Brian McLane

Media and Social Commentary

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Life Insurance 101 – Basics of Life Insurance in less than 500 words

July 29th, 2011 · No Comments · Family and Friends, Social Commentary

It’s important to have life insurance.

Life Insurance 101 - Basics of Life Insurance in less than 500 words

Life Insurance 101 - Basics of Life Insurance in less than 500 words

I get calls from people saying they were referred to me and just “wanted some information.” They don’t know the differences between Whole Life and Term, they’re not sure how much insurance they need or what they really want it to do for them. They don’t understand the concept of insurability and how one’s current youth and health are an extremely important asset to their future financial planning goals as well as some of the financial benefits regarding taxes and security which Whole Life affords. Notice I didn’t even mention dividends.

So as a benefit to my readers here’s the most basic Life Insurance 101 that I think it would be in you interest to read and if you have any questions, post a comment. I’ll see your email address and respond privately if you wish.

NOTE: What follows is my personal opinion and in no way reflects the opinions of my employer New York Life.

1. First and foremost, I made the personal decision to go with a Mutual Company – and not a stock company as I didn’t want to hold my breath every time the market took a beating. Of course if there’s always the possibility of another 2008. So do a little research and find out if the Life Insurance Company is a Stock Company or a Mutual Company. With a mutual company, there’s no conflict of interest with the stock holders. Note: New York Life is one of only 2 Triple A Rated Insurance Companies.

2. Life insurance isn’t about collecting premiums (any company can do that). There are levels of service and availability of options and deadlines that go well beyond what you could imagine once you are issued and having your own agent inside that company working for you is worth the few extra bucks (not a broker who just gets paid to facilitate a sale and then is gone). The most frequently asked question I get is “are these guys going to pay?”. You don’t want to deal with a death claim on your own. Your agent helps you through the entire process at a difficult time.

3. I personally wanted to go with a “pure” Life Insurance Company. Companies like All State, Nationwide, Farmers and State Farm are all good companies and have cute commercials, but they insure property, automobiles, homeowners, and so on. The claims are all ultimately being paid from the same bank account. I always thought about natural disasters and if there was a tsunami or a series of bad hurricanes that made the insurers pay out, would that affect me as a policy holder in any way? Maybe not on Whole Life which is guaranteed but what about when my 20 year level term runs out?

4. I avoid these website only insurance companies. You get what you pay for. Please see my post on which has turned into quite a thread.

5. Regarding the type of insurance there is essentially Term (cheap, pure death benefit – like renting) and Whole (expensive, death benefit, you get to keep your cash which accrues by dividend at about 4 times what the banks are paying, and has some tax advantages, your money can’t be touched by a lawsuit, etc.). I should point out that dividends aren’t guaranteed but New York Life has paid them for over 150 years.

I hope this information helps.

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