Two, you are going to need to provide a reason to the insurance company that you will be affected financially if the insured dies. The only exception to this is life insurance on children. Usually the parent of a minor can purchase life insurance on the child without any additional reasons. If you have nothing to lose from the death of the person, then you don't really have an "insurable interest" and really only will gain from the death of the insured. Just being a relative does not necessarily create an insurable interest. You will have to prove that you are somehow financially affected by the death of that particular relative.

Can someone else buy life insurance on me and then collect the money if I die?

As you can tell from my comments in the previous paragraph it is going to be very difficult for someone to buy life insurance on you without you knowing about it. First of all they are going to need your consent and participation. Most life insurance policies require medical tests on the insured and I think you'll notice the person coming over to your house to take your blood and to strap the EKG on your chest.

If a person purchases some kind of simplified issue or guaranteed issue policy without you knowing about it, then they are committing insurance fraud, which is a felony and would cause the policy to be voided.

Also if the person can't prove insurable interest the insurance company is not going to let them buy the policy. The company will let anybody willing to give them the money pay the premiums, but the company is going to need to know that the person who is named the beneficiary of the policy has the insurable interest. Now if you originally purchase a policy you can usually transfer the ownership of the policy or change the beneficiary to whoever you want, but you will have to prove that the initial beneficiary has insurable interest.

How do I Decide What Life Insurance Company to Buy From? (Part 3 - Customer Service)

2008-04-15T10:39:00.003-05:00

Just buy your life insurance from Garden State Life Insurance of course. End of article.

Just kidding.

I realize this is a weird article coming from a blog sponsored by a life insurance company, but try and hear me out. This is part three in a series of articles that has a few points to consider when reviewing your options whether you are interested in buying insurance from Garden State Life or not.

I have bad news and good news on the topic of finding a company with good customer service and one that will treat you fairly. The bad news is that unlike consumer products it is really difficult to find reliable third party reviews of customer service experiences with life insurance. I love it that when I'm shopping for a new electronic gadget, I can easily go to Amazon.com or Cnet.com and get an indepth product description, pictures and reviews of the products and companies that make the products. Unfortunately, I have not come across a life insurance company equivalent. Let me know if you have a good source and I'll link to it or write about it.

Since there is not really an unbiased location that I'm aware of for life insurance company reviews, I would recommend running a query on the company name in one of the major search engines (e.g. Google or Yahoo). If you run just a regular web query, you can see not only the company's website, but you may also run across articles that may have been written about the company or other information that you might find useful. I would also recommend running a query in the "News" search section of either Google or Yahoo to see if you can find any recent news involving the company.

The good news is that life insurance companies and agents are highly regulated by state governments so they are all forced to deal fairly with both prospective and current policyholders. This does not mean that all insurance companies are equal in how they treat their customers, but you can be assured that if you choose a life insurance company that has good financial ratings and has been in business for a while, then you will be treated fairly.

How do I Decide What Life Insurance Company to Buy From? (Part 1 - Ratings)
How do I Decide What Life Insurance Company to Buy From? (Part 2 - Price)

Garden State Life Video Contest Video of the Week #3

2008-04-03T13:46:00.002-05:00

Garden State Life's first video contest has only a few more weeks to go and the votes are starting to really pile up. A big thanks goes out to all of you who have already entered a video or registered to vote. Good luck to all the contestants. There's still time to get a video uploaded to enter the contest so bust out those cameras this weekend.

Here is a link to my favorite video this past week:

http://memelabs.com/gardenstate/index.php?play=2313

Great video, Garden State Zack. I loved the background scenery. Maybe he should make the name change official.

Past weeks:
Week #2 Video of the Week
Week #1 Video of the Week

How do I Decide What Life Insurance Company to Buy From? (Part 2 - Price)

2008-03-27T09:49:00.004-05:00

Just buy your life insurance from Garden State Life Insurance of course. End of article.

Just kidding.

I realize this is a weird article coming from a blog sponsored by a life insurance company, but try and hear me out. This is part two in a series of articles that has a few points to consider when reviewing your options whether you are interested in buying insurance from Garden State Life or not.

Price

While price may be the most important or only factor for most people, I purposefully did not talk about price in part one of this series. I wanted you consider other factors before you tune me out. Just because a company is offering the cheapest product you can find there are other factors to consider.

For the most part, this is going to come down to how much work you want to put into finding the lowest price. There is not a source or company that is always going to provide the lowest price for everyone. For example, some companies have more favorable rates for people who smoke and some may place more emphasis on a prior medical condition you had and charge higher rates. Just because you use a quote website or an agent that can quote multiple companies does not mean that you are getting the best deal. Most agents can only sell products for the companies that they have licenses to represent so you may have to talk to multiple agents or visit multiple sites before you find the best deal.

Also, when you are comparing rate quotes you need to make sure that you will actually qualify for the product. Many quote services will quote you the super preferred class of rates, but in the end you may only qualify for the standard class based on your personal or health history, which will have much higher rates than what they quoted you originally.

Also, be sure to only compare prices between similar products. A whole life product or a simplified issue product may have a higher price than a fully underwritten term life insurance product, but they both offer additional features for that price in return (e.g. whole life insurance has cash value and simplified issue life insurance is more convenient and does not require a medical exam.) Find the type of life insurance product with the features that you want and then search for the company that has that product at the price you want to pay.

How do I Decide What Life Insurance Company to Buy From? (Part 1 - Ratings)

Garden State Life Video Contest Video of the Week #2

2008-03-17T15:28:00.002-05:00

Garden State Life's first video contest has about one month to go and the best video of the week is getting harder and harder to choose. A big thanks goes out to all of you who have already entered a video or registered to vote. Good luck.

Here is a link to my favorite video this past week:

http://memelabs.com/gardenstate/index.php?play=2203

The dad and all three kids did a great job!

Past weeks:
Week #1 Video of the Week

How do I Decide What Life Insurance Company to Buy From? (Part 1 - Ratings)

2008-03-14T13:39:00.005-05:00

Just buy your life insurance from Garden State Life Insurance of course. End of article.

Just kidding.

I realize this is a weird article coming from a blog sponsored by a life insurance company, but try and hear me out. My next series of articles has a few points to consider when reviewing your options whether you are interested in buying insurance from Garden State Life or not.

Ratings

One thing you definitely want to know about a company before you buy from them is their ratings. Every life insurance company is reviewed on a regular basis by multiple ratings agencies. Their job is to look at the financial strength of the companies and give investors an idea as to whether it would be wise to conduct business with a particular company. This is especially important for one considering the purchase of life insurance, as you may need the company to pay benefits well into the future. You definitely want to know that they are going to be there when you need them. Also, if your life insurance company goes out of business and your health has deteriorated, then you may have to pay a substantially higher premium or may not qualify for life insurance at all. This becomes even more important if you have any type of product with cash value. Unlike banks that have FDIC insured balances, the U.S. government does not guarantee insurance company deposits.

An example of a common ratings agency used for insurance companies is A.M. Best. A.M. Best ratings are similar to the letter grades that you get in school. They go from A++ to F (for more details see http://www.ambest.com/ratings/guide.asp). I would advise that you purchase with a company that has an “A-“ rating or higher. This does not guarantee that the life insurance company will not become insolvent, as even an “A++” company can deteriorate over time, but your life insurance premiums should be about as safe as they can get.

Most life insurance companies with an “A” in their A.M. Best rating publish the rating on their sales materials and use it as a selling feature so you probably will not have to go through too much effort to find the rating of a highly rated company. If the A.M. Best rating does not appear in the sales material, you should be able to get the rating off of the insurance company’s website or from the agent or quote service trying to sell you the policy. You can also look the life insurance company up directly on A.M. Best's website to find their current rating.

Garden State Life Video Contest Video of the Week

2008-02-29T15:01:00.004-06:00

Garden State's video contest still has about another month and a half to go. We have some cute entries competing for the $10,000 prize and hope to get a lot more. Here is one of my favorite videos so far (especially her last line about the glass houses). Good luck everyone.

http://memelabs.com/gardenstate/index.php?play=1466

Joint Life Insurance Explanation

2008-02-22T11:30:00.006-06:00

This is part ten in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Joint life insurance allows two or more people to combine what would equate to two individual life insurance policies into one policy. There will be one premium paid, one set of fees, and one death benefit, but there will be two lives insured. These types of policies are usually used by spouses or business partners who have combined interests and finances.

There are two main types of joint life insurance: first-to-die life insurance and second-to-die life insurance. With a first-to-die life insurance policy, the insured group of people has only one policy, and a life insurance benefit is paid when the first of the insureds dies.

This type of policy can be great for businesses with partnership arrangements. The business can pay the premiums as a cost of doing business. If one of the partners dies, then the remaining partners can use the life insurance benefit to buy the deceased partner’s share of the business from the family or estate that inherits it. Here is a link to an interesting article in the New York Times that addresses the subject of partnerships and how to go about protecting your interests and it even specifically mentions this type of joint life insurance arrangement (Click here to read the article).

A first-to-die policy can also be good for a married couple that wants to have a similar life insurance policy on both partners. This allows the couple to essentially combine two separate policies into one and save on some of the administration charges from the life insurance company.

You need to be careful when shopping for first-to-die life insurance policies. They are not very common and so the rates may be less competitive. You may end up finding that it is cheaper to buy two single life policies than one first-to-die policy. You also need to assess the life insurance needs that the surviving partner will have. If the surviving partner will need to keep the life insurance after the death of the first partner, then individual policies may be the way to go. Another alternative is that some first-to-die policies have optional riders that allow you to convert the policy into a single life policy for the surviving partner upon the first death.

With a second-to-die life insurance policy the life insurance company pays the benefit amount after both insured lives have passed away. These plans are usually purchased by spouses and are usually used for estate planning purposes. Second-to-die life insurance premiums are much lower than similar individual life insurance products since it requires the death of two people instead of just one. If you think that you need a second-to-die life insurance policy, then I suggest that you consult with a trusted, professional financial advisor.

Guaranteed Life Insurance Explanation

2008-02-13T09:18:00.007-06:00

This is part nine in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Guaranteed issue life insurance is exactly what it sounds like. A guaranteed life insurance policy usually has more of a streamlined signup process and applicants are guaranteed to qualify for life insurance. The trade-off for universal acceptance is that these are usually low face amount whole life insurance policies with very high premiums. These products are usually very expensive relative to other life insurance policies. Most of guaranteed life insurance policies have an initial waiting period of one or two years during which you pay premiums, but the insurance company does not have to pay a claim if you die during that period. Also the face amount maximums for this type of product are usually no more than $20,000.

Pros:

Instant and guaranteed approval regardless of health, no health exam, short application

Cons:

Low face amount limits, higher premiums, waiting periods

Simplified Issue Life Insurance (No Exam Life Insurance)

2008-02-01T16:10:00.001-06:00

This is part eight in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Underwriting is the process that life insurance companies go through when you apply for a policy. An underwriter is a trained professional that reviews your medical, family and personal history to determine how low of a life insurance rate that you should pay. Also, as part of the underwriting process, the life insurance company will take blood and urine samples and run physical tests to determine your current health and try to find out whether you have any factors that may lead to health problems in the future.

Some life insurance companies offer products at lower face amounts that skip many of the physical underwriting steps. These products are usually referred to as simplified issue life insurance (other names include no exam life insurance, no medical life insurance, no physical life insurance). There is also usually a shorter application and the policy usually takes less time to issue.

There are many people that try to take advantage of simplified issue life insurance by lying on their application and trying to hide their health problems. I would strongly urge you to avoid doing this. Of course there is the moral issue. Also, just because the life insurance company does not complete a full examination before they issue the policy, it does not mean that they will not dig through your medical history and verify the accuracy of your answers on your application after you die. In most states, life insurance companies have the right to investigate the accuracy of your application if you die within two years of purchasing the policy. When you sign the policy, you give the company the right to investigate all of your personal records (medical, government, employment, etc). Just because they streamline things upfront doesn’t mean they aren’t going to do everything in their power to avoid paying a $100,000 life insurance claim. It would be a terrible thing if your family is counting on life insurance benefits that aren't paid because you lied on the application just to get a lower rate.

Pros for Simplified Issue Life Insurance:

No medical exam, convenience, shorter application, instant approval for qualified applicants

Cons for Simplified Issue Life Insurance:

Higher rates, lower face amount restrictions ($150,000 is the maximum for most companies with $300,000 being the highest I’ve seen).

Expect the Unexpected Video Contest Launches

2008-01-21T13:43:00.001-06:00

This week Garden State Life Insurance launched its Expect the Unexpected Video Contest. Garden State Life Insurance has partnered with video contest site Memelabs.com on this contest which encourages parents to film their children finishing famous sayings and proverbs in order to compete for a $10,000 U.S. Savings Bond or $5,000 cash. It should be an exciting few months so check the video contest site often to see what types of crazy videos the kids and parents create.

The URL for the contest is http://www.memelabs.com/gardenstatelife.

Check the blog each week or subscribe to the blog as I plan to post one of my favorite videos on the blog each week. There won't be a prize for blog video of the week, but I'm sure that the glory that comes with this honor will mean more than a monetary prize....Ok, maybe not, but it will still make my weekly pick feel really good about themselves. Good luck!

Accidental Death Life Insurance Explanation

2008-01-16T09:08:00.000-06:00

This is part seven in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Accidental death life insurance only pays the death benefit when the insured dies from accidental causes. The causes of death that the company covers and excludes are listed in the policy. The life insurance company is also supposed to list the covered and excluded causes of death in the marketing materials, but companies have gotten in trouble in the past for not being very upfront. Some companies have even tried to hide that their insurance only pays for accidental deaths so be sure and read the fine print when reading through marketing materials.

Accidental death life insurance is sold both as a stand-alone product and as a rider attached to regular life insurance policy. It is much cheaper than regular life insurance. This is partially because the chances of you dying in an accident are much lower. Also the insurance company has very little underwriting cost because your health status does not really affect your likelihood of getting in an accident. You should easily be able to get $100,000 of accidental death life insurance for only a few dollars per month if it is attached as a rider to another policy.

I am not really convinced one way or the other as to whether accidental death life insurance is a good purchase. I think it is a bad idea to only own accidental death insurance when your family is counting on that income when you die. Just because you are in good health now and you feel that the only way you could possibly die is by accident does not mean that you won’t get sick in the coming years. Actually, if you feel really healthy, then you should be buying regular life insurance because your premiums will be lower.

There is an argument to be made for attaching some accidental death coverage to your regular life insurance policy. If you die suddenly and unexpectedly rather than from an extended illness, then the extra insurance may be necessary since you will have less time to get your affairs in order. Also, since you are attaching it to another policy, there is very little additional marketing cost to the life insurance company and so it should be relatively inexpensive.

Variable Universal Life Insurance Explanation

2008-01-11T14:45:00.000-06:00

This is part six in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Variable universal life insurance works exactly like fixed universal life insurance with the exception that the investment performance of the cash value in the policy is tied to mutual funds instead of the fixed assets of the company. Usually the company provides the policy owner a list of mutual funds that they can split their cash value across. This is similar to how most employers allow you to divide up your 401K retirement accounts.

As with fixed universal life insurance, there are some estate planning reasons that may make variable universal life insurance a wise purchase, but you should be seeking advice from a trusted, professional financial advisor before you purchase a variable universal life insurance product.

Universal Life Insurance Explanation

2008-01-04T09:37:00.000-06:00

This is part five in a series of articles explaining the various types of life insurance products. To start at the beginning please click here.

Universal life insurance was created back in the 1980s to take advantage of the preferred tax treatment that life insurance policies receive from the IRS. As with whole life insurance, the life insurance company will offer death benefit coverage for the rest of your life. Unlike whole life insurance, the premiums are not guaranteed to be level.

The easiest way that I can think of to describe universal life insurance is that you are basically setting up a savings account to pay your life insurance premiums. A premium is paid to the life insurance company. The company then takes out any administrative fees and deducts the cost of the life insurance (COI) and the rest of the premium is credited to an account. The balance in your account is then credited an interest rate by the insurance company. There is usually a minimum guaranteed rate for the policy, but the actual rate credited usually fluctuates above that amount based on how well the insurance company’s investments are doing. As long as there is a cash value balance above zero the life insurance policy does not terminate. This makes universal life insurance more flexible than term or whole life insurance. A universal life insurance policyholder can usually make premium payments whenever and for whatever amount they choose as long as the balance stays above zero.

One benefit to a universal life insurance policy is that the balance or cash value in the policy earns interest tax free, unlike other investment vehicles like money market accounts or certificates of deposit. Despite this tax favorable tax treatment, it is usually not a good idea to buy universal life insurance just for the tax-free investment since you also have to pay for life insurance. There are some legitimate estate planning reasons to buy universal life insurance, but it is usually not the best option for someone either needing only life insurance protection or only an investment vehicle.