3 Minutes Guide to Life Insurance And How to Get Best Life Policy

How Life Insurance Works

life insurance represents a contract between a policy holder (typically an individual) and insurer (commonly large company). This contract stipulates that upon the death of the policy holder, the insurer will pay a selected beneficiary (usually close relative, i.e. spouse or children) an amount of money (the benefits).

There are many important factors to consider when it comes to purchasing life insurance. This includes, how much and what type of policy as well as what company and agent to work with. Before diving into these aspects however, it is important to first decide of life insurance is necessary given your personal situation.

Do I Need Life Insurance?

Although there are many flavors of life insurance including polices that include cash value and investment options, it should be noted that life insurance is designed to protect family, businesses and assets from the untimely death of a key person. This means, that despite what some insurance agents will preach, insurance is not really necessary for a single, childless, asset-less, debtless person with a job. This person may wish to purchase insurance in advanced to lock in lower premiums in anticipation of a family or business, but without any dependents, life insurance would be a luxury.

Life Insurance

When To Obtain A Policy

Many people with corporate jobs or other benefits packages through works will have a basic policy (typically term) provided by their employer. Check with your Human Resources (HR) department for specifics concerning your policy. In many cases the included life insurance policy will not cover family needs and should be supplemented with additional coverage. The following are examples of when life insurance is most commonly needed:

  • Marriage
  • Birth Of A Child
  • Purchase of Large Asset (House, Land, Etc.)
  • Death or Illness of Parent (Sibling(s) Still At Home)
  • Entering Into Business Partnership
  • Taking On Capital Expenditure (Business Purposes)
  • During Any Large Business Acquisition

Amount Of Insurance Needed

If you have current experienced or are getting ready to go through one of the scenarios above, it is probably time to purchase life insurance coverage. Even though policies are sold in bucketed segments, how much money your dependents will need will depend heavily on your personal needs. A good method for deciding would be to play a “what-if” scenario for your family or business, if you were no longer there to produce. This includes income and services for the family along with many categories for the business including services, sales, network, leadership and management among other duties.

For the family dependents include your spouse, children and possibly anyone else living with or dependent on you. This could include parents, aunts, uncles, nieces, nephews, grandchildren among many other possibilities. For the business it is a little more complicated, but should represent the amount of income you mean to the business. For example if you are in a 50/50 partnership and the business is worth $1M annual, your effective contribution may be $500K. The policy would need to cover that contribution for the amount of time that it would take to replace your contribution, maybe 2 years or a policy for $1,000,0000.

There is no exact formula and the loss of a loved one can never be replaced, however it should be noted that the higher the amount of the policy, the higher the monthly or yearly premium to keep it in force.

Life Insurance Types

Before going through the various types of life insurance policies available, be sure to cover the material presented on the home page of this website. Information presented there includes when to get insurance and how much is necessary among other facts.

The information below contains factual information about each life insurance type and some general recommendations for when a particular option. Although these endorsements are made by a former life insurance producer, they should be viewed as general guidelines. Every situation is different and direct counsel with a financial professional is suggested before making any concrete decision.

Term Life Policy

Term Life Insurance PolicyTerm life also called term assurance guarantees coverage for a fixed term and at a fixed rate of payments (typically annually or monthly). Common terms are 10, 20 and 40 years. Once the time period has expired the insurance is no longer valid, with no additional benefits.

Buying Term Life Insurance

Term life insurance is the most clear cut and clean form of insurance. It is also the cheapest way to get insurance for a death benefit. Most employers offer a version of term through group life, which may be paid wholly as part of employee benefits.

The major pros with term life insurance are that it is inexpensive and is risk free. The major cons being that once the term is up, rates are much higher (as insured is older) and there is no carry over or added benefits as there can be with other life insurance types. A term life insurance policy is a good baseline to have and if purchased early in life can be as low as $15-$20 a month.

Should I Purchase A Term Policy?

It is a good practice, if not provided by an employer, to purchase a term life policy with an amount that would cover any burial and estate costs, pay any outstanding debts and provide a few years annual income for dependents to recover. It is best to think of term life insurance like insurance for basic health, auto, home, renters, etc. It is designed to get you back to financial center, or as close to possible, should an untimely accident occur.

Whole Life Policy

life insuraceWhole life insurance (assurance) is a permanent form of coverage that remains in force for the insured person’s whole life and requires continual premium payment. These types of policies also build up a cash value which was developed to be a reserve that would build up against the death benefit. There are many forms of whole life insurance and ways to utilize the cash value, including withdraws, borrowing and investment opportunities.

Universal Life Insurance

total life insurance policyUniversal Life (UL) popular primarily in the United States is a form of permanent insurance that has many sub form with the primary two being Fixed and Variable. Universal Life allows for excess premium payments to accrue cash value. The cash value is credited each month with interest, and the policy is debited each month by a cost of insurance (COI) charge, as well as any other policy charges and fees which are drawn from the cash value, even if no premium payment is made that month.

Variable Life Insurance

variable life insuranceVariable Life Insurance (VUL) is a key form of Universal Life with the unique feature that the cash value within a VUL can be invested in a wide variety of separate accounts. This is similar to a mutual fund investment strategy, however many unique opportunities exist in the marketplace. Unlike whole life, there is no endowment age, which allows the value of a VUL policy to build up to a level higher than the death benefit. As with most Universal Life policies, VULs are common vehicles used to avoid or limit tax burden, particularly with high income earners. Special tax considerations are made for borrowing against these types of insurance policies.

While there are perfectly legitimate reason to have a permanent or cash value type of insurance policy, realize that these types of policies carry higher premiums and thus higher earnings for insurance companies and higher commissions for agents. Many insurance salesmen will push these types of policies as primarily investment or tax evasion vehicles, which is not only faulty and unethical but also illegal.

Life Insurance Quotes

Before getting a full blown insurance policy put in force, it is a good idea to shop around and retain some quotes from various providers. This is fairly easy to do, and insurance companies can provide premium quotes to fair degree of accuracy especially for term life policies. Basic information such as age, height, weight and smoker will be asked to give you a relative idea what monthly or annual payments will be.

Before actually getting an insurance policy however, a physical and blood work will need to be done before final premiums are calculated. This is done to ensure no chronic diseases exist such as HIV. It is also done to measure health factors such as cholesterol, smoking etc. Once this final lab work has been completed the insurance premium will be set.

An important note, however is that once the policy paperwork is signed the life insurance policy is in force. The insurer is covered in the gap between the time they sign the paperwork and the lab work is complete. If someone happened to the policy holder’s health or if they happened to die unexpectedly, the policy would hold based on the signing information.

Getting A Quote For Life Insurance

While it may be tempting to put your information in a form online for an instant quote, you may want to think twice before clicking enter. Many of these quote forms online are simply lead forms used to send your personal information to various insurance companies, producer offices, and independent agents.

Many companies offering online quotes are insurance lead broker; especially life insurance that gathers leads online and sells them to local agents near where the person lives. Depending on the lead program, these leads are often sold to more than just one agent, often three or more. This information is then often sold to 3rd party email marketing or auto dialer providers for other purposes.

There are literally hundreds online to provide you the cheapest quotes for life insurance. It is not necessarily a bad thing, because it puts people looking for insurance in contact with agents in their local area. It is simply important to know what you are getting into before putting all your info in the boxes.

Not all online quote options are like this. For example if you go to a large provider like ING or State Farm, they are going to at the worst give your info to one local agent near you. Of course if you want to avoid this all together you can simply call up some providers over the phone. Large providers of multiple insurance types like State Farm, American Family and All State will probably be willing to give you general premium quotes over the phone, but be prepared to be pressured for an appointment.

Getting A Quote Online

Life insurance like other financial services is a high commission sales driven industry. When you start putting your information out there for quotes and other inquires, either online or over the phone; be prepared for the sales cycle. It is part of the process, just like when you walk on to the car lot, you know a sales guy is going to come greet you. And this is not a bad thing. Most life insurance agents are hardworking financial professionals with families to support and protect just like you. Just be sure you are working with a qualified, licensed producer / company and it will be fine.

Credit Card Debt in United States

The increasing number of consumer goods in the world, in contrast to the gradual increase in income levels, has led the world into a new credit era, where people fulfill their worldly desires by exceeding their capacity to spend by taking credit facilities, called consumer debt, from financial institutions. There are numerous ways to obtain such consumer debts, but the most commonly used instruments for this purpose are called credit cards. Credit Card debts are those consumer debts which are to be paid off every month, and are obtained by people to meet their basic, sometimes luxurious, desires in life. The credit card debt has been increasing rapidly since all kinds of markets started accepting payments through the instrument. According to national statistics, the credit card debt had reached to about $976 billion in October of 2008. These debts do not included car loans, education loans and mortgages. No matter how much facilitating they are, credit card debts have reportedly been proving themselves to be very difficult to manage.

Credit card debts, or consumer debts, are regarded as short term liabilities of consumers in a country. With the passage of time, after witnessing the popularity of the instrument, financial institutions have made the availability of this debt a lot easier than it used to be when it was introduced. In this way, more and more people, from all parts of life, have started acquiring these debts to extinguish their basic needs, and even some of their unnecessary wants.

Easy monthly payment plans have encouraged the people even more, and the number of users is increasing rapidly. People keep making minimum payments every month, and continue to enjoy these credit facilities that the banks and other financial institutions provide them. The consistent creation of credit debt has contributed greatly to the economic development in the U.S. The increase in economy growth rate has usually coincided with the increasing numbers of consumer debt acquirers.

In recent years, due to the recession in the economy, the rate had somewhat experienced a decline, due to the fact that credit companies had tightened their credit terms as a result of adverse economic conditions. Despite of such strict measures the credit debts persistently remained above the $900 billion figure and, as of April this year, were recorded at approximately $931 billion.

As it would seem, such continuous growth in this sector has created a notion among people that having a credit facility is an integral part of their lives. Due to this, the number of people having any kind of credit card debt has continued to grow, resulting in the increased debts figures to become non-manageable by the credit card holders.

Today, managing a credit card debt is one of the biggest problems of people, especially those who did not anticipate things to get out of hands so easily. Although credit card debt has been a huge driver of the economy, managing it is becoming an issue for the people. Several debt management programs exist in the country, but the lack of knowledge of the people in this regard has left them unaware of such programs.

Hundreds and thousands of people have reportedly been facing litigations due to non-payment of their outstanding credit liabilities, because they had failed to appropriately manage their consumer debts. An average of $7,957 of credit card debt per household has been recorded as of April, which shows that nothing is proving to discourage the people from using this credit instrument.

Investing In Canadian Stock Markets for U.S Investors

Investors all around the world are doubling their resources by investing them in highly developed stock markets and other available projects in the country. Leading countries in the world of investment now are the United States of America and its neighboring country Canada. Investors in the both of them are satisfied to an extent with their respective economies and stock markets and are not afraid to take risks by making large stock investments, particularly the ones in the U.S. However, the U.S investors are being advised by local investment experts to also consider investment opportunities in Canadian markets in order to benefit from diversified investments. According to the experts, Canadian economy is one of the most prosperous in the world, therefore the country’s investment market also present high potential for large returns.

Investment experts in the United States are urging local investors to extend their investment activities across the border in to Canadian stock investment markets, claiming that the country is full of investment opportunities, particularly for stock investors. According to the experts, U.S investors have a number of ways to invest in Canadian stock markets, either directly or indirectly. They said that the U.S based investors can acquire Canadian stocks and bonds either directly from the Toronto stock exchange, Canadian national stock exchange and numerous other stock markets in the country, or indirectly through exchange-traded funds (ETFs) and American Depository Receipts (ADR) in the U.S.

The later, indirect approach might be much appealing to the people as it allows them to use local channels for investing in Canadian stock markets. These U.S listed Canadian ETFs and ADRs allow the investors to make their desired amount of investments with the same security as that of making them directly in Canadian stock exchanges. Investing through the listed ETFs allows investors to gain exposure to numerous types of stocks available in Canadian stock markets by just buying even a single security. This is possible because the ETFs are able to track the entire Canadian economic and industrial sector, which gives the investors a bird’s eye view of the whole market once they are in.

On the other hand, investing in Canadian stocks through registered ADRs allows investors to avoid transacting on foreign stock exchanges and to approach individual Canadian companies directly to invest in them.

Meanwhile, those opting for the direct approach, i.e. making direct purchases from the Canadian stock markets, are also not in loss. Investors, who have a more straight forward attitude towards investment, can purchase Canadian stocks and bonds directly from a number of Canadian stock exchanges approachable from the U.S. These investors can also make Canadian stock investments through several U.S stock exchanges like the E*Trade support trading on the TSX and TSXV exchanges, as a lot of large scale Canadian companies are listed in these exchanges and are, therefore, approachable for investment in their stocks.

Apart from this, the investors must not forget to act with due diligence by making all the necessary inquiries regarding the reliability and profitability of the stock investment. In addition to this, the investors must also make sure that they are complying with all the official formalities of such an investment, especially for taxation purposes. Only after taking care of these necessary formalities will the investors be able to take a rational decision.

An Overview of the Concept of Debt Syndication

A well developed economy demands a well developed financial system, and to develop the financial system it is important that proper debt facilities are created for companies to prosper and to increase the economic growth rate. In countries like the United States, which have one of the world’s most developed and systematic financial systems, it is important that proper debt and investment tools are created to keep the economy running. One of these tools used widely, particularly in the U.S, is called debt syndication.

Debt syndication is the process through which millions of dollars in advances are provided to, mostly, a number of companies or investors in the country. Debt Syndication is carried out by a number of financial institutions, including banks, finance corporations, and investment firms etc., which arrange large loans for companies, either to fund any of their projects or to save them from going bankrupt. One of the major and important signature feature of this dept facility is that involves over millions of dollars worth of credit tools.

The process of debt syndication is quite simple, as it is mostly based on the regular principles of other credit facilities. In debt syndication, several financial institutions decide to share the gains and the risks of creating a large loan for other needy companies. In today’s economy, a lot of finance companies have signed out from such syndication procedures and there remain only a limited number of organizations willing to carry it on. Due to this decline in the number of lenders, banks have become the usual lenders in the syndication process.

In a way, banks’ leading the debt syndication procedures is not such a bad idea, for these institutions are more careful while selecting their investments, particularly if they pose some kind of a risk for them. Due to such diligent attitudes, most of the time banks prefer to take credit deals which involve only advancing little money, and specialize in making syndication arrangements between other companies and investors.

Because of this, banks also abstain from taking the responsibility to underwrite the entire loan arrangement, as doing this will make them advance all the initial risk associated with the deal worth millions of dollars. However, they still are involved in some of the underwriting, due to their position as such. After initial underwriting, the bank usually tries to sell part of the loan arrangement in order to decrease the outflow of its funds in the procedure.

In this way, a number of investment companies, insurance companies, credit unions and other financial institutions willingly advance a portion of the loan along with the underwriting party, consequently also sharing part of the risk possibly involved in the loan arrangement.

The debt syndication procedures can be carried out more conveniently if the underwriter has a past record of making such arrangements, competently putting together the associated details of the loan arrangement, and has been able enough to attract other investment and finance companies towards it. Usually, a number of syndications are only termed to be finalized if the underwriters involved are able to arrange for additional financing for the credit advancement.

The United States has one off the world’s most systematic and developed economy. In the U.S financial market, there are a number of banks willing to go along with such debt syndication arrangements. However, it is of vital importance that only those banks are selected which have exceptional experience in going through such arrangements, particularly due to the fact that it involves millions of dollars in loan money.

Experts claim Housing and Credit sectors Responsible for U.S Debt Crisis

Economies around the world are operating on principles of free forces of demand and supply. They are called free because they cannot be tempered with anything but transactions and prices. Where such semi Laissez Faire economic principles have proven over times to maintain s certain success rate in the global economies, it has also contributed largely to the recent economic crises that the world just witnessed. Countries like the United States of America have been hit hard by the economic crisis in past years, and all due to the unanticipated economic developments that became solid grounds for such a crisis to be born. According to experts, the major role in the U.S debt crisis was played by the insolvent banking system of the country. But the question is how the banking system became insolvent. The credit, according to certain economists, for this situation goes to the credit failures of large financial institutions, sudden crash of global stock markets and the evident bailout of banks by the governments. These might not be the only reasons responsible for the debt crisis, but they have played a very important role in bringing it to life.

There have been many reasons for such a large scale international economic crisis to take place. However, analyzing the situation further, these numerous causes can be narrowed down to a handful of reasons. Expert analysts have created a timeline of events that preceded the U.S debt crisis, trying to figure out the actual reasons for such a drastic situation to occur.

According to the experts, before the debt crisis, the U.S financial sector had witnessed a large amount of inbound foreign remittances from other countries. During the same period, banks throughout the nation were operating on low interests rates. These two conditions gave way for increased debt financed consumption rate in the country, lifting the credit creation processes to their peaks.

In response to such developments, people turned their attentions towards the housing sector of the country, which was going through its boom phase due to such conditions. Because of these circumstances, investors from around the world started coming to invest in the U.S housing market.

However, the disintegration of the sector destroyed all the investment expectations of the investors, plummeted the value of global securities connected to real estate, and as a result the housing prices severely declined. The decline caused numerous financial investors around the world to suffer heavy losses. This triggered the debt crisis in the United States. To compliment the effects of the damaged housing market, the global stock markets also crashed, which resulted in a consistent decline in the availability of financing facilities. The decline put numerous banks towards insolvency and marked the peak of the debt crisis.

All of this, then, was followed by heavy losses to values of securities, tight credit situations, and decline in international trade activities. To add fuel to fire, the government was unable to anticipate such situations, and could not make effective fiscal and monetary planning to control, or at least counter it. The mortgage related financial products were heavily hit, and as a result a high scale crisis tightened its grip around the country, leading to approximately trillions of dollars in losses in the U.S alone.

To conclude this presentation, one can easily ascertain the failure of policy makers to respond appropriately to the adverse developments in the housing and debt sectors was one of the major reasons for unwanted escalation of the crisis. The role that could have been played by financial institutions, investment firms and other organizations was under estimated by the authorities. And most importantly, the uncontrolled debt system, leading to unmanageable numbers of loan advancements, was one of the lead causes of the crisis to gain speed and destroy the economy.