Life Insurance Isn't Just for the Young

Many people believe that when they reach retirement age, the need for life insurance diminishes. After all, once the kids have left home, the mortgage is paid off and Social Security and pension plans start kicking in, why pay for a life insurance benefit that’s not needed? The fact is, life insurance isn’t just for young families anymore. New economic realities mean a growing number of older Americans may benefit from incorporating life insurance into their retirement strategy.

Here are three reasons today’s retirees or pre-retirees should think twice before cutting back or eliminating their life insurance coverage.

Tougher Financial Times

Americans retiring today face a difficult economic landscape and are retiring with more debt. Nearly 45% of Americans enter retirement with a mortgage, and one in three owe $50,000 or more.1 These statistics are bound to climb, considering 30% of 45‐ to 54‐year‐old boomers currently owe more on their mortgages than their homes are worth.2 Life insurance can help ensure that mortgage payments continue for a surviving spouse, or help beneficiaries pay off an unwelcome debt.

Debt and other factors also are leading more workers to anticipate delaying retirement or working for pay in retirement. According to the Employee Benefit Research Institute, the percentage of workers planning to work for pay in retirement now stands at 74%.3 Almost all retirees who worked in retirement in 2010 name at least one financial reason for doing so, including a decrease in the value of their savings or investments, difficulty making ends meet, or keeping health insurance or other benefits. Another indicator of tight economic times: six in 10 boomers are still providing financial support to their adult children, handing over $3,675 per year, on average.4 Life insurance can provide a financial safety net for surviving spouses who depended on income from a still-working spouse, or it may give adult children the boost they need to become financially independent.

American Life Insurance-one of the Most Trusted Company

American Life Insurance the most trusted company which has a reputation of about 87 years. This company is one of the globally recognized life insurance companies and it has a number of branches all over the world which has a vast customer line following. American Life Insurance gives various tax benefits to all its insurance policy holders and it also takes care of all your life insurance related policies like retirement insurance policy, wealth management policy, medical insurance, health insurance etc.

Life insurance basic terms as you know is an important factor in every person's life and when it comes to life insurance age is not the main criteria when it comes to get your life insured. American Life Insurance also known as AIG insurance company and majority of Americans has insured themselves with this life insurance company. The market value of this company is high and you can find the companies ratings in the financial books due to their vast financial transactions with other financial institutes.

There are two major life insurance policies that this AIG Insurance Company deals with i.e. the Term Life Insurance and Whole Life Insurance. In case of Term Life Insurance the policy taken is for a short period of time and Whole Life Insurance is where you get yourself insured for your whole life.

AIG insurance company is one such life insurance company that charters to the needs of the common person. One of the benefits of getting insured in this life insurance company is that you reap a rich harvest of life insurance benefits on all your life insurance policies which no other life insurance company provides you as this company provides you with the benefits when you are still alive.

This life insurance company in order to increase its relationship with their vast flowing customer's have started life insurance online services which has made it easy and convenient for them to get themselves and their family members insured staying within the very comforts of their own house. AIG Insurance is one of the most sought of companies and it is a tough competitor to other life insurance companies.

Long-term care, life insurance, annuities part of new hybrid policies

Have you neglected planning for long-term care often uncovered by Medicare or health insurance? If so, you have more choices these days.

Straight long-term care insurance could rise in price just when you need it or perhaps, never get used. However, you might be eligible for a life insurance/long-term care policy or a long-term care annuity.

In fact, Palm Beach insurance broker Peter Bono says he is converting clients with certain annuities into these newer offerings. They are attractive, he says, for someone whose annuity had large taxable gains. Reason: Thanks to newer regulations, you generally can tap these new hybrid policies, provided that contracts contain appropriate language, tax-free for long-term care.

In Florida, expect to pay a median of $83,950 annually for a private room in a nursing home, $41,184 for a home health aide; or $31,950 for a private, one-bedroom assisted living facility, according to Genworth Financial.

So how do you know which policy to select?

With a long-term care rider on cash value life insurance, you generally can choose a long-term care benefit that pays benefits for a specific term. Whatever is unused passes to your beneficiary when you die.

With a tax-deferred fixed annuity, you may invest a lump sum with the life insurance company. A certain amount of the cash value may be tapped for long-term care benefits. If you don’t use those benefits, you can either withdraw your funds or obtain periodic income for life.

Benefits on either of these are likely not as comprehensive as straight long-term care insurance. However, experts say the long-term care benefits are apt to be more comprehensive on hybrid life insurance policies than on hybrid annuities.

On the other hand, if you have a pre-existing condition and can’t qualify for long-term care insurance, the underwriting for an annuity/long-term care hybrid likely won’t be as tough, according to Bono.

Life insurance policies, coupled with either long-term care or chronic illness riders, account for 6 percent of the market, says LIMRA in Windsor, Conn. But annuity/long-term hybrids are newer. On an annuity, expect to give up 0.75 percent to 1.25 percent of your interest annually, depending on your age, for a long-term care rider, says Jesse Slome, executive director of the American Association for Long-term Care Insurance in Los Angeles. Life insurance/long-term care costs are priced into your policy premiums and/or benefits.

In either case, you could lose if you withdraw early. Annuities may have both an IRS penalty if you withdraw before age 59½, as well as surrender charges if you withdraw early — often within the first seven years. On a life insurance hybrid, expect at the very least, to lose earned interest upon early withdrawal.

These programs can be attractive if you have lazy money — say $400,000 to $500,000 sitting in a bank account, Slome says. “What you have to do is put in enough now so that in 10, 15 or 20 years, you have meaningful coverage.”

Long-term care life insurance and annuity hybrids are complex, and the benefits may not be enough to fund your care. Inflation may erode the buying power of your long-term care benefit. Consult with your tax adviser. Earnings on your annuity, at least, may be taxed if you don’t use the long-term care benefit. And always check the financial strength of the insurance company you’re considering. The strongest are rated “A plus plus” by A.M. Best.

Let's dispel those life insurance myths

I grant you that life insurance can be complicated, even mystifying. Some current and potential policy owners do their homework and get up to speed at least part of the way.

Others do not. Unfortunately, in too many cases the latter group draws uninformed conclusions about a myriad of life-insurance topics. The more common errors are often widely held. Let's refer to these as life insurance myths, and let's dispel some now.

Myth: You can haggle your way to a better deal.

Reality: There is no such thing in life insurance.

The life-insurance agent represents the insurer and offers what he or she is authorized by the insurer to sell. The provisions of the insurance policy and the price charged (the premium) are set by the insurance company. The agent has no authority to change the price. So, while one can dicker for cars, houses and flea-market items, there is no use in trying to haggle with life insurance.

In fact, life insurance companies have to file their policies and premiums with state regulators. And, for applicants who are similar in terms of age, sex and medical condition, the premium has to be the same. The insurer cannot discriminate in favor of one or another applicant, even if the insurer does a boatload of business with that applicant's agent.

Myth: Insurance is cheaper if bought online.

Reality: There is no Internet discount.

Again, because of the prohibition against discrimination, the policies and premiums offered online are the same as a local agent can offer if licensed with the same insurer. The only difference is that without the agent you do not get expert advice and ongoing, personalized service.

So, while the buyer may be eager to go online to avoid a local agent in order to avoid paying a commission as part of the premium, in fact the commission is already built into the online premium. The insurer simply does not pay commission for an online sale but instead increases its own profits. In the meantime, the buyer has foregone the expertise and guidance of the local agent in favor of an online formula calculation of his or her insurance needs.

The same flaw can be found in the purchase of life insurance from an 800 number. The stranger on the other end does not know the buyer and may have had training for all of two weeks before answering the phone. Maybe more. But the point is that the buyer does not know if the voice really knows his stuff or is just winging it. And the two will probably never speak to each other again.

Myth: You're borrowing your "own money" when borrowing against the cash value of life insurance.

Reality: The cash value belongs to the insurer, is held for only your benefit, and is used as part of the reserve to keep your future policy premiums moderate and to pay the future death benefit. While the borrowed cash is outstanding, the insurer cannot earn sufficient investment return to reach the targeted amount for the death benefit. That's why you're charged interest on the loan; the insurer has to make up for that loss of investment return.

Such life-insurance myths abound. Asking questions of well-trained, seasoned agents will keep you well-informed and less susceptible to misunderstandings.

Buying a property is the top trigger for taking out protection such as life insurance

Getting on the property ladder is the top trigger for clients to take out protection, according to a survey of IFAs .

Scottish Provident's Financial Safety Net report questioned over 900 intermediaries and revealed that 92 per cent of IFAs said purchasing property was a major reason for taking out a new protection policy. The survey also found that having children, at 80 per cent, was the second most common trigger, while almost 57 per cent (three in five) say it is because their client simply wants peace of mind about the future.

Three quarters of IFAs (76 per cent) state life insurance is the most common policy clients ask about without being prompted, with just 10 per cent saying it was unemployment benefit, 9 per cent critical illness and only 5 per cent income protection .

Susan Barclay, head of marketing at Scottish Provident, said: "The research confirms that IFAs' clients are mainly prompted to take out protection products when they experience huge life changes such as buying a property or having children."