Last time, I started picking apart Dave Ramsey’s article called “The Truth About Life Insurance.”  I covered Ramsey’s claim that “cash value life insurance is one of the worst financial products available.”  And now I want to talk about his next comment, namely that is “sad” that 70% of life insurance policies sold are cash value life insurance, while the other 30% are term life insurance.

Term life policies, in case you don’t know, are policies that provide coverage for a period of time – maybe five years, or 10 years, or just while you’re working for your employer – some period of time, but definitely not until you actually die.  Cash value policies, on the other hand, provide coverage that goes until you die, whether that’s tomorrow or a thousand years from now.

Here’s something that Ramsey doesn’t mention in his article, probably because he doesn’t know it.  Out of every 100 life insurance policy payouts, 99 of them are for policy holders that owned whole life insurance.  That means that just one is for a policy holder that had a term policy. 

According to the Penn State University study, 45% term life policies are terminated or converted within the first year, and 72% are in three years and only 1% end in death claim. And what do the policy holders who owned term life but didn’t die during the term get?  You know the answer – they get absolutely nothing.  So, back to Ramsey’s argument; cash value life insurance is one of the worst financial products available today.  Really, Dave? 

I think that if someone offered to take my money, and then gave me a one in one hundred chance of ever seeing it again, I’d have to pass on a financial product like that!  But Dave Ramsey is only too comfortable suggesting that every person who watches his show, listens to his podcast or reads his newsletter take that chance.  If we all follow his advice than 99% Americans are going to die without leaving any legacy and potentially medical & funeral bills for children!

Next, Dave moves into the old “buy term and invest the difference” strategy.  No question, term life policies, when you’re young, are much less expensive (rather out of pocket dollars) than whole life insurance policies.  And when an insurance company pays one death claim for every 100 people who are faithfully paying premiums, they can afford to make them cheap!  Remember, insurance is a smart statically calculated formula: where you going to pay virtually NO claim – less premium.  Next time, I’ll show you why “buy term and invest the difference” almost never works!

It isn’t often that I get upset about things. But every time I hear someone quoting Dave Ramsey, I think about his ideas on life insurance.  And that makes me quite CONCERNED about the next generation American.  I am a fair person and admire his advice on credit and frugality, so I’m not going to say that he offers nothing of value in his financial advice.  As my grandfather used to say, “even a stopped clock is right twice every day.” 

But when it comes to advice about something as important is life insurance, not only is he pretty far off the mark.  I would go so far as to assert that he’s hurting the financial futures of thousands of people who, not knowing the real story, might take his advice.  And I’d like to spend a few weeks going line by line through his article shedding some light on a subject that he’s very much in the dark about.

Ramsey begins his article with the following assertion: “cash value life insurance is one of the worst financial products available.”  Now, I know that anyone who wants to be on TV has to be willing to state an opinion with certainty, and that means making a universal statement about something.  Anyone who is supposed to give advice should have a strong opinion. 

But in this case, Ramsey’s comments make about as much sense as an expert on hardware saying “the screwdriver is one of the worst tools you can buy at a hardware store.”  That sounds pretty foolish, right?  I mean, if you have something that you need to screw together, can you think of a better tool?  I’ve never tried using a hammer on a screw, but I’m pretty sure the results would NOT be pretty. 

My grandfather also used to say “every generalization is true, and every generalization is false, including this one.”  I’ll give you a minute to think about that one…because in every generalization, there’s also a bit of truth, but there’s never the whole truth.

Stephen Covey, in his book The Seven Habits of Highly Effective People, wrote that to be successful you must “begin with the end in mind.”  Only then can you decide what road to take to get you there.  Whether or not life insurance is a good choice among the universe of financial products depends on what your “end” is. 

Ramsey’s claim is that regardless of what YOUR end is, cash value life insurance is a waste of money.  And that’s just plain wrong.  You need the right tool for the right job, just like you need a screwdriver for some things, and a hammer for others.  In a few days, I’ll talk about Ramsey’s next comment.  He writes “Sadly, over 70% of life insurance policies sold today are cash value policies.”  What’s truly sad is that the other 30% are term life policies.  And next time, I will tell you why!

The first law of insurance is to “insure first” that which you can least afford to loose;

1) Your Income

2) Your Health

3) Your Life

The only real security is that which you create for yourself and your family.

A few months ago, the word was spreading throughout the industry.  There were magazine articles, and nightly news reports sending out the story that term life insurance rates were on the rise, after more than 10 years of declines. 

But honestly, there’s very little historical information about the cost of life insurance.  It’s not like the stock market, that’s tracked every moment of every trading day.  And different life insurance companies charge differing amounts for the exact same coverage on the exact same person.  So in a sense, it’s hard to say what’s truly going on, except in the most general of terms.

One article I read talked about how in the mid 1990s, the cost of a $500,000 term policy for a healthy 40 year-old man was close to $1,000 a year.  By 1999, the article continued, the cost had dropped to about $425 per year for the same coverage.  And by 2009, the cost had dropped further, to about $360.  The alarming thing, according to the article, was that at the start of 2010 the cost had risen to $400.  

Much of the decline in price can be attributed to the fact that people are living longer these days.  The more time that exists between when you start paying for your life insurance policy and when the life insurance company has to pay your claim, the less expensive the life insurance can be.

And much of the increase can be attributed to what’s happening in the financial markets these days.  Insurance companies are facing the same tight credit market that the rest of us are.  Understandably, insurance companies have to be more concerned about their own financial futures than they needed to be just a few years ago.

So if the costs of life insurance really are on the rise, should you rush to purchase a new life insurance policy?  Ask a local agent, and the answer is very often going to be “yes.”  Ask us, and the answer is going to be “it depends.” 

Ask yourself these two simple questions,  First, is there someone or something that you care about that would suffer if you were to die?  Think about your family, your business, your favorite charity or religious organization.  And second, do you have enough money right now that you could set it aside for them? 

If you answered “yes” to the first question, and “no” to the second, then I’d say it’s time for you to buy life insurance, regardless of what’s happening with the overall costs of coverage.  Buy the policy that best fits your needs now.  If prices go down later, you can “refinance” your policy and lock in the new, lower premiums.     

And if you already have insurance, but haven’t checked prices in recent years, take a look at a new policy.  You may find that there’s money to be saved.  It all starts with a quick phone call to BeamaLife!

One of the fastest growing segments of the population today is people who are more than 100 years old.  A recent article states that back in 1990 there were about 37,000 of them here in the U.S.  By 2008, the number had swelled to 84,000.  And estimates state that by 2040, there will be more than 500,000 “centenarians” living in the United States.

Living beyond 100 years – that’s an amazing accomplishment!  Because, as the article points out, people who live to 100 are not just people who made it to 80 and then tacked on an additional 20 years of physical and mental decline.  People who live to be 100 often avoid the chronic illnesses associated with age altogether.  No diabetes, no heart disease, no Alzheimer’s or Parkinson’s diseases. 

Another interesting thing that the article pointed out was that centenarians were, as a group, much happier about their financial situations that any other age group.  When asked, 95% of them responded that they had enough money to meet their needs, while 76% said that they even had enough to by the extras that make life even more enjoyable. 

The article then went on to highlight a surprising fact.  Of the centenarians surveyed, nearly 40% had no financial reserves whatsoever.  And another 37% had enough money for life’s necessities, but no “extra” money for more pleasurable purchases.  Yet, 95% felt they had all the money they needed to meet their needs.

As someone whose career is built around ensuring the financial futures of everyday people, I find that fact amazing.  And inspiring.  Because it points out something that I think is so important, but so simple, that it’s often overlooked. 

We choose how to feel about our circumstances.  Whether we have a lot or a little, we can always choose to be happy.  It may be easier to feel happy when you have a lot of money, but at the end of the day, we’re the ones who choose to put a smile on our faces when we get up in the morning. 

Let’s take a lesson from the valuable and inspirational members of our society.  Let’s do the things that we know we need to do to secure our own financial futures, and let’s choose to be happy.  And maybe we can be the inspiration for a future generation!

A recent article in The Wall Street Journal advised readers to “beware rule changes on Coverdells.”  Coverdells Education Savings Account, in case you’re not familiar with them, are investments that offer tax-free growth and withdrawals, as long as the money is use for qualified educational expenses.  They were once known as education IRAs, and sometimes they’re still referred to that way, although the money that goes into them is not deductible from taxable income. 

If you’re a parent who already owns a Coverdell, the article continued, you should be aware that there is good news – you can invest as much as $4,000 until April 15^th, since the money deposited before April 15^th counts towards the previous year’s (2009) limit.  And, there’s bad news.   Unless Congress extends the current benefit, starting next year withdrawals that are used to pay for expenses from kindergarten to 12^th grade will no longer be tax free.

That doesn’t mean that Coverdells are bad investments, of course.  They’re still a good way to save for and finance education in the United States.  Even with their limitations, such as the fact that beneficiaries must be under age 18 when the money is contributed, and that the money can’t be refunded to the person who started the account, they’re still better than doing nothing.

But there is one savings vehicle allows you to tax-free growth and withdrawals without those limitations.  Imagine being able to contribute what you wanted, when you wanted, without any limits.  Imagine being able to use the funds for any level of education, for any member of your family – even yourself!  Imagine the funds not all being needed, and the overage being returned to you, the person who created and funded the account.   Imagine even being able to pass the funds along to your heirs in the event of your death. 

By now you’ve probably figured out what savings vehicle I’m talking about.  It’s whole life insurance, of course.  And not only can it help you to save towards and fund your children’s educations.  You can use the money for any other purpose you choose as well.  Many types of life insurance policies have loan provisions that allow you not only have tax-free growth of your capital, but also to borrow tax free against the balance of your account.  For education, or for whatever other purpose you choose.

Life insurance is the only savings vehicle that I know of with so many uses – including the most important: making sure that in the event of your death, your family’s financial needs are completely taken care of.

But an article I read recently shows that for baby boomers, there’s a dramatic rise in mobility-limiting disabilities.  The upward trend for baby boomers is shocking, because for adults 65 and over, the number of disabilities is actually declining. 

The study on which the article was based found that 40 percent of the people age 50 to 64 reported having trouble with at least one of nine physical functions that were surveyed.  These are basic things we do every day, like bending, kneeling, climbing 10 steps, or walking a quarter of a mile.  In addition, more baby boomers are finding that they have to rely on special aids, like canes or wheelchairs, than ever before.

The researchers weren’t really clear on the causes of this alarming increase in mobility-related disabilities for baby boomers.   More and more people are reporting problems with back and neck pain, and there’s a national epidemic of obesity that I believe is part of the problem as well.  Heart disease, diabetes, nerve, muscle and joint problems can all be tied back to poor diets and lack of exercise.

But whatever the reasons may be, one thing is clear:  this trend will have consequences that extend far into the future.  And that’s because, in general, we don’t get healthier as we age.  If we’re having big problems earlier in life, it’s to be expected that those problems will only get worse with time.  There will be an even greater need for disability coverage and for long term care coverage in the years ahead. 

I once heard a speaker give the following advice:  do what you have to, as fast as you can, so that you can do what you want to as long as you can.  If it’s time to make some changes in your personal life, like eating better, or getting more exercise, the best day to begin is today.  And if your financial life needs some work, the best time to begin that is today, too. 

Do you have your own disability income insurance policy?  Do you own long term care insurance?  The need is there, and the best time to secure your future is today.

Preparing for risk always begins with recognizing that there is one, and then calculating the chances that it will actually happen.  But, as an article that I read recently pointed out, “the odds of a disability are themselves odd.” 

Some sources will tell you that you have an 80% chance of suffering a disabling illness or injury in your lifetime.  Others put the chances closer to 50%, and still others as low as 30%.  The number you hear – the number you choose to believe – is what will make the biggest difference in how you choose to handle this particular risk.

I like to think of it this way:  if the weatherman says there’s a 100% chance of rain, you’ll grab an umbrella before you leave the house.  If he says the chance is 50%, you may or may not.  But the important thing is this:  you know that it does rain, once in a while, almost everywhere, and so at some point in your life you buy an umbrella.  Or several umbrellas. 

Whether the chances that you will suffer a disabling injury are 80%, or 50%, or 30%, you need disability insurance protection.  Because every year, in this country alone, 31 million people just like you get rained on.   Maybe it’s a passing sprinkle, like a sprained ankle; inconvenient, but something you can recover from.  Maybe it’s a thunderstorm, like a mild stroke; sudden, disrupting, but again, only temporary.  And maybe it’s a downpour that not only never stops, but gets worse as time goes on, like multiple sclerosis. 

Don’t let the fact that you get different numbers from different sources be the reason that you become complacent.  Accidents happen.  Illnesses do come.  And without disability income protection, you’re left not only disabled, but disabled without any income.  About a third of all U.S. employers provide disability insurance.  But, since that coverage is employer paid, the benefits are taxed, so if you’re out on disability, you may be forced to make ends meet on 40% of your predisability earnings.

Who would you turn to if you couldn’t work?  Don’t think that Social Security will rescue you, despite the fact that you’ve been paying into it for years.  It can take more than a year for your claim to even be processed, and even longer if your claim is rejected the first time around.  Workers compensation?  Such claims are paid much more quickly, but the vast majority of disabilities are not work related, so workers comp is not an option. 

What are the chances that you’ll suffer a disabling illness or injury in your lifetime?   No one really seems to know that.  But here’s one thing you can be certain about.  You are your best advocate and your ultimate safety net.  You can make sure that your financial future is secure.

If you don’t have your own disability income protection policy, now is a good time to apply for one.  We’ll help you find the right combination of coverage and premium so that you’re prepared for whatever happens, come rain or come shine!

I’ve lived in New Jersey for many years now, and I think I’ve heard every New Jersey joke that’s ever been written.  Most of them are funny, and most of them are at least a little true.  But here’s something about New Jersey that isn’t funny at all. 

The number of residents age 85 and older is projected to grow by over 70 percent between now and 2030.  Currently, 13% of our population is 65+, and 175,000 of our residents are over 85.  And the numbers would be higher if we didn’t have a law that requires every third senior citizen to move to Florida! 

Okay, so I made that part up, but seriously, that group of senior 85+ is the group most likely to need long term care services.   And according to AARP, New Jersey is ranked 25^th in projected growth of 85+ population.  That means that 24 states out there are expected to see increases even higher than New Jersey does. 

Right now New Jersey is spending 80 percent of its Medicaid funds on institutional care, with 935,000 citizens relying on Medicaid, and 16% of them being 65 years old or older.  New Jersey is one of the states that permit Medicaid recipients to choose between nursing home care and in-home care, which is great because in-home care on average costs one third of what it costs to care for someone in a nursing home.

But in addition to those being care for by our state, 980,000 New Jerseyans are providing family care to a loved one at home, with the value of that care, according to AARP, is more than $11 billion.   I’m telling you this because what’s happening here is happening in your state too – and chances are your state is not providing the care options that New Jersey is.

Does it surprise you that there are only about 7 million long term care policies in effect at this time?  With Americans living longer, and with the costs of health care rising to rapidly, you’d think that everyone would be looking for ways to make sure that they can get the care they need in the way that they choose and at a price that won’t create a hardship for the rest of the family.

When we started this company, my focus was really on life insurance.  But the connection between life insurance and long term care insurance in a sound financial plan is undeniable.  Having enough of one can truly reduce your need for the other, and as we age, the importance of each changes as well.

If you have long term care insurance, I applaud you!  You’re among a select group that’s taken a very important step in planning for your later years.  If you don’t, take the first step and find out how your current financial plan will help you or hurt you in the event that you need long term care.  Call BeamaLife at (866) 972-3262 today to talk with one of our long term care insurance specialist!

I was listening to a personal finance podcast the other day, and the question was raised again about what kind of life insurance someone should buy.  The host went on for the next couple of minutes talking about how everyone should “buy term and invest the difference.”  Now I’m a fair person, and I admit that there are many, many times when that makes more sense than any alternative. 

But if there were a doctor out there who, for every patient, wrote the exact same prescription, it wouldn’t be long before that doctor would be out of patients at best, and in jail for malpractice at worst!  In my experience, absolutes only work as descriptions of reality.  One plus one equals two.  The sun is the center of our solar system.  Beyond things like that, absolutes just don’t work.

And when it comes to financial planning, it makes sense from my perspective to take a long, hard look at the patient before recommending a course of treatment.  Whole life insurance sales, according to recent figures, are now selling at a rate that is much higher than the year before. 

Here’s one reason why.  In order to beat the return on your investment in a whole life policy, you’d have to average 10% or more on your investment of the difference between what you’re paying for term life and what you would have paid for a whole life policy.  Can anyone show me an easy way to make that kind of return these days?  I can’t think of one.

And here’s another reason.  The Pollyanna mindset that says “let’s not worry about today, because tomorrow will be even better!” has all but disappeared as the various sectors of the economy have fallen like dominos over the past couple of years.  Stocks are just now beginning to recover, but jobs are still nowhere to be found, real estate values are not even beginning to show signs of growth, and with looming changes in heath care and taxes, the average American has very little hope that the next five years will bring prosperity back.

At BeamaLife we’re experts in all kinds of life insurance products term life insurance or whole life insurance, and we know how to help you find the one that makes the most sense for where you are financially right now.  So don’t buy into the “buy term and invest the difference” mentality.  For many people, it’s more like “buy term, plan to invest the difference, spend the money on other things, and then find yourself without the coverage you need when you need it most.” 

Call one of my experts today at (866) 972-3262 for a free, no-risk review of your life insurance.  We’re your best resource for advice, and the surest way to get the coverage you want for a price that you can afford.  Your family and your financial future deserve nothing less!