Whole or Term Life Insurance?

Term life insurance: There really is no debate about whole life insurance vs term insurance. They are used for different purposes. Term life insurance covers a person against death for a specific term, for example, until children are grown, or until college is paid for, or until retirement. If no claim is made against the term life insurance policy, you don't receive any benefits after the policy expires, just like auto or homeowners insurance.

Whole life insurance, also called permanent insurance, lasts your whole life; it does not expire as long as you pay the premiums. It provides coverage similar to term life insurance, but it also provides an investment vehicle. A portion of the premium goes for the whole life insurance, while the rest goes into an investment account. This account can be an interest bearing account or a variable (stocks) investment account.

Which is better (our opinion)? A young family with large financial obligations is usually better off with a term life insurance policy. The substantially lower premiums enable them to purchase sufficient coverage to protect against loss of income. Any discretionary investment funds can be placed in other vehicles (mutual funds, money market accounts, etc.) that are likely to generate returns similar to or better than a life insurance policy. Whole life insurance is often purchased by people for tax and estate planning purposes. Recently, some advisors have started recommending life insurance as an investment. You should consult with your financial advisor.

About Budget Life

The following term life insurance companies head up the Budget Life Top 15: Ohio National Life Assurance Corporation, Transamerica Life Insurance Company, Savings Bank Life Insurance Company of MA, Western Reserve Life Insurance Company of OH, AXA Equitable Life Insurance Company, Genworth Life and Annuity Insurance Company. We use a third party database of the best term life insurance companies to rank in terms of lowest life insurance rates. We can also provide whole and term life insurance quotes online.

Term life insurance rates have been dropping steadily in response to increased competition. Term life insurance is a commodity, and improved access to online life insurance quotes information, such as at this Web site, is making it even more so. Whether to use life insurance as an investment is a separate decision; but for the lowest life insurance cost, which is term insurance, why pay more than you have to?

Budget Life also lets you obtain term life insurance quotes from independent agents. A life insurance agent who uses our database can ensure that you receive the lowest life insurance rates, rather than just a quote for one life insurance company. Term life insurance quotes are commodities, so be sure to get the best term life insurance rate. Some can also provide life insurance underwriting for impaired risk life insurance.

To some, life insurance seems like an unnecessary expense. But if you have people who depend on you -- and your income -- you need it.

The purpose of life insurance is to take care of your dependents. As such, it's an important part of your financial plan. How much life insurance do you need? Should you buy whole life or term? Is there a time when you don't need life insurance? This chapter will explain every aspect of a life insurance policy so you will be an educated consumer when you go shopping for one.

Major types of life insurance

If insurance terms leave you dazed and confused, here's a quick cheat sheet for four major types of policies. Keep in mind that definitions may vary slightly from company to company and from state to state:

Term insurance -- The simplest form of insurance. You purchase coverage for a specific price for a specified period. If you die during that time, your beneficiary receives the value of the policy. There is no investment component.

Whole life -- Similar to term, but you purchase the policy to cover your "whole life" not just a set period. Premiums remain level throughout the life of the policy, and the company invests at least a portion of your premiums. Some firms share investment proceeds with policyholders in the form of a dividend. Many companies will offer "a relatively low guaranteed rate of return," but in reality pay at a rate in excess of the guarantee.

Universal life -- You decide how much you want to put in over and above a minimum premium. The company chooses the investment vehicle, which is generally restricted to bonds and mortgages. The investment and the returns go into a cash-value account, which you can use against premiums or allow to build. With some policies, sometimes called Type I or Type A, the cash account goes toward the face value of the policy on the death of the policyholder. With a second variety, sometimes called Type II or Type B, the beneficiary receives the face value of the policy plus all or most of the cash account. While Type II is meant to provide a partial hedge against inflation, it demands higher premiums as you get older than Type I.

A variation of a universal policy, often called universal variable life, allows policyholders to choose investment vehicles.

Variable life -- With a variable policy, there is usually a wider selection of investment products, including stock funds. As with a universal policy, returns on investments can offset the cost of premiums or build in the account. And depending on the type of policy, the beneficiaries will either receive the face value of the policy or the face value plus all or part of the cash account.

Inflation and deflation

he main differences between inflation and deflation.

Introduction

Inflation is commonly understood as a situation of substantial and rapid general increase in the level of prices and consequent deterioration in the value of money over a period of time. Different economists have defined inflation differently. We may, thus, enlist a few important definitions as under which would give us a comprehensive idea about this intricate problem. Harry Johnson defines inflation as a sustained rise in prices. Crowther, similarly, defines inflation as "a state in which the value of money is falling, i.e., prices are rising".

Deflation is just the opposite of inflation. It is essentially a matter of falling prices. Deflation, according to Prof. Paul Einzig, "is a state of disequilibrium in which a contraction of purchasing power tends to cause, or is the effect of, a declining of the price level". Deflation is the sate of falling prices when the output of work by productive agents increases relatively to money income. Deflation arises when the total expenditure of the community is not equal to the value of output at existing prices. Consequently, the value of money goes up, and prices fall. In short, deflation is a condition of falling prices, accompanied by a decreasing level of employment, output and income.

Inflation versus Deflation

Both Inflation and Deflation are socially bad, but inflation may be considered to be the lesser of the two evils. Inflation is unjust in its effects on the following counts:

1. Inflation redistributes income in the favour of the rich and the profiteer class at the cost of the poor masses - the wage-earners and consumers.

2. Through its redistributive effects, inflation increases the inequality of income in the community by widening the gulf between higher income groups and lower income groups. The rich become richer and the poor become poorer during inflation.

3. Inflation is regressive in effect in the sense that it hits hard those who are already weak and cannot protect themselves. It is specially the middle class which suffers most due to inflation.

4. Inflation is unjust because it affects different classes of people in society in different ways and different degrees .if inflation were to affect everyone in the society in exactly the same manner and to the same degree, it would not alter the economic and social relationships in the community. But inflation takes away wealth from some people and transfers to others arbitrarily without taking into consideration the sound maxim of social equity.

5. Inflation is also unjust because it breaks public morale. From the point of view of social ethics, inflation is always demoralizing; it introduces the spirit of gambling. It promotes speculation, hoarding, and diverts business skill and efficiency from productive purposes to speculative purposes.

6. Inflation erodes real savings by deterioration in the value of money.

7. Inflation creates money illusion and generates artificial prosperity, which is not permanent.

On the other hand, Deflation is inexpedient and, therefore, not advisable. It is considered inexpedient for the following reasons;

1. Deflation means falling prices in general which adversely affect the marginal efficiency of capital. Consequently, investment volume tends to contract causing unemployment to increase.

2. Deflation paves the way for depression. In a depressionary phase, economic activity contracts, scale of production is curtailed, output shrinks, no new investment if forthcoming; on the contrary, investment is curtailed.

3. By reducing aggregate income, it also pauperizes every group in society. It inflicts on society the harsh punishment of mass unemployment. Volume of employment falls, money income of the community diminishes and, therefore, even though people's purchasing power is increased due to falling prices, they are unable to buy goods in the required quantity. Thus, aggregate demand falls, profit falls producers suffer heavy losses and curtail investment and output further, leading to a further decline in employment and income.

This clearly shows that through inflation is unjust, it is better than deflation. Prof. Keynes showed a preference for inflation, because it is the lesser of the two evils.

The following points bring out the fact that inflation is a lesser evil:

1. Inflation, though it redistributes income and wealth in the community in an unjust manner, does not reduce the national income of the community. Deflation, on the other hand, reduces the national income of the community and pauperizes society as a whole.

2. Deflation increases the level of unemployment in the economy, whereas inflation at least implies that all factors are employed in some way or another. Inflation is a post-full employment phenomenon; deflation is an under-employment phenomenon aggravating the problem of unemployment.

3. It is easy to control inflation by a clear money policy, coordinated by appropriate fiscal policy, but it is difficult to recover from deflation. Once a deflationary tendency starts, it increases business pessimism, the marginal efficiency of capital diminishes, and investment is contracted, and ultimately a severe depression sets in. Monetary policy becomes helpless here, and no amount of increase in the money supply can revive the price level and business expectations or marginal efficiency or capital in the economy during depression. On the other hand, an inflationary spiral can be reflated by controlling credit and money supply.

4. Prof. Keynes felt that a mild inflation could stimulate economic development. In his opinion, poverty in the midst of plenty can be overcome by raising the price level through the injection of more purchasing power by way of deficit financing of public investment programs.

Thus most economists including Prof. Keynes preferred inflation to deflation. But, at the same time Prof. Keynes recognized the dangers of inflation and suggests that it should not go out of control, since hyperinflation can be extremely bad.

Information on long term care insurance

Long-term care insurance: who needs it, when and why. Learn how it can forestall financial disaster, and what to seek in coverage.

Long term care insurance is a hot topic today, and it needs to be a thoughtful concern of those who are considering its purchase. The cost of any type of extended care rises every year and we know only too well that it will continue to do so.

Some people do not need to think about insuring themselves against a prolonged need for daily assistance. The very wealthy, who in 2001 can afford to pay $30,000-80,000 per year for care, should read no farther. At the other end of the spectrum, those with few assets and limited incomes will qualify for Medicaid very quickly and don’t require insurance either. Singles don’t have the need to protect their assets for a spouse and may opt to take their chances without insurance.

But for those people in the middle, with nominal assets, the shadow of long-term care darkens the horizon. To illustrate the point, Bob and Mary were both in their 80’s and their combined estate was in excess of a million dollars. Much of the estate was not liquid—a lot was real estate, and not the kind that is easily marketed.

Bob, who was the younger of the two, suffered a stroke that left him unable to care for himself. Mary, a slight little lady, couldn’t care for him at home. The answer was a nursing home and the cost was in excess of $3,000 per month. (These are central Virginia amounts—that figure could be more than double in high cost areas.) Additionally, the monthly charge for the home care doesn’t include prescriptions, supplies or any medical procedures not performed in the nursing home.

Because of the value of their assets, Bob and Mary could not qualify for Medicaid. The monthly income for the two was low—social security and a small pension. Mary sold the farm equipment, one rental house and some land. However, the house was mortgaged and the equipment went at fire sale prices. The rental properties operated at negative cash flow, and Mary had those expenses in addition to Bob’s care.

Fortunately, there was timber that sold and brought in needed cash—it provided money for the nursing home for less than three years. That was a true case of money growing on trees, but most of us don’t have that kind of a resource. Bob died last spring although his day-to-day health was such he could have lived much longer. Mary commented, “Bob and his money ran out at the same time.”

At a time when Mary needed all her inner resources to cope with the illness of her spouse, she was called upon to juggle finances to simply stay afloat. Hearing the story should cause many to perform in-depth analyses of their financial situations. Not everyone has a million-dollar estate but they do have could easily be shrunk to nothing if long-term care is required for any extended period.

Another common factor in today’s society is for a couple to have children by prior marriages. This can further complicate the situation, especially if the estate value is skewed to one of the partners. The next generation may resent the assets of one being depleted to care for the other.

In spite of legislation that attempted to prohibit the advice, many professionals still advise clients to “spend down” their assets so that Medicaid will be available should long-term care be required. This is generally accomplished by gifting and can trigger gift taxes if the assets are considerable. In addition, if gifting within the family you can have the age-old problem of siblings who are resentful or who spend the gifts immediately even though it might have been the donor’s intention that the money be set aside for later care.

For those who opt for insurance, it’s expensive. Even in areas where the rates for healthcare are relatively low, the policies required to cover the expenses have high premiums. In high-cost areas, more coverage and higher expenses would be necessary. On the other hand, the insurance does more than guarantee care—it can give peace of mind and the knowledge that assets may be used for our enjoyment now, not hoarded against the day the dark clouds produce rain.

Whatever the individual circumstances, anyone who’s considering long-term care insurance should shop around; become familiar with the coverage offered by various policies and know what current nursing home or in-home care costs in your community. Coverage for in-home care should be included as the trend for leaving the elderly in their homes as long as possible is on the rise. There are various features in all the policies that protect the insured against inflation and those should also be thoroughly understood.

Shop till you drop is highly recommended here. This is insurance against a catastrophe, not for one. Hopefully, you’ll never need it, but if you are among those that need it for peace of mind and asset protection, shop now..

Types of life insurance

Description of several types of life insurance products including Single Premium Life, Term Life, Whole Life, Universal Life, and Variable Life policies

There are many types of life insurance products available to meet the differing needs of many individuals and families. It is often difficult to understand what kind of protection each policy offers. Learn more about the various types of life insurance products and to clarify the differences between these policies. In order to evaluate which life insurance policy will meet your particular needs, it is important to discuss the matter with an agent or advisor. There are numerous factors to evaluate before purchasing life insurance coverage. Some of the many things you should consider include your age, marital status, number and ages of your children, medical history, earning capability, debt ratio, and anticipated financial needs. Single Premium Life insurance requires the insured to pay a one-time premium to receive a fully paid life insurance policy. There is usually a minimum death benefit that depends on the individual insured and the amount of the lump sum payment received for the policy. Normally, the full payment goes into a cash value account and the interest rate is applied to the cash value account annually. The interest rate may fluctuate from year to year but there is usually a guaranteed minimum interest rate amount. The insurance company typically charges an annual fee, which covers mortality risks and administrative costs. This policy is usually looked at as a long-term policy since insurance companies typically charge a large amount on a Single Premium Life insurance policy if the insured takes money out during the first few years. The insured may take out a loan against this type of policy and usually the terms are favorable to the insured. Most insurance companies try to structure these policies to meet federal tax law requirements so that death benefits are free from income tax to the beneficiary. Term Life insurance provides a specific amount of life insurance coverage for a designated time period. Currently, the available policy lengths for Term Life insurance are one year, five years, ten years and fifteen years. If the insured person dies within the time frame in which the policy is in effect, the insurance company pays out the face value of the policy. If the insured person lives longer than the term of the policy, the policy expires and would pay nothing. Term Life insurance does not build any type of equity is often one of the least expensive types of insurance and is available in several forms. Term Life insurance is typically purchased as a means of temporary protection or when an individual can't afford the cost of other forms of Life insurance. Some people prefer to invest their own money elsewhere and feel they can obtain higher yields without having to use a Life insurance plan. There are Renewable and Non-Renewable Term Life policies. Both of these types are fairly simple and can be dealt with quickly. With Renewable Term Life, one automatically re-qualifies and is able to continue the existing policy when the original term is up. Non-Renewable simply means that when the policy expires the individual must take another physical and answer more health questions in order to re-qualify for a new policy. There are also Convertible and Non-Convertible Term Life policies available. With Convertible Term Life policies, the insured may switch his/her term policy into a permanent form of life insurance such as Whole Life, Universal Life or Variable Life. Non-Convertible simply means that one can't switch the policy to another form of life insurance. Level and Decreasing Term Life insurance are often more difficult to understand and determine which is appropriate for one's needs. The selection of one over the other is entirely dependent on the individual's personal financial conditions and needs. Level Term insurance provides a designated dollar amount of coverage for the entire period of the policy. For example, a five-year Level Term policy for $100,000 will pay $100,000 at any time the insured dies within the policy's effective period. With Decreasing Term, the sum of money that will be paid upon the death of the insured is reduced gradually over the policy period. Less would be paid out as the policy ages. One reason to select Decreasing Term insurance may be that one's financial needs may be decreasing during the policy period. For example, if you were to purchase a 10-year Decreasing Term policy and were anticipating having your house paid off or your children out of college, you may not feel that you need as much Life insurance in the future as you do today. Whole Life insurance provides coverage for the entire life of the person insured, regardless of how long you have the policy or how much has been collected in premium payments that keep the policy in force. Premiums may be paid throughout the insured's life or for a portion of his/her life (for example, 10 years or 20 years). Also, premiums may be paid in lump sums when the policy is taken out. The cash value portion of a Whole Life insurance policy belongs to the insured and may be taken out as policy loans or when the policy is cashed in. With Whole Life insurance, part of the premium payment goes toward the insurance portion of the policy, part of the premium payment goes toward administrative expenses and the remainder goes toward the investment or cash portion of the policy. The investment portion of the policy usually consists of stocks, bonds and/or mutual funds. Interest drawn on the investment portion of a Whole Life policy is usually tax-free until it is withdrawn. Universal Life insurance is a variation of Whole Life insurance. The difference is that with Universal Life, the term life portion of the policy is separate from the investment or cash portion of the policy. Also, with Universal Life policies, the investment portion of the policy is invested in money market funds as opposed to stocks, bonds and mutual funds. The cash value portion of the policy is an accumulation fund that investment interest is credited to and death benefits are paid from. With Universal Life insurance, the insured can vary the amount of his/her annual death benefit and annual premium payments. Insured people may also make partial surrenders of the policy and/or take policy loans against the cash value of the policy. A partial surrender is when an insured withdraws some of the funds that have accumulated in the investment or cash portion of the policy. There are two types of Universal Life insurance. Under Option A, there is a set death benefit for the insured regardless of premiums paid to keep the policy in force. Under Option B, the death benefit for insured is equal to a set amount plus the current cash value of the policy at the time of the insured's death. Option B usually pays out more than Option A following the death of an insured. Variable Life insurance is also a form of Whole Life insurance. As with Whole Life and Universal Life insurance, part of the premium payment goes toward the term life portion of the policy, part to administrative expenses and part to the investment or cash value portion of the policy. There is a major difference between the investment portion of Variable Life and that of other forms of life insurance. With Variable Life, the insured person (you) is able to choose how to invest the funds in the investment portion of the policy. The insured may select from an array of investments such as stocks, bonds and mutual funds as long as they are within the insurance companies portfolio. Usually, there are a few times during the year that the insured person may modify his/her investment selections. Variable Life insurance is generally more expensive than other forms of Life insurance. Death benefits may fluctuate up or down depending on investment performance however, there is usually a minimum level for benefits so they will not drop below a certain level.