life insurance for children

Life Insurance as a Gift for Children

Permanent Life Insurance for Kids is a Smart Start in Life

Life insurance for children can serve several important needs, and is a great way to gift money in a way that creates value several ways at the same time.  First, it is life insurance, and while nobody expects a child to need this for a long time, getting a permanent policy on a child allows them to leverage their age to enjoy lower premiums, no special medical exam, and a high probability of getting an offer from an insurance company.

Insurance companies only offer permanent insurance on children when they are the sole insured of a policy. (Some policies on adults allow for children to be insured through a rider on the adult’s policy, until the child reaches a certain age; usually 18)  But when a child has a stand-alone policy, that policy is generally permanent, and in the case of a whole life policy, the premiums are guaranteed to never increase, thereby locking in a low premium because of the insured’s age.

Benefits of Permanent Life Insurance for Children and Kids

Along with life insurance benefit, there are several other benefits that can generally be included in a good whole life policy.

  1. Tax-free cash-value growth. Generally, a permanent life insurance policy has cash-value, and this cash-value can growth several ways; in the case of whole life, it grows on a guaranteed schedule, and if the policy is “participating”, it can grow additionally through dividend payments that may be paid by the issuing carrier. In the case of universal life, cash-value is credited differently than whole life; please read the general article about universal life in general and then about the three methods of cash-value crediting.
  2. Tax-free access to cash. A permanent policy, properly maintained, will generally experience cash-value growth over time. This growth can generally be accessed tax-free, even when more money is taken from the policy than was originally put in. A knowledgeable, experienced agent can explain how to decide the method of accessing cash-value, so you continue to have the policy in the future, operating the way you wish it to.
  3. Future increases without proof of insurability. Some carriers allow the insured, and/or the owner the ability to increase coverage, at certain milestones of the insured, without the need for the insured to prove they are insurable. This can be very valuable, especially in the case of genetic diseases, which may not manifest themselves until the child is older.
  4. Waiver of premium due to disability. This feature is typically a rider that can be applied for at the time of initial application that provides for the insurance company to pay the premiums for some period of time, (including up to the policy’s maturity date) should the insured become disabled and meet the criteria to activate the benefit.
  5. Accelerated benefits. If your contract has this provision or rider, it allows the policy owner to access a certain percentage, or defined amount of the death benefit, in the case of a diagnosis of terminal illness of the insured, as defined in the policy.

Who owns the policy?

Usually a parent or a grandparent wants to start an insurance policy for a child, and be the payer for the gift. In the case of a parent, or legal guardian, this is very simple, in the case of a grandparent, they need the permission of the parent or guardian.  Other relatives or friends who to give this gift, can be designated the “payer” of the policy, but insurance companies then usually requires the parent or guardian to be the owner of the policy. The owner of the policy has all rights allowed in the policy, including, changing beneficiaries, adding additional cash to accelerate growth (if allowed by the policy), changing beneficiaries, speaking with an agent or the insurance company directly about the policy, and  accessing various features in the policy, as well as transferring ownership.  The policy owner also gets notification if a premium payment is not made by the designated payer.

Automatic transfer of ownership.

Typically, upon the death of the policy owner, the insured becomes the policy owner by default, provided the insured has reached the age of majority in the jurisdiction where they live (18 years old or older in most states).  Another possibility is the owner naming a successor owner; this is a good idea in the case of a grandparent owner who may pass away before the child insured has reached the age of majority, since the policy’s ownership could be in question and have to be decided by a judge, or an executor.  Another consideration is the maturity of the insured at the time they become the policy owner; a young adult may not yet appreciate the value of a policy started for them years earlier, and may wish to surrender the policy for the thousands of dollars, potentially accumulated in the policy, or they may stop paying premiums, and force the policy into a non-fortitude mode, so that the policy fails to continue to create additional value for the long-term.

What Next?

Not all of the features and benefits mentioned above are offered by all companies, so it’s important that you choose an agent carefully, so you can get a full understanding of what the policy you choose can do, and how it should be operated over time.

Declined for Life Insurance

How To Recover from a Decline

Getting declined for life insurance is very serious

While a decline doesn’t necessarily mean an insurance company believes you are going to die very soon, it does mean they have concerns about your statistical life expectancy or personal history, or activities. And a decline by one insurance company can generally be seen by other insurers. So a decline “on your record” might just make it that much harder for you to be seen positively by another company.  So let’s talk about how to avoid a decline as best as possible.

Working with an experienced life insurance agent is crucial

If you have known health issues, chronic or otherwise, engage in potentially dangerous activities, or have a personal history that involves trouble with the law, you may find yourself an unacceptable risk to many insurance companies, and therefore a candidate for a decline. Does this mean you shouldn’t try to get coverage?  Well no, not without consulting an agent who is experienced and knowledgeable and who can first assess your potential “problems”, speak to underwriters about the information they need to make an informed decision, and then follow through to present the best and most accurate information possible to the underwriters. 

Many times it is incomplete, or even erroneous information about a prospective insured that leads underwriters to decline an application. Unfortunately, blame can usually be shared by an agent’s inexperience to ask the right follow-up questions, and an applicant’s attempt to tell the most favorable story about themselves that they can.  

So when you get declined you, here’s what you need to do:  
  • Write to the company representative who sent you the decline letter, and ask for specifics about why you were declined.
  • Follow-up with your agent when you hear from the company that declined you.
What can usually be fixed:
  • Erroneous information in a medical record.
  • Personal history that has not been updated.
  • Personal history that is not yours.
  • Incorrect information on the application.

If you have been declined and don’t think there is any hope in being issued a policy by any company, you should speak with one of our affiliated agents and get an understanding of what other options may be available.

life insurance for your business

Keyman Coverage

How term insurance can protect your business

Term insurance can protect a business, its’ owners, and management in a variety of ways.

Keyman coverage with life insurance is generally a life insurance policy that is owned by a business entity, which gives that business the life insurance proceeds upon the passing of a keyman in the business, for the purposes which include: giving the business time to find and hire a replacement, keeping creditors satisfied that the business has enough operating capital in a time when there may be grave concerns about the business’ future and the debt the business may be carrying, and pay-off any accrued compensation owed to the keyman’s estate. 

The policy design of this type of coverage is more complex than an individual owning his own coverage for his family’s protection. An experienced life insurance professional should be sought to make sure the policy structure achieves the desired goal for the need. There may also be issues around taxation and tax deductability of premiums or proceeds. 

life insurance for executives

Buy-Sell Arrangements

How to use term insurance to protect your business in buy-sell arrangements

A buy-sell arrangement is a formal contract between parties that have, or could have, an interest in a business. These arrangements are generally designed by attorneys to suit the specific needs and goals of the interested parties. Many times, should a provision of the arrangement be triggered by the death of an owner, partner, shareholder, or otherwise, the life insurance death benefit on the individual who passed away, is used to buy-out that person’s interest in the business.

These arrangements can be fairly complex when it comes to designing the life insurance coverage and “funding” the arrangement with life insurance proceeds, as there are several ways the coverage can be structured, depending on a variety of factors, including how many interested parties there are involved, the funding structure of the policies, the beneficiary designations, the need to be able to change insureds as the interested parties change over the years, and so on.

life insurance as executive bonus

Executive Bonus/Golden Handcuffs

Whole life insurance can be a great executive bonus to help your your business attract and retain top talent

Using a life insurance policy as an executive bonus arrangement and/or as “Golden Handcuffs” is a great way to have a have a discriminant method of offering a bonus to select individuals .  The purpose is of course to attract and retain top talent in your business.  By offering a life insurance policy as part of their employment contract, you provide a valuable benefit that can be contractually restricted over a certain period of time — a time period you define in the arrangement agreement.   

A built-in, self-vesting schedule of the available cash-value within the policy which should increase over time makes the life insurance policy more valuable over time and harder for the executive to walk away from.   Any other timed restrictions that were agreed upon at the time of the arrangement contribute to making this a great enticement tool — thus being like “Golden Handcuffs” — keeping them personally financially invested in your business.   

Getting Roth IRA style benefits from a whole life insurance policy

Generally speaking, this type of arrangement can also be very attractive because the possibility of the cash-value growth being tax-deferred, and the eventual tax-free use of the cash-value within the life insurance policy.  This creates a scenario  that mimics the tax advantages of a ROTH IRA but without any of the income, earnings, or contribution limitations. 

Life insurance policy design is critical

For these type of strategies, permanent cash-value insurance is required, and the type of policies, and the policy design are crucial. As with any financial strategy using life insurance, an experienced life insurance professional should be sought to make sure the policy structure achieves the desired goal.

protect income

Income Replacement Coverage

How would your family survive if you could not work and earn an income?

Income replacement coverage is just what the term implies, covering the future income, for those who are counting on it, family, business partners, creditors, etc. 

However, the income replacement calculation can be tricky because of the need to calculate project into the future and make some assumptions about future projected earnings, inflation, changing financial obligations and other items. 

Due to these variables, one could be looking at an increasing need, a decreasing need, or a static need. This must only be calculated with the help of an experienced, knowledgeable professional, as this calculation is too important to guess about.

how to protect your home

Mortgage Protection

Protect your most valuable asset - your home - with life insurance

Mortgage protection coverage is a life insurance policy that covers the balance of a mortgage or loan over the period of that loan.  A mortgage protection life insurance plan can optimize the coverage so that only the approximate coverage that is needed at any given time interval, is being paid for. 

In other words, since the principal balance a mortgage decreases over time, an experienced knowledgeable agent can design coverage for you that declines approximately along with the mortgage balance, so you are not paying for excessive coverage.