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!

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!

The economics of life insurance relate to human life value, which in turn pertains to human capital. Human capital is a person’s income potential over their lifetime as well as additional factors such as fringe benefits, monthly expenses, and savings growth rate. The human life value concept is the primary reason for insurance and the basis of the ‘survivorship need’.

 The ultimate goal is to maintain your assets and pass them on to your family in the event of premature death or even if you live your full life. You want your family to receive the full value of your working life if you were to die prematurely. Also, you don’t want the government to end up as the biggest heir to your estate, if you die wealthy. Upon your death, tax on your assets is inevitable if you fall in the estate tax bracket. But understanding the economics of life insurance will allow you to cover what is due by creating a source of funds to pay estate tax liabilities through affordable premium payments in the form of a gift to an Irrevocable Life Insurance Trust. Furthermore, the death benefit from your life insurance policy to your loved ones has no federal estate tax, no state inheritance, and no federal or income state tax consequences if life insurance policy is structure in a correct manner.

The economics of life insurance also concerns tax-deferred growth. By law, the cash value growth inside a permanent life insurance policy is tax deferred. This makes a permanent life insurance policy especially whole life insurance a tremendous savings vehicle and provides great value for any individual with tax concerns. Lastly, the growing cash value inside a whole life insurance policy is increasingly used to fund children’s education, retirement savings and wealth creation purposes.

It’s a new year, and that’s the time when many people make resolutions to change their lives for the better in the coming months.  Many of the changes you might be considering can also be ways to save money on your life insurance.  Of course, there are the usual ways that most people would think of, like quitting smoking, or cutting back on drinking alcohol, or losing a few pounds.

But here’s one you may not have considered: going vegetarian. With all the talk about what’s happened to the American diet over the years, it isn’t a surprise to anyone that there are many health benefits to being a vegetarian.  But here are a few facts:

• Vegetarians are half as likely to develop heart disease as meat eaters
• Vegetarians have just 40% of the cancer rate of meat eaters
• Meat eaters are nine times more likely to be obese than vegetarians

When an insurance company evaluates your risk, which most of them do through a medical examination, there are a number of ways in which being a vegetarian will result in your being a lower risk, and therefore having lower life insurance rate and premiums. 

• Your cholesterol levels will be lower
• Your blood pressure will be lower
• Your risk for diabetes will be lower
• Your risk for heart disease will be lower

At this time there’s no “official” life insurance premium discount offered to vegetarians, like there is for people who don’t smoke.  But the health benefits are so clear that your acceptance is guaranteed to have fewer problems than you’d have as a meat eater.

Life insurance companies believe that it would be hard to verify that someone really was a vegetarian, or if they were just trying to get a discount they didn’t deserve.  Well, unless someone lights up a cigarette in the middle of a medical exam, it’s hard to prove that they’re a smoker, too.  So I think this is something that will change in the years ahead.

But even without an official discount, the benefits of being a vegetarian will lead you to a healthier life, and that means more time to enjoy all of the things that make your life worth living.  Best wishes for a healthy and happy 2010 from all of us at BeamaLife! Please call (866) 972-3262 to speak with life insurance specialist or complete life insurance quote request form for term insurance quote or whole life quote.

In the December issue of Employee Benefits Advisor magazine, a survey of 4,500 employers found that 2010 will be a good year for your employee benefits in lots of ways.  Most employers remain committed to keeping their benefits plans robust, offering medical and dental, vision, life insurance, short and long term disability insurance.

Here are the highlights you should know about:

• 82% of employers plan to keep their contributions levels the same for employee medical insurance in 2010.  With premium increases in the double digits, this is definitely good news for employees.
• 97% of employers do not plan to make any changes to their dental coverage in 2010.  Dental premiums are not rising as fast as those for medical insurance, but this also great news for employees. 
• Very few employers plan to add vision coverage this coming year, while a small percentage are actually considering dropping the coverage to save money.  If you have health insurance, you probably have some vision insurance as well.  I suggest employers make vision coverage voluntary – make it available for employees who want to pay for the benefit themselves.
• 90% of survey respondents indicated that they offer life insurance, and another 8% said that they intend to add life insurance in 2010.  This is great news, as the number of Americans with adequate life insurance is really quite low.  As I’ve written before, however, if your employer offers voluntary group life insurance, it may actually be less expensive to buy the same amount on your own.  Get the term insurance insurance or whole life insurance you need, and be smart about how much you pay for it!
• 90% of employers that currently provide long term disability insurance coverage are planning to keep it in 2010, but only 4% of companies that don’t offer it now are planning to add it.  Whether your company offers it now or not, you should have right amount of disability insurance coverage.  Please call (866) 972-3262 to speak with disability specialist about supplement coverage if you have disability from work or new your own coverage if you don’t have any protection.
• Short Term Disability is the least likely to be added in 2010.  Most disabilities are short term – less than 90 days in duration.  But that’s enough time to ruin your finances.  Protect yourself, even if your employer is already providing you with some short term disability.

The majority of Americans get the majority of their some financial services through their employers, so it’s great that companies are still willing and able to fulfill that role.  My advice is that what your employer offers should be your starting place – not the end of your financial planning journey.   visit BeamaLife for Term Life Quote, Whole Life Quote, Disability Insurance Policy, Long Term Care, College Savings and Retirement Savings – and make 2010 your best year ever!

According to the MIB Life Index, life insurance applications in the U. S. are on the rise, with November showing some of the biggest increases in the last two years. 
That’s a good thing for the life insurance business, of course, but it points to some very good things that are happening in the economy – and it points out an important lesson that every generation seems to need to learn again as if for the first time.

The MIB numbers showed that for November 2009, non-group life insurance applications rose 4.1% over the same time period last year.  The numbers themselves point to the fact that in general Americans are being freer with their money and are still very much aware that a big part of a family’s financial security depends on having adequate life insurance. Taking the numbers apart, however, reveals something that never seems to change.

The largest increase in individually-underwritten life insurance applications came in the 60+ age group – 18.8%, while the lowest increase – 0% – came from those who are 44 or younger.  The 45 – 49 age group also increased by 6.7%.  Why is it that the younger people – those who have young families, of course, but even those who are single – seem the least likely to have the life insurance they need?

There are a number of reasons.  Perhaps they think that their income levels are not high enough to support a quality life insurance policy.  Or maybe they think that because they get a small amount of life insurance from their employer, they have no need for anything more permanent.  Certainly these young people with relatively few assets are not a “target” for financial services professionals who work on commissions.

These are just some of the reasons that my colleagues and I built BeamaLife.com.  We want to dispel the myths that you can’t afford the insurance you need, that your employer-paid life insurance is enough, that as a single person, you don’t need life insurance.  If you are a business owner, or work for someone else, or if you’re a freelance or contractor – even if you’re a homemaker raising children and taking care of your family.  There is a solution out there, and you don’t have to look very far to find it! Call (866) 972-3262 for term life rates & life insurance quotes or complete life insurance quote request now.

There’s no question that for many people, money is tight these days.  And when you’re low on options for increasing your income, your thoughts may turn to that life insurance policy that you’ve been paying on for so many years.  You could sell it in what’s called a “life settlement,” but is that the right move?

According to The Wall Street Journal, more than $10 billion worth of life insurance policies were sold this way last year along.  The concept is pretty simple.  You sell your life policy for less than its face value, and when you die, the third party gets the payout from the policy.  You get the cash you need right now. 

In my experience, there definitely are times when selling your life insurance to another party makes sense.  When you no longer need the life insurance – for example, when your kids are grown and gone, your house is paid for, and you’ve got enough money to cover any estate taxes that will be due when you’re gone yourself. 

But it’s difficult to determine just how much your life insurance policy might be worth to another party.  If you’re 70 years old and have a policy with a $1 million face value, would you take $250,000 for it today?  Or even $400,000? 

And there are other factors to be considered as well.  There is no more life insurance benefits for your loved one, somebody is waiting for you to die, and there’s plenty of paperwork to go around.  According to current industry transaction, you as the seller should not expect to walk away with much more than 20 cents in return for every dollar of the policy’s face value. 

So if you’re in a cash crunch, and you’re thinking that selling your life insurance might be a way out, be sure to talk to a couple of expert  advisors at (866) 972-3262 before you take the plunge.  It may be a good move for you, but you bought the life insurance for a reason.  Most people would shudder at the thought of choosing to lose 80% of their investment.  You should too. Let me know what you think…