Life Insurance Reviews

Given the investment advantage of the personal pension plan, it is odd at first sight that many self-employed people continue to purchase endowment policies. Other than the lack of knowledge of the benefits of such a plan there is one possible reason for this, which is that pension plans cannot be used as security for loans. The benefits under a personal pension plan cannot be assigned to any other person; once the contributions have been paid, moreover, even the life insurance plan ­holder may have no access to them until retirement. Thus, although it is possible to stop paying premiums and to receive a reduced pension at retirement, it is not possible to surrender the policy. In most cases this factor will not weigh heavily against the benefits of the pension plan, but it should always be borne in mind.

A normal life insurance policy involves the payment of regular premiums by the policyholder in return for a final cash benefit on maturity or death. The annuity simply reverses this situation, in that the life insurance company guarantees, in return for a lump-sum payment, to pay a regular income to the annuitant until his or her death. On taking out an annuity, the annuitant therefore loses control of the capital invested.

The principle of annuities is simple enough, and even the British Government issued them until as recently as 1962. From the mortality tables the company’s actuary knows the average proportion of people of a given age who will die each year, and from this, together with the rate of interest obtainable on investments, the annual sum that can be paid to each annuitant can be worked out. Some annuitants will die early, soon after paying their lump sum, and the office will make a “profit”; some will live for more or less the average period the actuary has estimated and receive all the capital back that they originally paid over (plus interest); while others still will live to a very ripe old age and the office will make a “loss”.

It is true that the more risky policy of limiting one’s investment to a “specialist” fund (for example, one investing only in Far Eastern stock markets or only in gold-mining shares) can also produce higher profits just because of the greater volatility of these sectors of the overall investment market. So the problem of selection finally comes down to the question of how much risk the individual is prepared to take.

Normally, the answer is determined by two factors (apart from the temperament of the individual) - the resources available and the time period involved. If you have only a small amount of money to devote to saving, then you should be wary of putting it into the higher-risk alternatives. If you have more, then you can afford to split your saving between the plan involving lower risk and another involving higher.

In general, therefore, the type of fund best suited for those with limited resources and no wish to take unnecessary risks is the managed fund. Here, the managers will aim to adjust the proportions of the fund invested in the three main sectors (property, shares, fixed-interest securities) to minimise losses in falling markets and maximise gains in rising ones. Over any short period, through this spreading of assets, they are likely to do less well than at least one of the three sectors might do individually, but over a longer period this should be outweighed by the ability to mitigate the poor performance of one of the individual sectors over other periods.

For those interested in being more venturesome, the next best choice is an equity fund or unit trust with a broad spread of holdings in UK companies. A point worth noting is that funds aiming to produce high capital growth normally invest in low-yielding shares and therefore generate a low annual income (this applies especially to unit trusts investing in overseas stock markets). Over the long period of a life insurance policy (minimum l0 years) the reinvestment of income can account for a large proportion of growth.

The actual form of the life insurance policy has not changed a great deal over the years. The policy is a contract between the policyholder and the company, made on the basis of the proposal form in which the prospective policyholder has to give such information as the company may require (accuracy is essential here if the contract is to be valid). In return for the payment of the specified premiums, the company guarantees to pay the sum assured plus, was relevant, bonuses, to the policyholder at the specified maturity date or on the policyholder’s earlier death.

The difference between life insurance and general (motor, household and other risks) insurance is that, having made the contract, having made the contract, the company is bounded by it and cannot refuse to accept future premiums if, say, the policyholder’s  health deteriorates. Life insurance is a long term contract, whereas general insurance is renewable at the option of both parties and the premium rate may be adjusted as the insurer thinks fit.

There are some legal limits on the faculty to be insured. One may insure the life of another person only if he has a financial interest in that person death or survival. This condition used to be applied very strictly, to the extent that a man might not, for example, insure the life of his father. However, this rule is now more liberally interpreted and some offices would allow a man to insure the life of his father to provide for the CCT that would become payable on his father’s death.

Unless some similar financial interest is established, a parent may not insure the life of a child (except under certain industrial assurance policies to provide for funeral expenses), but a lender may insure the life of his debtor, since he stands to suffer a loss if the debtor dies before repaying the loan. One relatively modern innovation in life insurance is the appearance of policies designed with women. The bulk of traditional life insurance policies were designed with the male breadwinner in mind.

Planning to get life insurance can vary in complexity. Planning wisely how much life insurance you want is significant.

The life-cycle model of consumption and savings is a new approach that is based on the life-cycle model which was developed in the 1950s and 1960s. This model assumes that an insured’s goals are to secure the living standards of the household and ensure comparable living standards for his or her survivors. In the economic approach, spending targets are derived by deriving how much the household can afford to consume in the present and still be able to preserve the same living standard in the future. Although spending targets under Capital Needs Analysis approach can be adjusted to approximate those derived under the economic approach, there are practical limits to doing so. This is particularly true in the case of households experiencing changing demographics or even facing borrowing constraints.

This approach is based on the fundamental goal of saving money and having life insurance which stems from the desire to avoid major disruptions in a household’s standard of living. This approach uses advanced mathematical techniques to calculate the savings and life insurance needed to balance consumption in the present with consuming in the future and to preserve the household’s living standard for survivors. This method describes how life insurance holdings are adjusted as life insurance needs change. All economic resources, tax liabilities and benefits- social security benefits and survivor benefits, etc are taken into account in the calculation, along with family demographics, tax-deferred savings, housing plans, and special expenditures among others.

This type of modeling includes contingent planning, which recognizes that survivors may have special needs and different incomes. Key variables, for instance, age of retirement, social security benefits and tax-deferred asset withdrawals, for example- can be changed to determine how these factors alter the maximum sustainable living standard. Life insurance recognizes recommendations and is substantially different from those of the conventional methods. This type of approach would allow the agent or representative to better determine the extent of life insurance.

People who like Agatha Christie novels - or those who watch the Matlock tv series - know that a person’s body contains generally nine dollars eighty worth of chemicals and useful organic substances. At the other end of the economic scale, a person’s life value is a calculation of what how much we are valuable as persons, and it takes into account our degrees, qualities, and what could we earn. The calculation of a person’s life is mostly made in sad circumstances, death lawsuits for example, where a wife claims for indemnification for the loss of a husband who brings money into the house. For middle aged persons earning one hundred thousand dollars, the amount it is worth in the future can be easily calculated to be in the three to five million range when inflation and normal increases in salary in the future are calculated approximately. In the end, it is the capital amount that counts to replace the persons’ earnings.

In the business of life insurance, replacement of income is used mostly to represent a person’s loss through death, and is generally the first reason why somebody might buy life insurance. It is most of the time acquired out of love. If the household consists of one or two income earners, it is most improbable that the household can survive without income earners. Most people do not have the leisure to put money aside in case a problem might arise. Post people have mortgages, medical expenses, food expenses, and other expenses for insurances such as fire, flood or disability. Given that most household are very short of cash when the end of the month crops up, the consequences of a family losing its main income earner can be catastrophic and sometimes very stressful.

Life Insurance should be high on peoples priority list if you have a spouse, children, mortgage or business. You can choose the amount you want to be insured for and the length of time depending on your individual needs. You can have a single policy or a joint policy. When an insurance policy is taken out for one person all the insurance is on a single life basis. For two people it can be a joint policy where it covers both lives and would normally pay out event of the life that dies first. If the policy was to cover your mortgage the amount insured needs to cover you’re the total amount of your mortgage, loss of income and any outstanding liabilities. There is no cash value to these protection plans and if the premium stops at any time the plan is cancelled.

Once you know the amount of cover you require the premium will depend on a number of factors, age, sex, medical history and whether you smoke or not, height and weight ratios, family history or hazardous pursuits. The insurance company may send you for a medical with your doctor. In some cases the premium will be increased depending on the above factors and in some circumstances cover may be refused.

You must be over 18 years of age at the time of taking out the protection policy. Your main home address is in the United Kingdom and you have UK bank account. A foreign national must have lived in the United Kingdom for over a year.

There are a few different types of life insurance, all of which suit different circumstances that people maybe in. If you decided that you want to take a reviewable contract then this is generally more affordable when the cover commences. When the policy is reviewed a number of different alternatives to the cover could occur. The premium could go up a little bit, it could remain exactly the same as what it was previously or it could also go down a little bit.

You may imagine that the premiums would be related to your current health, occupation or lifestyle, but once the policy has been underwritten no further medical or underwriting questions can be asked. If the payments are going to change then the majority or providers will inform you in writing immediately.

The opposite of reviewable premiums are guaranteed, these are as the words say guaranteed and they will not change during the length of the cover unless a change is made. Guaranteed remember will be more expensive than reviewable premiums when the cover starts.