Fidelity insurance products are issued by Fidelity Investments Life Insurance Company (FILI), 100 Salem Street, Smithfield, RI 02917, and, in New York, by Empire Fidelity Investments Life Insurance Company®, New York, N.Y. FILI is licensed in all states except New York. Other insurance products available at Fidelity are issued by third party insurance companies, which are not affiliated with any Fidelity Investments company. Fidelity Insurance Agency, Inc. is the distributor. A contract's financial guarantees are subject to the claims-paying ability of the issuing insurance company.
Great read (http://momanddadmoney.com/insurance-and-investing-dont-play-well-together/ as well). Really taught me a lot. I’m a growing professional and a ‘friend’ tried to sell me a whole life participating life insurance. Like I believe you mention several times, all the ‘pros’ sounded really attractive. It actually made it sound stupid not to buy it. However, this alone made me hesitate as we all know what usually happens when something is too good to believe. I did a number of searches and read a few articles before stumbling on to yours. Excellently written providing a comprehensive explanation in terms that even a layman (i.e. me) could understand. Thank you as you just saved me from making a very big mistake. I hope others are lucky enough like me to happen upon your article before they make their decisions.
And your conclusion at the end is spot on: the insurance industry ABSOLUTELY knows about the negative stigma associated with these kinds of products and is ALWAYS looking for new ways to package things to make them sound attractive. Whether it’s variable life, universal life, equity-indexed universal life, or whatever this new thing is that they were trying to sell to you (I’ve honestly never heard of FFIUL), there’s always a new angle and the sales pitch is always going to sound good.
Any person who uses permanent insurance should be out of debt and have the discipline to maintain a long term approach. There aren’t any get rich quick schemes and any plan can work as long as an investor looks to get the maximum value for the money they pay. Cash Value Life insurance provides values that promises you or I can’t keep unless we partner with one of these companies.
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Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.
To sell insurance products on behalf of a particular insurer, an agency must have an appointment with that insurer. An appointment is a contractual agreement that outlines the specific products the agency may sell. It also specifies the commissions the insurer will pay for each product. The contract usually describes the agency's binding authority, meaning its authority to initiate a policy on the insurer’s behalf. The agent may have permission to bind some types of coverage but not others.
The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.
So what happens at 65 or so after the term policy ends? It will renew but at what rate? What if the payout isnt enough to cover funeral costs and any remaining debt? The average American can barely retire and be comfortable let alone have enough money stashed away in a bank or in investments to help with any costs or debts after he/she has passed away. Term life is great for those who have had good careers most of their life and have a nice savings and investments to cash in on in the later stages of life. Unfortunately, that is not the average American. You only presented one side of the coin.
The beneficiary receives policy proceeds upon the insured person's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. If a policy has an irrevocable beneficiary, any beneficiary changes, policy assignments, or cash value borrowing would require the agreement of the original beneficiary.
I on the other hand, got married and moved to England,I m not working at the moment, since I have to wait for my spouse documents to be legalized before looking for work, about 6, 7 months, and don t think it s useful for me over there, my husband or even for my son, since I didn t realize that it s only for him to collect it if i die, I would be more open to having something for ME while living, I m not worried about my son so much anymore now that I am married to a wonderful man and through his job, I m fully covered on a number of things.Would u mind replying to my email and letting me know if I should stop payments,and if so, do I get penalized, do I pay any fee for canceling it,surprising enough, I can t reach anyone at the Insurance co that will give me any straight answer or honest, easy to understand reply, and I just don t want to pay another month if I don t have to.Thank you so much for all of your input, clarity and dedication to everyone, you are obviously in love with your work,your calling!All my best!
Term life is a type of life insurance policy where premiums remain level for a specified period of time —generally for 10, 20 or 30 years. After the end of the level premium period, premiums will generally increase. Coverage continues as long as the premiums are paid. Perhaps this is an option you may want to consider when you’re on a more limited budget and will have significant expenses over a shorter period of time.
I think that post does a good job of showing how the illustrated (non-guaranteed) return from a whole life insurance policy is comparable to one of the most conservative types of traditional investments you can make IF you end up keeping the policy for 30 years. Of course, that conservative traditional investment doesn’t have most of the other downsides discussed here AND doesn’t require you to hold it for 30 years to see a reasonable return. And, of course, you are allowed to put your money into other, less conservative investments outside of a life insurance policy, some of which may even have special tax advantages (401(k), IRA, HSA, 529, etc.).
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Don't forget to ask about the optional protection of a personal umbrella liability policy. Umbrella Coverage from $1,000,000 for individuals wanting higher liability protection. Most home and auto insurance policies stop at $500,000 liability coverage. A personal umbrella policy provides coverage on top of basic auto and home insurance: $1,000,000 to $10,000,000 available.
As for it being undiversified, NO investment by itself is completely diversified. Cash value life insurance can ADD diversity and security to a portfolio (the top companies have incredible financial strength, good policies can have a solid conservative return while meeting a life insurance need). Diversification is an issue with cash value life insurance if it makes up a good portion of your assets, and if it would, you shouldn’t be buying it.
With that out of the way, I’ll point out that I would not even consider selling my best friend whole life. It’s a rip-off in his hands and I value my friendships too strongly to alienate those I love by selling them whole life. I would however sell it to my wife! Why is that? Well, because the commissions on these policies are HUGE. Between the First Year Commission and the override, if I buy the policy for myself or my wife and just roll the commission into additional whole life, it begins to look attractive. That compounding makes it attractive for insurance salespeople in a way that is simply not available for the average consumer. So when your insurance guy says “oh yeah, I own this policy” it’s probably true…but the value proposition is very different for each of you. Beyond this particular case, I’m not a fan of whole life in just about any situation. Go figure then that half the people who attend the Million Dollar Round Table conferences generally sell a lot of this crap. Take from that what you will…
Underfunded whole life insurance may have only performed 4%. However, designed with additional premiums they have actually earned closer to 7% in the 30 years from 1984-2013. Even during the period between 1977 and 1982 where interest rates shot through the roof and bond holders didn’t recapture their losses for several years, over funder whole life returned 35% after the cost of insurance is considered.
Insurance broker became a regulated term under the Insurance Brokers (Registration) Act 1977 which was designed to thwart the bogus practices of firms holding themselves as brokers but in fact acting as representative of one or more favoured insurance companies. The term now has no legal definition following the repeal of the 1977 Act. The sale of general insurance was regulated by the Financial Services Authority from 14 January 2005 until 31 March 2013 and by the Financial Conduct Authority since 1 April 2013. Any person or firm authorized by the Authority can now call themselves an insurance broker.
Death benefits are generally received income tax-free by your beneficiaries. In the case of permanent life insurance policies, cash values accumulate on an income tax-deferred basis. That means you would not have to pay income tax on any of the policy’s earnings as long as the policy remains in effect. In addition, most policy loans and withdrawals are not taxable (although withdrawals and loans will reduce the cash value and death benefit).2
Often a commercial insured's liability insurance program consists of several layers. The first layer of insurance generally consists of primary insurance, which provides first dollar indemnity for judgments and settlements up to the limits of liability of the primary policy. Generally, primary insurance is subject to a deductible and obligates the insured to defend the insured against lawsuits, which is normally accomplished by assigning counsel to defend the insured. In many instances, a commercial insured may elect to self-insure. Above the primary insurance or self-insured retention, the insured may have one or more layers of excess insurance to provide coverage additional limits of indemnity protection. There are a variety of types of excess insurance, including "stand-alone" excess policies (policies that contain their own terms, conditions, and exclusions), "follow form" excess insurance (policies that follow the terms of the underlying policy except as specifically provided), and "umbrella" insurance policies (excess insurance that in some circumstances could provide coverage that is broader than the underlying insurance).
Progressive Home Advantage® policies are placed through Progressive Specialty Insurance Agency, Inc. with affiliated and third-party insurers who are solely responsible for claims, and pay PSIA commission for policies sold. Prices, coverages, privacy policies, and PSIA's commission vary among these insurers. How you buy (phone, online, mobile, or independent agent/broker) determines which insurers are available to you. Click here for a list of the insurers or contact us for more information about PSIA's commission. Discounts not available in all states and situations.
In times of need, we stand by you. We’re here to make sure you have the right coverage for your needs. And should an accident occur, our claims service will be there to help when you need it most. If you’re comparing our quote or policy to another insurer, be sure to understand the value of the coverage you’re considering. Compare apples to apples. Make sure driver and vehicle information are the same. Our auto policy is the only one backed by an On Your Side promise.
It is wise to note that as a business owner or individual that the cash values of WLI can serve as collateral (via assignment) when otherwise collateral may not be available. This can help greatly with loan rates that may be needed in the future for a variety of reasons. Banks realize they are protected against insolvency, liens, and lawsuits (another benefit of WLI) ( yes trusts can do this but why pay 8-15k in legal fees to structure them).
“In the policy that was attempted to be sold to me, the “guaranteed return” was stated as 4%. But when I actually ran the numbers, using their own growth chart for the guaranteed portion of my cash value, after 40 years the annual return only amounted to 0.74%. There are a number of explanations for this difference, including fees and the way in which the interest rate is applied.”
Finally, IF you decide that these are not the right policies for you, it’s generally better to cancel sooner rather than later in order to minimize the amount of premiums you pay. You should even look at your policy to see whether you’re still within an initial period where you could get all your payments back. Again, I’m not saying that you should cancel, just that if you do want to cancel it’s better to act quickly.
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Many people have a 401(k) or other retirement plan with their employer. Just about everyone has the option of contributing to an IRA. Then there are regular taxable accounts. All of these options allow you to choose your investments, control your costs (though employer plans will be more limited here), diversify, and avoid the downsides of whole life insurance we’ve just gone over.
Boomer Benefits’ office is easy to find on Google places. We are staffed Monday – Friday and some Saturdays so that you can reach us by phone, email, or in person when you need help. Some agents who sell Medicare products work by themselves out of their homes. Unfortunately, that means that whenever the agent is in a meeting with another client, your call goes straight to voicemail. Who knows how long you will wait for a return call? It’s in your best interest to work with a bigger Medicare broker that has numerous representative standing by to take your call. Our agents will know you and care about you.
Some communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts.
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I bought a whole life insurance policy for my daughter when she was 4! What a mistake to make! Now that the policy is 21 years old, I am undecided whether to continue paying the annual premium or surrender the policy.I have paid $25,126 over the years, and will walk away with $36,250 if I surrender it now. The policy covers has a $100,000 coverage and the annual premium is now $1179. I would appreciate your advice!
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Insurance can influence the probability of losses through moral hazard, insurance fraud, and preventive steps by the insurance company. Insurance scholars have typically used moral hazard to refer to the increased loss due to unintentional carelessness and insurance fraud to refer to increased risk due to intentional carelessness or indifference. Insurers attempt to address carelessness through inspections, policy provisions requiring certain types of maintenance, and possible discounts for loss mitigation efforts. While in theory insurers could encourage investment in loss reduction, some commentators have argued that in practice insurers had historically not aggressively pursued loss control measures—particularly to prevent disaster losses such as hurricanes—because of concerns over rate reductions and legal battles. However, since about 1996 insurers have begun to take a more active role in loss mitigation, such as through building codes.