If you typed “Houston life insurance” or “Texas burial insurance” in a Google search, then you’ve come to the right place. There are many options for buying life insurance, but many people settle for buying a policy over the phone. With Houston life insurance you have the opportunity to meet face-to-face with an experienced agent to have a meaningful insurance conversation. Visit our about page to learn more.
Nearly every life insurance blog I come across can’t avoid talking about the benefits of cash value when whole life is the subject of conversation. I’ve never heard an author discuss the dangers of cash value, which do exist. One reason for this lack of information is that so many authors give very basic, top-level explanations of a product. Countless websites recycle and regurgitate the same basic information about cash value benefits without taking a deeper dive into the potential harm. Another reason for this lack of information is that many authors are certified financial planners who usually only deal with high net worth clients. Their lack of client diversity gives them a narrow perspective for the use of a product. With that being said, let’s discuss the dangers of life insurance cash value.
Many seniors buy whole life policies that barely cover the cost of a funeral. Cash value is used to secure policy loans. If the insured dies before a policy loan is paid off, the unpaid portion of the loan is subtracted from the death benefit. If the policy barely covered the cost of a funeral, then any subtraction from the death benefit could severely jeopardize the purpose of the policy.
Cash value poses a problem for people of low income. Any unexpected expense becomes a financial emergency for this group of people, which causes them to look for a policy loan. If the premium was barely in the budget, the additional expense of a loan repayment may be too much. The most likely result of this scenario is a cancellation.
This article disputes what other authors say are the best whole life insurance companies. Learn why their list of best companies is flawed.
I have to admit I’m jealous of other websites that are given clout and authority by search engines despite their terrible advice. These websites don’t deserve the clout and authority given to them. One whole life insurance article touted New York Life and State Farm as two of the best life insurance companies. I will dispute this assertion.
New York Life has a particular life insurance product that is sold to seniors. This product is ridiculed by hundreds if not thousands of independent agents. Here is what makes it so bad: premiums increase every five years and the policy automatically cancels at age 80. So even if seniors on a fixed income can somehow afford the premium increases, the policy cancels just a year after their life expectancy. Yes, the policy is convertible to a permanent policy, but I suspect the vast majority of policyowners don’t attempt conversion until age 79, when they are greeted with an unpleasantly high conversion quote. What might not be explained well is the way conversion rates are calculated; they are based on the age of the insured at the time of conversion. Nearly everyone trying to get a permanent policy in their late 70’s or early 80’s will have to pick their jaw off the floor after reading the quotes. Seniors are much better off buying simplified issue whole life, where the premiums never change and the policy never cancels (as long as premiums are paid).
State Farm has many good things going for them, but competitive life insurance rates is not one of them. State Farm is well known for having some of the highest life insurance rates on the market. State Farm does have an impressive reputation for never missing a dividend payment, but I suspect that can be attributed to overpriced premiums. If companies charge too much in premiums, they will always have enough money to pay dividends. Non-participating policies (no dividend payments) seem to be the norm for companies with competitive premiums.
I recently ran across a blog article from a certified financial planner. In the article he described a situation where a 28 year old man with $5,000 in credit card debt and no heirs was sold a $200,000 whole life policy. The financial planner mentions term life as the best solution in this situation. However, his analysis relies on too many assumptions, including an assumption that disability will not occur. According to the US Centers for Disease Control and Prevention (CDC), 1 in 4 adult Americans will suffer from disability. The financial planner picked the cheapest term policy he could find when doing his analysis. The cheapest term policies typically don’t include living benefits. A living benefit provides an income stream to insureds if they become disabled. Cheap term policies may also lack valuable riders like the waiver of premium for disability rider, where the insurance company pays premiums for a disabled insured. People who become disabled are often unable to pay premiums, so living benefits are critically important. Don’t automatically go with the cheapest option.
I will agree with the financial planner that whole life wasn’t the best solution, but term life wasn’t either. A better solution would have been indexed universal life. With this type of policy, the insured could have paid the minimum premiums for a short time while he was paying down credit card debt. After the credit card debt is paid off, the insured can increase his premium payments (universal life offers flexible payments).
Another problem I have with the analysis is the assumption that sufficient funds will be available after a term policy expires, therefore a new life insurance policy won’t be needed. Even with careful financial planning, there’s still a chance of not having enough money. At the very least, people should fund their final expenses with a permanent life insurance policy. I’m not talking about a large policy; just something large enough to cover end of life expenses. If you don’t like the idea of paying premiums for the rest of your life, there is a special type of policy called limited pay whole life that allows you to pay off a policy in 10 years. After 10 years there are no more payments to make, and the policy stays in force forever.
As an insurance agent, I am interested in the way new risk factors affect my industry. I searched the internet for news stories of life insurance and Covid-19. One news story seemed to paint a dire picture for people trying to get term life insurance. I wrote an email to the author explaining that term life insurance is traditionally the most difficult type of life insurance to qualify for, even under normal circumstances. Part of the appeal of term life insurance is low premiums. The only way to maintain low premiums is through a low rate of claims. To give you an idea, one life insurance company (I promised not to mention their name) told me only about 1% of their term life policies result in a claim. With a claims rate that low, any new risk factors could dramatically increase premiums. So it stands to reason that term life policies have additional underwriting restrictions for Covid-19 in order to protect premium rates.
My email continued by mentioning another type of life insurance policy that has been relatively unaffected by Covid-19: simplified issue whole life. Most simplified issue whole life policies haven’t made any changes to their underwriting guidelines. One of the few companies that made changes added a Covid-19 questionnaire and they temporarily reduced the maximum issue age to 75 (they normally issue policies to age 85). However, it’s important to note that even if a company doesn’t change its underwriting guidelines for Covid-19, people can still be denied coverage if they experience damage to major internal organs. Recent damage to internal organs usually has underwriting consequences regardless of the pathogen that caused the damage. Some insurance companies may not feel the need for Covid-19 restrictions because they already deny coverage for anyone with a recent hospital admission. If you have any questions, don’t hesitate to contact me.
New Year’s resolutions are often short lived because they require continuous effort. That fitness goal might last for a couple months until some excuse is made for skipping an exercise. Then the floodgates of excuses opens up and the goal is shattered. Luckily for life insurance, no continuous effort is required. Many life insurance policies don’t require an exam, so you’re done with the application process after the agent leaves your home. There are some items to take care of after a policy is issued, but its not a big ordeal. Who knows? Maybe your success with getting life insurance will act as a springboard for accomplishing more difficult goals. You’ll also be one of the few people who can brag about fulfilling your New Year’s resolution. If you start it after January it no longer counts as a New Year’s resolution. So the time is now to do it. I am always available if you need help figuring out the best Houston life insurance plan. Go to my contact page for ways to reach me.
Life insurance ads often take a one-size-fits-all approach, emphasizing the use of one type of life insurance over any other. Since certain age groups typically only see ads for one type of life insurance, those products become more popular within their respective age groups. For instance, people under 50 will never see ads for whole life unless they see an ad intended for an older age group.
Life insurance solutions are often more complicated than the one-size-fits-all strategy shown in advertisements. I use a two policy approach for people under 50. For final expenses I recommend whole life, and for all other expenses I recommend term life (affluent consumers should look at universal life). The problem with term life is that it terminates at a designated point in time, and some expenses, such as the cost of a burial or cremation, never go away during a person’s lifetime. Therefore, it’s inappropriate to use term life for everything.
Here is the takeaway: popular is not always better. Insurance products are only popular because ads make them that way, and ads make them that way because they only have enough time to discuss one product. Insurance agents, on the other hand, have plenty of time to discuss multiple products, and how those products compliment each other.
Congratulations if you bought Houston life insurance. However, your job isn’t done yet. There are important steps to take after a policy is purchased.
The first step is putting your agent’s business card on the refrigerator so you always know where it is and it has no chance of getting lost. If you ever need to update your payment information or make another policy change, you’ll have a tough time doing it if your agent’s business card is shoved deep in a drawer and the policy is buried in a stack of papers.
The second step involves letting your beneficiaries know about their new status as beneficiaries. Keeping them in the loop will avoid confusion later. I don’t recommend having this conversation with contingent beneficiaries though. A contingent beneficiary is only entitled to the death benefit if the insured outlives all the primary beneficiaries. Contingent beneficiaries play an important role in making sure a living beneficiary is available for benefit payments. However, they may resent being told they are second in line.
The third step is deciding where to store your Houston life insurance policy. Many people give the policy contract to their beneficiary since the beneficiary will need immediate access to it when it comes time to filing a claim. If you want to keep the policy in your home and with the beneficiary, the insurance company will charge a small fee, usually around $25, for a duplicate copy. I also recommend placing it in a fire safe.
Any reputable agent selling whole life insurance will avoid modified plans unless there is no other option. Every client dreads the bad news that only modified whole life can be offered (agents don’t enjoy giving the bad news either). To soften the blow, I’ve constructed a list of medical conditions that typically trigger an offer for modified whole life. I want to caution that every insurance company is slightly different in the medical conditions they accept, so don’t think of this list as exhaustive. Also, as a general rule, the companies with the best pricing tend to have more restrictive underwriting.
- organ transplant
- terminal illness
- congestive heart failure
- cognitive impairments such as dementia
- heart problems within the last year
- supplemental oxygen (some companies will accept this for sleep apnea)
- recent drug or alcohol abuse
- recent cancer
- assistance with daily living activities (eating, bathing, etc.)
- current dialysis
If you do get an offer for modified whole life, it isn’t totally bad. You will have full coverage after a two or three year waiting period. In the unfortunate event you pass away during the waiting period, the premiums you paid weren’t wasted because all of that money comes back to your beneficiary plus interest, and the interest is better than anything you would get at a bank. Be sure to contact us with any questions.
When I talk about disbursement options, I am talking about the different ways life insurance companies can pay out your benefit payment(s). I will discuss the following disbursement methods: lump sum, payment for a guaranteed period, payments for life, payments of a specified amount, and interest only payments. There are minimum requirements for any option other than lump sum payments, so check with your insurance company or policy contract for those requirements. Also, if you are going with any option other than lump sum payments, talk to your tax advisor about the consequences of accumulating interest.
- Lump sum is the least technical method. It also happens to be the default method if an option isn’t selected. Lump sum is going to be the desired method for the majority of people. If you fall within that group, then sit back and do nothing–you’re set. Besides the obvious advantage of getting all your money at once, there is also the tax advantage of no interest (or very little interest if the claim is contested).
- Payments for life provide equal monthly payments for a guaranteed period, and then for life. It basically annuitizes the life insurance benefit for a period certain.
- Payments of a specified amount breaks up the total benefit into monthly, quarterly, semiannual, or annual equal payments. A minimum amount of interest is applied.
- Payments for a guaranteed period provide equal monthly payments for the number of years elected.
- Interest only payments are self explanatory. The interest only payments are for a set number of years and they cannot go beyond the lifetime of a beneficiary. A minimum amount of interest is applied.
You might be wondering why anyone would select a life insurance disbursement option other than lump sum. Perhaps a beneficiary is inclined to overspend if too much money is given out at once. Another advantage is the interest rate, which is better than anything at a bank. Don’t hesitate to contact us with any questions.
Perhaps the biggest reason people hesitate to buy life insurance is the fear of it being too expensive. It doesn’t help that most websites providing instant quotes default to $10,000 of coverage. How did $10,000 become the default amount to quote? That amount of money is excessive for the growing number of people choosing cremation over traditional burial. By using $10,000 as a default, people might assume that’s the minimum amount that can be purchased, and they might be using that to determine if life insurance is affordable. Fortunately, much lower amounts of coverage can be purchased.
Every life insurance company sets a minimum amount of coverage, but all companies that I’ve seen do at least $5,000 for a minimum. Many will go down to $3,000. The lowest I’ve seen is $1,500. These minimums can be helpful for those on a very restricted budget (low income) who are planning for a cremation. A cremation with ceremony shouldn’t run more than $5,000. People who don’t want a ceremony can get away with lower amounts of coverage. Here is a quoting tool where you can put in $2,500 for a minimum. Finding coverage amounts this low is only half the battle because you also have to find agents willing to write policies that small. You don’t have to worry about that with Houston Life Insurance Plans. We will write any amount of coverage, no matter how small.