UNITED STATES, Dec 11 — Some insurance companies are criticized because it’s not always clear how your premiums are used nor how the value of your policy is calculated. At a state level, insurance departments and commissioners do their best to protect your interests, but the majority of consumers are not well protected. This is less important with term insurance, but whole life and universal life policies have an investment element that slowly builds up and gives you a cash value in addition to the minimum guaranteed death benefits. Paying this as a lump sum is a big hit
S
ome insurance companies are criticized because it’s not always clear how your premiums are used nor how the value of your policy is calculated. At a state level, insurance departments and commissioners do their best to protect your interests, but the majority of consumers are not well protected. This is less important with term insurance, but whole life and universal life policies have an investment element that slowly builds up and gives you a cash value in addition to the minimum guaranteed death benefits. Getting the most out of these more expensive policies is important. Note that, unlike "ordinary" policies, cash-value policies do not lapse if you stop paying the premiums.
Once you reach a minimum threshold, the policies remain valid and the investment element continues to accumulate value - this assumes the wider economy is doing well and the stock and bond markets provide a worthwhile return. So the best way of looking at these policies is as a saving fund. If you had run a savings account in your bank, this would give you a nest egg to draw down when you retired. You can treat cash-value policies in the same way. Almost everyone with a whole or universal life policy pays long enough to reach protected status. Most take out a policy during their twenties and are still paying twenty or thirty years later. What seems a high premium when you started becomes more affordable as inflation works in your favor.
Now the big decision is whether to continue paying. The longer you pay, the better the benefits. But if there’s a family emergency, you can stop paying, withdraw some of the cash or take a loan, and keep the policy valid for when you die. If you hold a life policy, you should receive an annual statement telling you the minimum cash value and the guaranteed death benefit. But, with both a whole and universal policy, you can contact your insurer at any time, and get an up-to-date statement. If you simply make a withdrawal or take a loan, check the effect on the death benefits. Always get the most information from the life insurance company before taking the decision.
One key issue with a loan is the amount of interest payable. Borrowing always has a cost attached to it and, unless you want the interest to come out of the remaining cash value, you should make regular payments back to the company whenever you can afford it. One option to consider is using a cash withdrawal to buy a long-term care insurance policy. As everyone now lives longer, making provision for future health needs makes good sense.
Alternatively, think about buying an income annuity. The only limit on your use of the cash is how much tax-free death benefit ultimately passes to your heirs. You can be selfish and use the money for your own comfort and protection or plan for your family’s future. One word of warning. Do not be tempted to surrender your life insurance policy. You will owe back taxes on all the investment gains made since the policy came into force. Paying this as a lump sum is a big hit. It’s always better to leave the policy in force and draw down cash or take a loan.
Communicate directly with Linda Walker, the author of this article. Ask questions, send suggestions, comments, engage in conversation, or perhaps you would like to submit a project.
Click Here to ask a question, send a comment, or proposal.
Take a deep breath. . . maybe another one. O.K. try to remain calm and assess the situation. If the only damage is to your car - don’t worry, it can be repaired.
I’m going to walk you through the 10 essential steps to ensu
Gone are those days when people used to rely completely on Medicare insurance plans. If you have a regular Medical policy then buying Medigap indemnity can prove to be extremely advantageous for you and family. There are numerous Medigap insurance pl
Medicare indemnity plans are available in every country and state but having one in California has some more advantages as compared to other states. The benefits of choosing from the Medicare plans in California can give a special advantage. You can
Most people find it extremely hard to choose a right Medicare indemnity plan. They have to balance the income needs and to evaluate a right price that is affordable. Medicare supplement plans comparison is the only way to sort out this problem. In su
People who have a flexible income are never in possession of Supplemental Medicare Insurance because they are always aware of the fact that they would be able to meet up the costs incurred on their health in some way or the other. But the people who
The first thing you need to do, if you want to get a Drivers License in California is to get the California Driver’s Handbook at the local DMV office. Read it several times until you know it good enough to take a test. If you are 15 ½ ye
Indemnity health insurance policies are known as handed-down health insurance policies. These health insurance policies may be expensive but often cover many health issues that may arise, while other insurance policies exclude some illnesses from the
Finding Health insurance coverage sounds easy, but it can actually be quite a challenge if you are looking for Individual Health Insurance. The problem with health insurance is that it seems like a waste of money when you are paying for it every mont
Car insurance quotes might intimidate you the first time you have to deal with them. It's not just the rules and regulations, and all the requirements the state puts down, it's also the companies who provide the car insurance quotes. But we feel that
With the costs of medicines and hospitalization increasing, health care has become extremely expensive for most people to tolerate. As important as it is to buy health insurance, it is also important to save money, especially in these times of econom
Some of you have probably heard of universal policies used for insuring life. What are they all about and what benefits do universal policies bring to their holders? Well, simply put, universal insurance polices are insurance products that provide co
We all want to make sure our family and loved ones are protected and safe no matter what. This is why there are so many companies out there offering you to insure your life. Life coverage is a good way to protect your spouse, children, family members
As most of you know there are two forms of insuring one’s life: term and whole. And as you can guess from the name, whole life policies provide continuous coverage for a person’s entire life, while term policies cover only for a specified
Many people have heard of mortgage protection through insurance policies but it may sound quite complicated to some. To answer the question right away: mortgage protection through insuring ones life is a form of personal insurance that pays off mortg
Some insurance companies are criticized because it’s not always clear how your premiums are used nor how the value of your policy is calculated. At a state level, insurance departments and commissioners do their best to protect your interests,
Syndication
tweet
PDF version
Printable version
Publisher HTML version
Discussions (0)
Email Article
Post New Comment