Life Insurance and Your Expectations

October 29, 2010

Is your cash value life insurance policy living up to expectations? Many whole life and universal life policies that were purchased in the 1980’s and early 1990’s were purchased with an underlying interest assumption that was significantly higher than it is today. At that time, insurance carriers were crediting policies with record high interest payments. Today, many of those same carriers are paying interest at record lows. All else being equal, a policy can’t help but to under perform.
If you are actively following your policy you may realize the effects of under performance by noticing less than expected cash values, projected lapse dates well before life expectancy, or perhaps even strong suggestions from your carrier to increase premiums.
Many life insurance policies that are being written today take into account recent mortality tables, maturity dates that extend beyond age 100, and much more robust guarantees. As a result, these new policies are often times a good alternative to a policy that isn’t living up to your expectations.

Be sure to seek the advice of a professional as to whether or not it would make sense to change.
* Guarantees are based on the claims-paying ability of the issuing insurance company.


Why is Now a Good Time to Review Your Life Insurance Portfolio – Part 2

October 28, 2010

The Economy

Carriers that issue life insurance policies with guarantees similar to those mentioned above are reconsidering those products due to the heavy reserve requirements that come along with such a product. This is an important consideration for these carriers as they too are not immune to the significant downturn in the economy. Many carriers are considering removing these products from their product offerings or increasing costs.

Many of us have experienced a significant reduction in our net worth, some of which may have been intended for our children, grandchildren, or charity. Life insurance is an exceptional way to nearly and immediately replace that portion of your wealth and to assure that those you care about will still benefit in the ways you intended.

Why is Now a Good Time to Review Your Life Insurance Portfolio – Part 1

October 26, 2010

Product Pricing and Evolution
When it comes to pricing, life insurance products that are being issued today are in large part taking into account the 2001 CSO mortality table. The most widely used mortality table prior to the 2001 CSO mortality table was the 1980 CSO mortality table. As you can imagine, improvements in technology and medicine were significant over that 21 year period and as a result life insurance carriers assume clients will live longer and that assumption is built into lower annual pricing assumptions.

Additionally, thanks to improved technology and population mortality, life insurance carriers began issuing policies priced to age 120 and with language guaranteeing that as long as a certain premium is paid the carrier will guarantee coverage until the day the insured passes away, even if that turns out to be age 130, and even if there is $0 cash value in the policy. This is a significant departure from many of the life insurance policies in existence today.

Which Life Insurance is Right for You?

October 21, 2010

Life insurance needs vary depending upon your personal situation. From term insurance to the many permanent products that offer guarantees and cash accumulation, choosing the right product can be confusing. Below is a brief overview of the various types of insurance that are available to help guide you in choosing which Life insurance is appropriate for you. Ultimately, I recommend contacting a Life Insurance professional for more information and to help determine what form is best for you.

Term Insurance – Term life insurance is a form of temporary insurance that provides a lump-sum payout upon death for a state period of time. Since term insurance can be purchased in large amounts and for a relatively small out-of-pocket expense, it is most suitable for income replacement and short-range goals (i.e., to pay off a mortgage loan, to fund a child’s education, etc.)
Death Benefit: Fixed
Premium: Choice of level or increasing
Cash Value: No
Goal: Pure Protection
Whole Life – Whole Life is a form of permanent insurance that covers a client for as long as he or she lives and continues to make the required premium payment. Whole Life can be a good fit for achieving long-range goals, as the premiums remain the same for the life of the policy. In addition, cash values may provide money to help with temporary needs or emergencies that may arise.
Death Benefit: Fixed or Increasing
Premium: Fixed
Cash Value: Yes
Goal: Protection and Cash Value
Universal Life – Read the rest of this entry »

September is Life Insurance Awareness Month

October 19, 2010

No matter what stage of life you’re in—whether you’re currently working or already retired—life insurance may be an important component of your comprehensive financial plan. And, September is Life Insurance Awareness month: I encourage you to take a few moments to review your current life insurance policy to make sure it meets your needs.

Here is a link to some handy life insurance calculators. Visit

Mid-Term Market Moves – Part 2

October 14, 2010

Since World War II, there have been only two mid-term election years (1978 and 1994) during which U.S. equities did not experience a fourth-quarter rally. During both of these years the Federal Reserve (Fed) was aggressively hiking interest rates.
In 1978, the lead up to the Islamic Revolution resulted in strikes and unrest in Iran. In November 1978, a strike by Iranian oil workers reduced production from 6 million barrels per day to about 1.5 million barrels. At the same time, foreign oil workers fled the country. In the United States, inflation hit 9% in the fourth quarter with no signs of stopping as it approached double-digits. In response to soaring inflation pressures, the Fed was aggressively hiking rates during 1978 with 1.25% of hikes in the fourth quarter alone (the Fed ended the quarter with a policy rate of 10%).
In 1994, the S&P 500 turned in a flat fourth quarter on the heels of a shift in power to the Republicans. However, the performance was less of a reaction to the election results than to rising fears of recession amid the Federal Reserve’s aggressive hiking of short-term interest rates and a corresponding run-up in long-term interest rates (to nearly 8% from below 6% at the start of the year).
We expect the Fed will be on hold until next year, but past performance suggests a headwind for the stock market if the Fed does start to hike late this year.

Mid-Term Market Moves – Part 1

October 12, 2010

So far, the stock market performance in 2010 has tracked the typical pattern for U.S. stocks in mid-term election years, albeit with a bit more than the usual volatility. The path is usually range-bound and volatile, but capped by a strong fourth quarter rally averaging about 8%.

The market’s reaction to mid-term elections has nearly always been positive, even when the balance of power has shifted in one or both houses of Congress—as we expect this year with the Republicans having a good chance of taking the House. In four of the five years that mid-term elections resulted in a change in power (2006, when Democrats took the House and Senate; 2002, when Republicans took the Senate; 1986, when Democrats took the Senate; and 1954, when Democrats took the House), fourth-quarter returns were positive, much like those in mid-term election years when no change in power took place.