Pensions and annuities (II): back to the drawing board?
ByDuncan Minty.
The scale of the ethical challenge facing pension providers can be neatly illustrated by the fact that most people completely misunderstand what a pension is. Most people think of it as the monthly payment they receive after retirement, when in fact, it’s the product into which savings are accumulated prior to retirement. This misunderstanding can of course be quickly sorted out as the person nears retirement, but nevertheless, it is symptomatic of the gap between those who manufacture pension products and those who buy them.
Is misunderstanding inevitable?
Is such misunderstanding inevitable with a complex product like insurance? Not at all. Some commentators (including within the market itself) see it as having been build up to allow for more lucrative annuities sales at the point of retirement. That comfortable carpet of sales has now been pulled from under their feet by the Chancellor’s reforms.
So the number one ethical issue that pensions providers must tackle is ‘information asymmetry’: the imbalance in understanding between provider and purchaser. That inevitably means simpler products, which can then be sold on more clear terms and relied upon later in life with greater certainty.
Insurers are being encouraged along this simplification route by the UK’s Financial Conduct Authority. Its chief executive, Martin Wheatley, has indicated that simplified polices will be looked upon favourably by regulators, on the basis that they are likely to lead to fewer conduct problems later on.
A Revolution in Language
Simplication should also bring about a revolution in pensions and annuities language. Policies have previously been written mainly with the financial planner in mind, but as adviser firms orientate their business towards those more able to pay their regular fees, a gap is opening up around those with small to mid sized pension pots. More simply worded policies help fill that gap: they’re more easily designed with a target market in mind, more easily understood by that target market, more easily sold on a direct basis and if necessary, more confidently bought on an execution only basis.
Stratification and access
Another ethical issue that pension providers must together face up to is stratification and access. There’s a danger that in times of change and uncertainty, the market adopts an even stronger focus on those customer segments it feels most secure dealing with. If this is at the cost of attending to other, less familiar, perhaps more challenging, segments, then there’s a danger that some types of consumer will find access to pensions much more difficult. Times of change are opportunities for innovative thinking, not repeat thinking, both in terms of the design of products and the ethical ideas that influence them.
Another question that each insurer needs to carefully weigh up on a set of ‘ethical scales’ is how much longevity risk they incorporate into their product offering. The market has been criticised for distancing itself from longevity risk and should this apparent trend continue, it needs to be clearly signalled in how products are targetted and communicated.
And is this ultimately a healthy trend? Is long term insurance with reduced longevity risk a bit like say, a car without fuel: in other words, nice on the outside, but really, what’s the point? A popular phrase here in the UK is ‘it does what it says on the tin’, which, for long term insurers, means grasping longevity risk and delivering the value that comes from risk transfer and pooling.
Pensions and annuities (I): will insurers rise to the ethical challenges facing this market?
By Duncan Minty.
The pensions and annuities market in the UK is huge. It is also complex and undergoing considerable change, or to put it another way, frequently misunderstood and politically charged. So in the next few posts, I will be highlighting a series of ethical questions that the market needs to find lasting answers to in order that the transformation it is about to undergo delivers public confidence in private provision for retirement.
The pensions market will have their work cut out to deliver renewed public confidence. It has a chequered history of misconduct that has tilted public trust away from it. This led to a lower take-up of what the mainstream market was offering, which raised concerns in Government about an increased burden on the state. This in turn encouraged Ministers to tinker with laws and taxes around pensions to boost pensions take-up, which produced even more complexity and a market the in’s and out’s of which were even more difficult to understand. A simplified overview no doubt, but one that many in the public would recognise.
The latest stage in this long running saga was the surprise announcement by the Chancellor of the Exchequer in March this year of sweeping reforms to the options at retirement available to consumers with a defined contribution pension. The Chancellor also promised that by Apri l 2015, all of the circa 400,000 people who reach retirement age each year would be offered ‘impartial, face to face and free at point of use’ guidance. Interesting tactic – turn the market on its head and then tell it to quickly and hugely scale up the very type of guidance that it has at times struggled to deliver to a much smaller audience.
Delivering this revolution will make many demands on the pensions market, but probably the one it will find most challenging will be the regaining of public trust. After all, the “best laid schemes o’ mice an’ men” will count for nothing without that trust. So there’s a danger that a huge amount of effort, innovation, redesign and reorganisation will count for nothing unless the sector faces up to, and tackles, some fundamental ethical challenges.
So where should a typical insurer or adviser network start? Certainly the first thing not to do is make a grab for the nearest and most obvious ethical issue and tell everyone in your firm to do better at it. Such flurries rarely have any lasting effect. Equally, taking huge strides to offer more and more guidance to many thousands more people will achieve little unless those people feel able to trust what they’re being told and unless the options on offer to them feel more secure than, say a buy-to-let property. We’re talking about a mountain to be climbed here.
The ethical issues I’ll be looking at over the next few posts fall into two broad categories: design and distribution. When questions are raised about misconduct in the pensions market, the focus is invariably on the distribution side: conflicts of interest, inducements and suitability for example. And these are big issues, but, starting in the next post, I’m going to look first at the design side of pensions, for I believe that is where the root cause of many of the sector’s problems lie. The three subsequent posts will then look at distribution, data and how insurers can respond to the ethical issues raised.
The pensions and annuities market in the UK is huge. It is also complex and undergoing considerable change, or to put it another way, frequently misunderstood and politically charged. So in the next few posts, I will be highlighting a series of ethical questions that the market needs to find lasting answers to in order that the transformation it is about to undergo delivers public confidence in private provision for retirement.
The pensions market will have their work cut out to deliver renewed public confidence. It has a chequered history of misconduct that has tilted public trust away from it. This led to a lower take-up of what the mainstream market was offering, which raised concerns in Government about an increased burden on the state. This in turn encouraged Ministers to tinker with laws and taxes around pensions to boost pensions take-up, which produced even more complexity and a market the in’s and out’s of which were even more difficult to understand. A simplified overview no doubt, but one that many in the public would recognise.
The latest stage in this long running saga was the surprise announcement by the Chancellor of the Exchequer in March this year of sweeping reforms to the options at retirement available to consumers with a defined contribution pension. The Chancellor also promised that by Apri l 2015, all of the circa 400,000 people who reach retirement age each year would be offered ‘impartial, face to face and free at point of use’ guidance. Interesting tactic – turn the market on its head and then tell it to quickly and hugely scale up the very type of guidance that it has at times struggled to deliver to a much smaller audience.
Delivering this revolution will make many demands on the pensions market, but probably the one it will find most challenging will be the regaining of public trust. After all, the “best laid schemes o’ mice an’ men” will count for nothing without that trust. So there’s a danger that a huge amount of effort, innovation, redesign and reorganisation will count for nothing unless the sector faces up to, and tackles, some fundamental ethical challenges.
So where should a typical insurer or adviser network start? Certainly the first thing not to do is make a grab for the nearest and most obvious ethical issue and tell everyone in your firm to do better at it. Such flurries rarely have any lasting effect. Equally, taking huge strides to offer more and more guidance to many thousands more people will achieve little unless those people feel able to trust what they’re being told and unless the options on offer to them feel more secure than, say a buy-to-let property. We’re talking about a mountain to be climbed here.
The ethical issues I’ll be looking at over the next few posts fall into two broad categories: design and distribution. When questions are raised about misconduct in the pensions market, the focus is invariably on the distribution side: conflicts of interest, inducements and suitability for example. And these are big issues, but, starting in the next post, I’m going to look first at the design side of pensions, for I believe that is where the root cause of many of the sector’s problems lie. The three subsequent posts will then look at distribution, data and how insurers can respond to the ethical issues raised.
– See more at: http://ethicsandinsurance.info/2014/08/26/pensions-pt1-challenge/#sthash.wSDXq63V.dpuf
A Love Letter About Life Insurance.
By| Jack Dewald.
I recently ran across a yellowing sheet of paper with a typewritten letter; it was a copy of a note I had sent to my son. The datetypewriter on the letter was Nov. 21, 1989, and my son was just four months old at the time. As I read it again after so many years, I realized something: Although I was telling him about the life insurance policy we had just purchased for him, it was, in fact, a love letter.
Love letter, you say? What has life insurance got to do with love? Well, quite a lot, it turns out. The bottom line is that you buy life insurance because you love people and want to protect them financially.
I may be biased because I work in the industry, but take a look at the letter to my son, and see if you don’t agree:
Dear J.P.:
Today is November 21, 1989, and possibly you are wondering what the date has to do with writing you this letter.
While you are only four months old at the present time, I hope that this is a date you will remember, because today we purchased for you a life insurance policy. It is one like we have and it will be for your use for the rest of your life.
J.P., the difference between financial success and failure is often determined by whether or not a person can discipline themselves in a consistent and conservative financial strategy. Life insurance is ideal in this respect because it has withstood the test of time both for family security and savings; it’s the greatest savings plan in the world because IT WORKS!
It may be that you will have to call upon the cash value of this policy many times during your lifetime and, at such time, we hope you will remember that we started this for your benefit.
This policy carries with it two features of particular significance. The first is an automatic purchase option, which will allow us to increase your coverage as you attain certain ages. The other feature is one that has been very meaningful to me in my financial life and it is called disability waiver of premium. This means that in the event you should ever become disabled, your financial plan will be self-completing for you and your family.
This policy is a special gift of love and affection from both your mother and me; and we suspect that it will be remembered long after all other gifts are forgotten.
May God’s blessings be with you always.
Love always,
Dad and Mom
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Jack Dewald, CLU, RHU, is a 30+ year veteran of the insurance and financial services business, and the owner/CEO of Memphis, Tenn.-based Agency Services, Inc. He is also the past chair of the LIFE board of directors.
Five Reasons a Life Insurance Policy Is Needed Today By Mike Valles
Life insurance is a great tool to help ensure the family’s financial future. It really is not an option. Here are 5 reasons why every family should have it.
Life insurance provides a powerful way to prepare the family financially in the event that the breadwinner is no longer around. There is no time like the present to get a quality policy and ensure that the loved ones are going to be financially secure.
Here are five reasons why life insurance should be considered a necessity in today’s high-cost world.
Immediate Needs Are Resolved with a Life Insurance Policy
Because one never knows when the benefits of a life insurance policy may be needed, it is a good idea to always be ready. Life insurance can provide money for immediate needs such as living expenses, for the costs of health care if there was an accident or illness previously, funeral and burial costs, and other expenses that may be needed right away.
Debts Can Be Paid Off from Life Insurance Benefits
A large benefit of having a life insurance policy is that it can enable all debts to be paid immediately. This can be especially useful if there is only one income and there are mortgage payments, credit card debt, car payments, health insurance payments, and more. The insurance benefit can pay all of the debt immediately, bringing relief to the family’s financial needs and providing security.
Another serious need to prepare for is that there could be estate taxes, as well as the annual taxes on any real estate owned. Money from the estate could be a long time in coming (possibly up to three years) and the property taxes, home insurance, utilities, and maintenance will have to be continued until then, as well as normal living expenses. Money from a life insurance policy can provide for the spouse and children and enable life to go on at the same accustomed lifestyle.
Life Insurance Can Provide for the Childrens’ Education
If the children are still young, then it will be necessary to think about their future education. With the cost of a college education continually rising, financial help is apt to be needed – if they are ever to get that post high school education. The proceeds from a life insurance policy can provide for some or all of their future educational needs.
An Inheritance Can Be Given with a Life Insurance Policy
Another benefit of life insurance is that an inheritance can be supplemented or even created with the right kind of policy. This will enable loved ones to be remembered long after they are deceased. The children or grandchildren can enjoy the additional finances and use it to get established in business or some other goal. If combined with a trust, the money can be made to last a long time.
Retirement Can be Made More Comfortable with Life Insurance
Preparation for the possibility of an early death does not automatically mean it will happen. It is quite possible to live longer than anticipated. In that event, however, cash from a life insurance policy could provide some financial help and security (depending on the type of life insurance obtained).
Life insurance, whether term life insurance or whole life insurance, can enable a family to be prepared against many potential problems. Online life insurance can easily be obtained and a physical exam may not even be needed. Because life insurance rates do vary considerably, it will be a good idea to get several life insurance quotes before buying and then comparing the life insurance policies carefully to ensure the best coverage for the family.
Los Peruanos invierten solo 5% de su presupuesto en Seguros de Vida.
Piura – Los peruanos invierten solo el 5% de su presupuesto familiar en contratar seguros de vida, parciales o completos, frente a un 15 % que se invierte en otros países de Latinoamérica, como Chile por ejemplo, según lo aseguró la mañana de ayer el gerente de Renta Vitalicia de La Positiva Vida, Raúl Fermes. El gerente manifestó que tras el crecimiento económico del Perú, los peruanos muestran un interés cada vez mayor en los seguros de salud y vida; y en mejorar sus pensiones, pero lamentó la falta de información disponible para ellos.
“El Seguro de Vida ha pasado de una necesidad 7 a 5 dentro de la canasta familiar. Ahora se destinan mayores ingresos, sobre todo se debe generar conciencia en personas que empiezan la etapa familiar”, comentó Fermes.
Resaltó la importancia de los seguros y la cantidad de productos disponibles para cada persona, de acuerdo a sus necesidades.
Americans to Protect Family Security is a partnership of America’s life insurance companies, agents, and financial advisors that is dedicated to educating policymakers about the role our products play in the financial lives of 75 million American families.
These families turn to life insurance companies and trusted agents and advisors to protect their financial futures with life insurance, annuities, long-term care, and disability income insurance.
The Coalition includes the American Council of Life Insurers (ACLI), Association for Advanced Life Underwriting (AALU), GAMA International, Insured Retirement Institute (IRI), National Association for Fixed Annuities (NAFA), National Association of Independent Life Brokerage Agencies (NAILBA), and National Association of Insurance and Financial Advisors (NAIFA). Our goal is to highlight facts about our products and their importance to the financial and retirement security of American families.
To view personal stories about how life insurers’ products help families, businesses, and individuals, visit the LIFE Foundation at www.lifehappens.org.
Families and businesses alike need financial stability and count on Life Insurers’ products for peace of mind, long-term savings, retirement planning, and guaranteed lifetime income.
Life insurance companies, agents, and financial advisors proudly serve 75 million American families as they prepare for a secure financial future. Life insurers’ products also provide stability and certainty to employers of all sizes—fueling economic growth.
•75 million American families depend on life insurers’ products to protect their financial and retirement security.
•Almost 20 percent of Americans’ long-term savings is in life insurance and annuities.
•Life insurers pay out $1.5 billion to families and businesses every day.
•The life insurance industry generates approximately 2.5 million jobs in the U.S.
•Life insurers invest $5.2 trillion in the U.S. economy – 90 percent of the industry’s total assets.
•Life insurers are the largest single source of bond financing for American business, holding 17 percent of all U.S. corporate bonds.
Life Insurance – Products and Benefits American Families Count On
Whether protection against the financial risk of the sudden death of a loved one, outliving savings in retirement, lost income due to disability, or paying for long-term care, life insurance companies provide 75 million American families with financial protection and retirement security products.
In 2010, life insurance companies provided over $557 billion in payments, helping families guarantee their financial security – both now and in retirement.
Click on the tabs above or download our Life Insurance: Providing Financial Protection brochure (PDF) to learn more about the different products and benefits life insurers provide families every day.
Today, 75 million American families wisely use the savings incentive in retirement annuities and life insurance to ensure their families’ long-term financial security. Annuities help families establish solid financial plans for retirement by providing guaranteed income for life.
Americans are living longer than ever – many 20 to 30 years after retirement – and every year fewer are covered by traditional pensions that provide lifetime benefits. Managing and maximizing retirement savings can be a daunting task and annuities can alleviate financial uncertainty by providing steady cash flow to cover retirees’ day-to-day financial needs.
In these tumultuous financial times, encouraging Americans to make solid financial plans for retirement is more crucial than ever. Responsible retirement planning that includes retirement annuities gives retirees and their families’ peace of mind in the knowledge that their financial security is protected and that they can count on steady income for life.
Download our Annuities: Creating Guaranteed Income for Life (PDF) brochure to learn more.
Facts and Figures:
The only way to create a guaranteed lifetime income stream in retirement is through an annuity.
A 2011 survey shows that only 13 percent of American workers are very confident that they will have enough money to live comfortably throughout their retirement years, down from 27 percent in 2007.
20 percent of Americans’ long-term savings – one in every five dollars saved – are in annuities and permanent life insurance. In 2012, American families received $70 billion in annuity payments.
A survey by the Committee of Annuity Insurers shows that 79 percent of annuity owners say that annuities are a safe and secure way to save for retirement and that annuities make them feel secure in times of financial uncertainty.
American families rely on retirement savings plans – like 401(k)s and IRAs – to help them save for retirement and to ensure their families’ financial futures are secure.
Life insurance companies offer these retirement savings plans to employers and they are typically funded with contributions made by both employers and employees. These plans reward responsible saving with a special tax status that allows the funds to grow tax-free until they are withdrawn in retirement. Financial penalties for early withdrawal of funds before retirement ensures those savings are held for when they are most needed.
In search of revenue for the government, policymakers may curb the amount of tax-deferred funds that can be put into retirement plans. In doing this, the government would discourage American families from taking responsibility for their financial futures. Policymakers should be focused on ensuring our laws encourage a competitive marketplace of retirement plan products and, most importantly, support and reward financial responsibility.
For more information about retirement savings, visit the Coalition to Protect Retirement at www.howamericasaves.com.
Join Americans to Protect Family Security—a coalition of companies, agents, and advisors—to show your support for the life insurance industry that helps protect the long-term financial security of American families, businesses, and the economy.
The current tax treatment of permanent life insurance encourages
individuals, families, and businesses to efficiently manage risk and
prepare for long-term financial needs, despite a general environment
that focuses more on the short-term. Americans are facing greater
hurdles than ever before when planning for financial security. Any
changes to public policy must encourage Americans to plan for their
financial futures.
Secure Family: Peace of Mind
“Ninguna otra inversión financiera puede hacer lo que hacen las compañías de seguro de vida. Ninguna otra industria respalda sus productos con reservas tan saneadas como las de la industria del seguro de vida. Un ejemplo concreto es el de la Gran Depresión de 1929: cuando la Bolsa de New York tocó fondo y muchos bancos quebraron, las compañías de seguros pudieron dar a sus asegurados una seguridad que no pudieron encontrar en otro lugar. Otras industrias quebraron, se perdieron fortunas de un día para el otro, se evaporó el ingreso de las propiedades y los bienes raíces. Pero no se conoció ninguna pérdida por el fracaso de alguna compañía de seguros de vida. Ningún asegurado perdió un centavo. El récord de fuerza y seguridad de las compañías de seguros de vida, aún bajo las condiciones más adversas, es un emblema de orgullo en la industria del seguro. Ninguna inversión u otro tipo de negocio, ha tenido un récord de seguridad superior al del seguro de vida”Life Underwriter Training Council
Ever since I began focusing on the retirement market in early 2003, my business focus has always been on increasing the assets I manage here at my firm, whether it be assets under management as a fee-based RIA or fixed and indexed annuities.
I had never done much life insurance until 2010. I recognized that there was a client need for life insurance, but I was not entirely sure how to serve that need. I therefore made a commitment to learn how to successfully implement life insurance into my current practice.
I believe that the most effective way to add life insurance to your practice is to work with your current clients. You should have a trust-building relationship with them, and they look to you for advice and direction. It is your job as their advisor to show them their potential risks, and how to solve those risks in their financial plan.
Two significant risks
Most of us are well aware of the risks of inflation and losing money in a bad market. However, most couples face two other significant risks to their lifestyles during retirement. One of those risks is the threat of needing long-term health care. The other is the threat of one spouse significantly outliving the other, and the income loss affecting the surviving spouse.
One of the best ways to address these two risks together is with life insurance. The insurance industry is moving more and more in the direction of providing long-term care benefits that are connected to life insurance, whether it’s an accelerated death benefit for long-term care needs, or an asset-based long-term care plan that leverages the death benefit into a much greater long-term care benefit. These benefits can provide our clients with tremendous protection against these two risks.
I also believe it is important to show clients that life insurance is an alternative asset class in their portfolio. While it may or may not be a cash asset, depending on the product chassis you use, it is a valuable insurance asset that can provide for long-term care and/or survivor needs. We should always be communicating life insurance as an alternative asset in their portfolio to help address these risks, and client reviews should include this insurance asset.
My experience has been an eye-opener. While I previously realized many of my clients do have a need for life insurance, the need is much more significant than I originally thought. Furthermore, when used properly, life insurance can provide a significant enhancement to the services you provide for your clients. When implemented successfully, it can help transform your business.
About the Author
Jim Brogan is president and founder of Brogan Financial in Knoxville, Tenn. He was named Senior Market Advisor’s 2011 Advisor of the Year.
Don’t listen to Suze Orman’s «buy term and invest the difference»
By Jeffrey Berson
To most of us who understand the insurance world and the real choices available for our clients, the advice that Suze Orman gives is, at best, irritating and, at worse, negligent. It is virtually impossible for one piece of advice to be the answer for millions of people all at the same time.
In our world of financial decisions, each client is like a snowflake: No two are alike, and no set of circumstances is the same. In Suze’s world, everyone is the same and should just do what she says — black or white, no gray.
Recently while driving in my car, I was listening to a financial talk show. The caller said, «But Suze Orman says I should just buy term and invest the difference.» To his credit, the host asked the caller several questions to see if that strategy made sense for that individual. The whole exchange got me thinking: Why do so many people like Suze think that buying term and investing the difference is a good idea? And more importantly, why do they not understand the power of permanent life insurance the way we do?
In my experience, people who say they will «buy term and invest the difference» (BTID) rarely actually do so. Instead, they buy term and spend the difference. The truth is, people don’t always understand the savings element of the BTID idea. Initially, they may have had the thought of investing the difference, but typically, life gets in the way. This is where the BTID idea usually fails, leaving the client with no insurance and no investments.
But, for the sake of this article, let’s assume that our client does invest the difference and does stay true to the BTID idea. There are still several problems with the concept that Suze and her pals tend to brush over or minimize. Perhaps the biggest risk, other than the actual investment that the client might choose, is the insurability risk.
We often say that people are never more healthy than they are right now. This is true in a lot of cases, but what it points out is a possible risk that can happen in the BTID strategy. Insurability may be lost in between terms; in other words, a client must «re-qualify» for the new term policy each time the term period runs out. If they can’t qualify or if the new policy might be rated, then costs for the term can be significantly higher, or worse, the insurance could be lost.
Another problem that is often overlooked by the proponents of BTID is the investment risk. And within the investment risk, there is also another risk: the risk of the tax implications. One of the myths of the BTID strategy is that somehow, the investment will always grow and magically be there when you need it. Unfortunately — and recent history shows this — investments can be volatile and inconsistent, and there are no guarantees that the funds will be available and at their peak when you need them most. In addition, the tax implications of the investment are not often factored in when making the decision. With cash-rich life insurance, the tax advantages are simple. The cash value is tax-deferred (no taxes due on money as it grows), and the funds in a policy can often be accessed tax-free via policy loans.
The BTID idea needs to be flushed out for each individual and compared side-by-side to a permanent life solution to determine if it is a good idea for our clients. There are several software programs that do this well, and they can provide you with a valid comparison that can help your client make a good, informed decision. I wonder if Suze and her friends have ever done this type of analysis?
We are firm believers in the power of cash-rich life insurance as part of a long-term plan. But, and this is an important distinction, we would never say that it is right for everyone. Term insurance does have a place and can solve a specific need. But to simply eliminate the idea of permanent coverage as an option discounts the true value of a permanent plan. Financial gurus like Suze Orman who make blanket statements with no regard for the individual set of circumstances are short-sighted and irresponsible. So, stop! Don’t take Suze’s word for it. Investigate the permanent options on your next case. You may be surprised what you find out.
As an independent life insurance broker I am asked quite often, “why should I buy from you? I can just buy life insurance online.” The answer is yes you could. But there is value to having an experienced independent insurance broker. First of all, our services are FREE. We are paid by the insurance carriers a commission. In most cases, we can find great products from A+ Rated insurance companies at a better price and value that what a consumer will find online. Why you may ask? There are several carriers that do not have huge marketing budgets because they only market through insurance brokers. Therefore, they do not have the big marketing budgets of some of the more well known insurance companies. Those savings reflect to cheaper premiums to the consumer.
An insurance broker is especially helpful if there are underwriting concerns. There are a lot of factors that can cause rate ups or even declines from buying life insurance. Some examples can be overweight, diabetes, high blood pressure, high cholesterol, prescription drug use, driving records and even occupations. The experienced life insurance broker can use case managers and underwriters to determine which product and insurance company to apply for. Thus avoiding an unnecessary decline, that can haunt you for years every time you try to purchase life insurance or health insurance. This will not be the case to the novice insurance consumer who unknowingly applies online not knowing the consequences of being declined for life insurance.
Let me tell you a story about a client I had recently. This is a story that illustrates the true value of an independent life insurance broker. I received a referral from a somewhat frantic and upset man we will call “John”. “John” had a big issue with his insurance company bank draft. It seems “John” purchased $1 million 10 year term life insurance 10 years ago online without the assistance of an insurance broker, because he felt he would get a better deal. “John” was 40 years old when he found his current policy. He was paying $80.01 per month with a very well known nationally recognized life insurance company. Which by the way, was about $15 per month too much, but I digress. It seems that somehow, the 10 years were up and “John” wasn’t paying attention until the life insurance company took out his new adjusted premium of $3,768 per month! Luckily, “John” was still healthy and qualified for another $1 million in life insurance that we needed to get issued a.s.a.p. as paying over $3,700 per month was not a feasible option. I hate to think what would have happened had “John” had a health issue. Had “John” used an insurance broker 10 years earlier, he would have had known with plenty of advance notice that was about to happen and avoided having to pay the exurbanite high premiums for two months. That is just one example of the value of an experienced independent life insurance broker who is on top of client needs.
“You can’t always get what you want, but if you try sometimes, you might find, you get what you need.”—Mick Jagger
Seguro de Vida con Valor en efectivo: Es una póliza de Seguro de Vida que acumula valores en efectivo en una cuenta, además de pagar en caso de muerte del asegurado. También se lo conoce como Seguro de Vida con capitalización. Es un instrumento financiero que permite obtener Protección e Inversión simultáneamente. Su uso está muy difundido por ser la herramienta ideal para constituir la columna vertebral de todo Plan Financiero de Largo Plazo.
El capital, el interés y las ganancias acumuladas en la póliza no son gravables (no están alcanzadas por el impuesto a las ganancias), y puede ser utilizado como un fondo del cual pedir prestado y como un medio para pagar primas de las pólizas en caso de no desear continuar los aportes (primas). Existen diversos tipos: de vida entera, de vida variable y de vida universal (el más empleado por ser el más versátil), son todos los tipos de seguro de vida con valor en efectivo. También conocido como seguro de vida permanente, ya que proporciona cobertura para toda la vida del asegurado, mientras que las pólizas de vida a término son por un plazo en vigor durante un período especificado.
Cash Value Life Insurance: A type of policy that accumulates value during the policyholder’s lifetime and pays out upon the policyholder’s death. The interest and earnings on the policy are not taxable, and it can be used as a fund from which to borrow and as a means to pay policy premiums later in life. Whole life, variable life and universal life are all types of cash value life insurance. Also known as permanent life insurance because it provides coverage for the policyholder’s entire life, while term life is only in force for a specified period.
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Cash Value Life Insurance: A Great Investment
Cash value life insurance has come atop the many life insurances available. The popularity of this insurance started because it is considered a great investment by those who have benefited from the deal. Its introduction has yield best results with all the rightful comments and testimonies coming from satisfied customers
It works in many ways as a great investment for both the beneficiary and the policy holder?s delight.Should the policy holder pass away, there is sure money waiting for the beneficiary. It is like building up an investment to be used in the future.
Though the holder passes away, there is still money which can be used by the beneficiary to pay for sudden fees. In some insurance policies, you can even garner money which you can use intently for the purpose of education. The sure credit is at hand.
It is considered a great investment too because you can make use of the money investment if you want to. Loans using this insurance are possible. You just have to be mindful that these insurance usually permits the insurance company to take amounts that if saved can be of great help to your beneficiary.
The more you depend on credit loans, the lesser the benefits that your family will get in the future. Should you choose to get all the money and forfeit the policy, you can do so at any time. Now, the investment becomes like a savings plan that you can just withdraw. You have the access of your money just when you needed it.
In these ways, cash value life insurance is considered a great way to invest. As money is involved, you are also sure to get a lump sum on the interests that your money has accumulated during the times when you have been saving.
The scale of the ethical challenge facing pension providers can be neatly illustrated by the fact that most people completely misunderstand what a pension is. Most people think of it as the monthly payment they receive after retirement, when in fact, it’s the product into which savings are accumulated prior to retirement. This misunderstanding can of course be quickly sorted out as the person nears retirement, but nevertheless, it is symptomatic of the gap between those who manufacture pension products and those who buy them.
Simplication should also bring about a revolution in pensions and annuities language. Policies have previously been written mainly with the financial planner in mind, but as adviser firms orientate their business towards those more able to pay their regular fees, a gap is opening up around those with small to mid sized pension pots. More simply worded policies help fill that gap: they’re more easily designed with a target market in mind, more easily understood by that target market, more easily sold on a direct basis and if necessary, more confidently bought on an execution only basis.
