Annuity Payment Payout Options

Recently there is probably a good chance that you may heard alot of buzz lately about annuities or you m ay own one already. What we will discuss here are annuity payment payout options. When I first got started in this business and learning about this product, payouts were the biggest thing on my mind.

So to begin annuity payment options also called pay out options and settlement options are the methods provided in the contract for paying the income benefits to the annuitant. The contract owner has the right to chose the option.

There are 2 primary groups or families of payment options: the Fixed Period Payment Options and the Life Annuity Payment Options.

The fixed period payment option: The benefit period is fixed or set as to the number of years the income is to be paid. There is no lifetime benefit, only a series of payments for the chosen number of years. There  are two varieties of fixed period options:

- Annuity Certain means the income benefit will be paid to the end of the period whether or not the first payee (annuitant) lives to the end of the period. A second payee is named to receive any payments remaining in the fixed period when the first payee dies. All principal and interest is liquidated over the period of time selected.

A temporary annuity means that the payments will be made to the end of the period or to the death of the first payee (annuitant). There is no second payee and the continued payment of benefits is contingent upon the annuitant continuing to live. This is not a type of life annuity, even though the benefit stops at the annuitants death, because the payments are limited to the fixed period.

Generally  once a payment option is chosen, it cannot be changed.This is brief information regarding annuity payment payout options.

Cheap Term Life Insurance

Affordable Term Life Insurance Rates

Sometimes, as an insurance agent, it amazes me when people are looking for cheap term life insurance quotes. Without sounding rude, the premium for term life can be as affordable as you want it to be. There is no 1 set price for the product. The pricing includes many variables. Obviously, the lower the face amount, then the cheaper the policy is going to be. Some coverage is better than no coverage and if an insureds economic condition improves they can always apply for a higher face amount later.

Why buy a cheap term life insurance policy for your family or even your business anyway?  Because none of know the day we will pass away. If an insured has dependents, then there may be a house to pay for, rent, income to supplement your family for many years and college costs for the children so that they may have promising future.  

Because term life insurance is a pure death benefit, its primary use is to provide coverage of financial responsibilities for the insured or his beneficiaries Such responsibilities may also include, but are not limited to, consumer debt, dependent care, funeral costs, and other expenses. Term life policies do not accumulate cash value, that's why they are so cheap.

Now here is one overlooked aspect about this product... The younger and healthy you are when you buy it, the cheaper it is. Even if you are single, buy it to not only lock in the lower rates, but to guarantee your insurability in case of a future unexpected onset of a diseases or medical condition that might came about. You can still get life insurance when you are older and or unhealthy, but it costs a whole lot more. Be smart and get covered today. You could die tomorrow. maybe you won't, who knows. I don't.

Have life insurance from your company already? Chances are it only covers accidental death and the face amount is really not high enough to provide for your loved one for several years.  Term life policies can range from 10 years up to 30 years. Some life insurance companies allow the term policy to be converted to permanent (all your life) policies too. There are additional benefits on permanent coverage, ask your agent today for details.

I hope I have provided you with some good insight about cheap and affordable term life insurance policies and I hope you buy one today, if you do not have one already. Buy the way, be sure to ask what other amazing benefits are included in your new term life policy, I think you will really like what insurance companies are offering these days. Gone are the old and antiquated versions of boring life insurance polices. These days they are exciting and worthwhile to have.

Quotes for Term Life Insurance

Getting quotes for term life insurance is a great idea. First if you own a home and have a family, that is probably the biggest reason to get a term life policy. Other reasons one may consider a term life insurance plan is because the life insurance provided by employers is probably not enough, especially if the primary wage earner in the household were to pass on.

So how much is enough term life insurance coverage anyway? Well lets take a look at a average middle class family owning one house and having 2 young children, then you should be able to gage from there if you need more or less...

- To Secure Your Home mortgage: Lets say $175,000
- Children Education  (4 years university/2kids) $100,000 each = $200,000
- Income for Family (5 years minimum) Lets say bread winner makes $45,000 a years X 5 years= $225,000 needed
- Funeral/  burial expense  $10,000

Total Life insurance need to protect family and ensure a good future: $610,000

Lets say the bread winners employer life policy is 2 times annual salary ($90K)

Looks like there is a short fall of about $510,000 in life insurance coverage.

If the bread winner, in this example passes on tomorrow, their family / dependents will encounter financial hardship and a downgraded life style. Their future does not look to bright in my opinion.

Do not relay on your employers life insurance coverage! Get a term life insurance policy. They are very affordable.  They come in terms of 1 to 30 years. An experienced life insurance agent will help you obtain proper coverage.

Don't wait and put it off, thinking you will live a long time to live, because you do not know when that day is.

Secondly the longer you wait to buy life insurance means the price goes up every years as you get older, PLUS if a health or medical condition develops, the price is really going to go up!  If you are healthy, young and have dependents... then do something about this now. If you already have a term life insurance plan, then I congrats on being responsible!

Life Insurance Policy Loans

How do policy loans for life insurance policies function? usually whole life insurance and universal life insurance plans have some sort of cash accumulating ability. The flexibility of the permanent cash value life insurance policy provides for the borrowing of money. Policy loans may be taken against the cash values at an internet rate specified in the policy. As far as a fixed interest rate goes, each state has set limits to that. If the policy provides for an adjustable interest rate the state will have set limits for that too.

A common question asked by life insurance policy holders  is... "Why must I pay interest for using my own money?" The answer lies with in the financial structure of the premium. Cost of mortality plus the cost of operation take away interest equals the premium. The premium charged anticipates that the policy reserve (cash value) will be invested and be earning interest. When a policy loan is made, the cash value is used as collateral and the company loses the investment value of that amount. this must be offset or the premium charged will be insufficient. Therefore all policies specify that interest must be charged on policies loans.

The life insurance policy loan is a continuing claim against the proceeds of the policy until the loan is repaid. The loan never need be repaid, but it will eventually reduce the payment made to the beneficiary or policyowner at its maturity.

Should the policyowner fail to pay the policy loan interest when due, it is added to the amount of the loan. Consistent failure to pay the interest can result in complete loss of cash value. Failure to repay the loan or pay interest does not void the policy unless the total indebtedness, including accrued interest, exceeds the cash value of the policy. It all depends on your objectives when you obtain the policy. I like the tax free retirement idea  with universal life insurance plans.

History of Life Insurance

Some history about life insurance. In a broad sense, insurance is a method of spreading, among a very large group of persons, a financial loss which might be disastrous to an individual or family. Many people look upon life insurance as a modern product, an invention of our century. Actually however a form of risk sharing was developed by merchant tradesmen in the kingdoms around the Mediterranean Sea hundreds of years before the Christian era. Later, in the middle ages, guilds were formed of people in the same trade or occupations, such as bankers or silversmiths. They agreed to help each other with the expense involved if someone became sick or died. At each meeting they would "pass the hat", so to speak, taking a collection to build a fund which would be used when a member became ill or died. in a sense, they were beginning to recognize the monetary value of the human life.

There is remarkable similarity between the risk of pooling of the early tradesmen and today's life insurance companies. in all cases, a number of people exposed to similar hazards pool their assets spread among themselves the impact of a financial loss. Insurance is commonly defined as a pooling of funds and sharing the cost of losses.

Persons who buy life insurance policies pay a premium that creates the pool of funds. When losses occur the persons who suffer the losses are paid from the funds in the insurance pool.

Modern insurance practice is based on a mathematical principal called the law of large numbers. This law states that the larger the number of exposures to loss, the more closely the experience of the sample group will approximate the experience of an infinite number of exposure to the same loss. Today by using the experience of large numbers, insurance companies are able to predict with reasonable accuracy the number expected to die in each age group, each year, as well as the number of accidents and illnesses. I hope you understand more why it is necessary to pay for life insurance premiums.

Beneficiaries of Life Insurance

When you own a life insurance policy you must list a beneficiary. So who may qualify to be listed on a life insurance policy anyway? All individuals have an insurable interest in their own lives, therefore, we all may purchase insurance on our own  lives and name anyone we choose as the beneficiary.  Generally the amount will have to be reasonable and the beneficiary must have an interest in the well being of the insured or the insurance company could decide to to participate in a speculative contract.

The right to name and to change the beneficiary is reserved for the policy-owner of the life insurance plan, who is named in the application. Changing the beneficiaries is accomplished by filing a signed and dated "change of beneficiary" form with the insurer.  The change is usually effective on the date signed, but only if the form was recorded by the company, prior to payment of the death benefit.

A "beneficiary" is a person (it may be an individual or any legal entity, such as a partnership or corporation) named by the owner of a life insurance contract to receive the policy proceeds (the death benefit) at the death of the insured. The policy owner is the person who may name and change beneficiary designation.

Here is an order of the way you will encounter beneficiary designations The first being the Primary beneficiary, this is the first person named to receive the death benefit, what percentage of it and if he or she is living at the death of the insured.

The second designation is the Contingent beneficiary (or secondary) is 2nd in line and will receive the policy proceeds if the primary has predeceased the insured.

The third is the Tertiary beneficiary or 3rd in line. They will receive the proceeds only if the previous two beneficiaries have predeceased the insured. The payment order would read "pay to the primary, if living; otherwise to the contingent, if living; otherwise to the tertiary."

if all three beneficiaries of the life insurance policy have all predeceased the insured, the usual payee is the estate of the insured. You may want to avoid that if possible and keep your policy up to date. Also be sure that your beneficiaries know that they have been listed as such on your life insurance plan.

Planning for Retirement

Retirement Plans can be divided into 2 categories; qualified plans and non-qualified plans. The following is designed to present a broad overview rather than something overly technical and boring about qualified plans.

First there are Qualified Retirement Pension Plans. These types of plans allow for an employee to put pre-tax, (that being tax sheltered) dollars into the plan. This allows for the money to work and earn interest and can gain in some value before the funds are taken out for social security, Medicare or federal income taxes. The plan participant can literally put 100 cents of each dollar into the retirement plan to accumulate income for retirement.

Increases in value from interest earnings or appreciation in value grow tax deferred in the plan.

Importation please remember that that income that has not been taxed will be taxed when the income is received from the retirement plan.

The IRS has set some rules for eligibility and gives overall limits for percentage of earnings and dollar amounts per year limits. Employer plan documents for establishing retirement plans must comply with the rules  and limits of the Internal Revenue Code.

Distributions from a retirement plan prior to age 59 and a half years of age are subject to a 10 percent early withdrawal tax penalty. However there are 3 exceptions.

Death of the retirement plan participant, disability and hardship, and start of a distribution over the expected lifetime of the person annuitization.

Distributions must be started by April 1st following the year the plan participant reached age 70 and a half. An exception was put in for 1997 and later. A person who is still employed and does not own 5% or more of the company does not have to start receiving funds until they cease work.

Ways to take money out of a plan would be to arrange for a direct transfer - IRA rollover - and put the funds into another qualified retirement plan. Another way would be to request a lump sum distribution. 20 % of the funds will be  withheld when selecting this method of distribution. Check with your plan administrator for more details.  The money withheld is sent to the IRS as a prepayment of taxes that may be due.

This is a brief over look of qualified plans for retirement planning, IRA rollovers and annuitization of money.

Child Term Life Riders

Well I was speaking with the home office life insurance support team today about term life.  I was having a brief conversation with them explaining that I will be making some changes to my Texas life insurance policy.  As were we speaking the rep asked me if I had kids? I said yes I have 2 children. Then he reminded be the benefits of adding a child rider to the policy, which I already understood.

That benefit being a term life insurance child rider, which would also cover my kids under my term policy. Not only that, but with this life insurance company, the child rider term life insurance policy is convertible to permanent life coverage like whole life or universal life.

Why would that be important?  Well as it turns out it in many cases, like the one I am about to explain to you now. Seems one of the mangers with this insurance company recently had a boy. He added the boy to his term life policy as a child rider. When the boy turned 2 years of age, the child was diagnosed with autism.  Luckily the child was covered before the diagnosis!

Insuring the life of an autistic child is difficult. It can be done, but it could be very expensive and the coverage may also be limited. In the case mentioned here, the child will have full life insurance benefits for the rest of his life since the dad will be converting the boys policy to a whole life plan.  That means this young child will have a very nice life insurance for the rest of his life! Not only that, the policy will be accumulating cash value!

When the child grows up, there will be a very nice reserve of cash that may be accesses to pay for school or make any other important purchase, like a home down payment.

Do you have young children who are not on your life insurance policy? Then add them to guarantee that they will always have access to life insurance, before something unexpected happens.

Life insurance is all about planning, being prepared and financially protecting your loved ones future so they never have to experience final hardships or a down graded life style.

I'm available if you need me for assistance.

Life Insurance Policies

Have you ever wonder if you should really carry life insurance? I mean if you are the insured and you pass away, you will never see the money (face amount). But I hope you are responsible enough to provide to those who matter most! If you feel life insurance is a waste of money then you don't really understand the importance of life insurance.

Chance are you may understand it and appreciate it, but I frequently run into people who say they do not even believe in it!  First, if you have dependents and they rely on you or someone who is a primary wage earner in your household, then there should not only be some sort of insurance plan in place, but it needs to be enough!

The simplest of this type of insurance and perhaps most popular is term life insurance. This type of product covers the insureds life for a "term" being a period of time for a certain face amount.  If the insured has acceptable health, a common face amount I see is usually $250,000. If the insured passes, then the beneficiary gets the money.  There may be more than one beneficiary too.

The second most common life insurance coverage plan is group life insurance from an employer. The free basic version offered by employers is 1 times your annual salary. So, if you make $40,000 you could get a basic life insurance plan with that face amount. Make sure to check with your employer and make sure it's not just an accidental death and dismemberment policy. If it is, them the group life policy will not payout for a death from a medical occurrence, like a heart attack. When you go to work tomorrow, please check on this. If you need help, email me.

Another thing, if you or someone passes away... will that $40k face amount be "enough" to provide income to your dependents for the next 5, 10 or 20 years?

Term life insurance is getting cheap, as long as you have acceptable health by the life insurance companies underwriting guidelines. Even if you have health issues and experienced agent can still present you with some good options.

The main point I want to make is if you have a spouse and possibly kids, make sure that they will not have to suffer financial hardship in case of the passing of a bread winner. 

I am a Texas life insurance agent. If you are in TX and want info, contact me.