This month is Life Insurance Awareness Month.  What better time to begin your term life insurance education?

Having an amount of life-insurance that is three to four times household income can help the surviving spouse be more financially secure, according to a new study from MetLife.  Less life insurance than that and the surviving spouse can feel not only financially insecure but be forced to make numerous life changes immediately.

While the study found that 8 out of 10 survivors had to make financial adjustments, life insurance may help limit the number of changes that need to happen right away.

For example, of the individuals who participated in the life insurance study:

• 42% who received no life insurance benefits said they had to borrow money from friends and family compared to 25% of those receiving benefits.
• 36% who received no life insurance benefits relocated residences compared to 23% of survivors receiving benefits.

Term life insurance can be an affordable option for young families.  And it is important that both men and women have life insurance.  The survey found husbands who lost a spouse received significantly less in benefits because the wife had a small life insurance policy.  Life insurance is not just about being able to replace loss of an income.  It is also about having to pay for services that the individual may have handled, such as child care or elder care.

That’s why it’s important to regularly review your life insurance policy, both husband and wife, and make sure that the amount of the benefits is appropriate to at least continue your current lifestyle.

Don’t check that box yet to purchase.

If this is a voluntary benefit – which means that you pay the full cost – it is smart to shop for term life insurance on your own first.  If you are young and healthy, you will likely find lower cost term life insurance if you buy on your own rather than through the workplace.

That’s because group insurance usually has very little underwriting – which means if you have existing health conditions, you still may be able to get insurance. That’s good news – and probably a good purchase – if you have health conditions. But it costs more.  So if you are generally healthy, you might find that buying term life insurance on your own can cost you a lot less. That’s because you are a better insurance risk than those with health conditions. Plus, you’ll have the policy no matter where you work, as long as you keep paying the premium.

Shopping for term life insurance online is easy.  Go to sites like www.iquote.com and simply fill out the information.  Match it as close as you can to your offer from work so you can get a good comparison. You’ll receive term life insurance quotes from a number of insurance companies. That’s another reason to shop on your own – term life rates can vary dramatically from company to company.  And you can always talk with an agent to make sure that you are selecting a plan that best fits your needs.

So before you check that life insurance box at work, find out if you can save or buy more coverage on your own for the same price by purchasing an individual term life insurance policy.


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The other deciding factor of how much life insurance costs is the amount of the policy you would like to purchase. They can range from $50,000 – $5,000,000. There are many sites on the internet to help you determine the amount your policy should be.  iii.org has lots of information on life insurance and many other types of insurance.  lifehappens.org is a wonderful site to get stories and fundamentals involving life insurance.  iquote.com is another great site for free information and they provide free quotes online.

So when asking yourself how much does life insurance cost remember there are many factors to consider.

Life insurance used to be a contract strictly between an individual and an insurance company. You paid your premiums. Your beneficiaries were paid a lump sum when you died. If you felt you no longer needed the life insurance or the premium was no longer affordable, you had just three options. You either continued to pay the premiums, gave up all value on a term policy or settled for the “cash value”. Now you may have a fourth alternative called a life settlement. In certain circumstances, your policy may have significant value to independent investors and you may have an asset that you never realized was there.

About Life Settlements

A life settlement transaction involves selling a life insurance policy that’s no longer wanted or needed to a third party – a person or business other than the insurance company that issued the policy — typically for more than the policy’s cash surrender value but less than its net death benefit.

Generally, the purchasers of life insurance policies are institutions called life settlement companies. They may hold the policies to maturity (that is, the death of the insured person) and collect the net death benefits, or they may resell the policies, or they may sell interests in multiple policies to hedge funds or other investors. The person selling his or her policy receives a lump sum payment. The amount of that payment will depend on a range of factors including his or her age, health and the terms and conditions of the life insurance policy. The purchaser agrees to pay any additional premiums required to keep the policy in effect and receives the death benefit when the investor dies.

What type of policies?

What are the most likely situations when a life settlement could make sense for a consumer?  First, the face amount of your policy should be $250,000 or more.

Many term life insurance policies provide a right to convert the coverage to permanent life insurance for an additional premium. While you might not need life insurance coverage beyond the original term, it may have long term value, depending on your life expectancy. If you have encountered an adverse health condition since the time you purchased the original policy, it is even more likely to be the case.

Some older policies may have had a very slow increase in cash value. However, unlike term insurance, you have the right to keep it in force as long as you pay the annual premium. Again, an independent investor may calculate that it is worth paying an owner more than the insurance company’s scheduled cash value plus continue to pay the premiums.

Certain businesses may have purchased “key man” insurance to provide financial assistance to a business in the event of the death of an important executive. However, circumstances may have changed as the company management expanded or the executive prepared to retire.

How it works

You contact an insurance agency who has a relationship with the specialized brokers. You will need to provide information on the specific policy form and current financial status of the policy. You will also be asked to provide basic information on your health. A preliminary estimate can be provided in a few days. If it looks like it is worth pursuing, more detailed information will need to be compiled and you will have to release your medical records but you will not be asked to take a physical. Once the information package is complete, the specialty insurance broker can solicit firm quotes.

The Financial Industry Regulatory Authority (FINRA) recommends these five factors to consider before agreeing to a life settlement include:

• Ongoing
  Life Insurance Needs. If you’re considering buying a new policy with the proceeds of the life settlement, you will need to determine whether you can get a new policy – and at what cost. Once sold, the old policy will still be in force and may affect your ability to get additional coverage.
• Determining
  a Fair Price. The best way to make sure you’re getting a fair price is to shop around — by contacting multiple life settlement companies yourself or using a licensed life settlement broker who will shop your policy around on your behalf.
• Financial
  Impact. The lump sum payment you receive can be taxable, depending on your circumstances. If you currently receive state or federal public assistance such as Medicaid, a life settlement can negatively impact your ability to participate in those programs.
• Transaction Costs. Commissions paid by life settlement companies to life settlement brokers and other financial professionals involved in the transaction can be as high as 30 percent. Ask your broker or other financial advisor how they are being compensated and what other parties are receiving commissions.
• Privacy Concerns. When you sell your life insurance policy, you will have to authorize the release of medical and other personal information so the buyer can determine how much to offer for your policy. Before accepting any offer from a life settlement company, make sure it has procedures in place to protect the confidentiality of your information.

How should I think about this?

First, focus on the value of the life insurance arrangement and whether it suits your circumstances better to accept a lump sum or to continue to pay the premiums and have your beneficiaries receive the full death benefit. Do not allow someone to confuse you by talking about what you might be able to use the money for. The financial world is filled with seemingly magic solutions like, “sell your life insurance and get a long term care policy”. One doesn’t necessarily have anything to do with the other. the proceeds can be used for most anything. Keep focused on the issue of your life insurance policy.

Secondly, work with an organization that you feel you can trust. Specifically, you should be assured:

• That the information will be held confidential and used only for purposes of evaluating your policy for a life settlement transaction;
• That you will receive more than one bid and the broker will disclose all bids to you; and,
• That the broker is acting as a broker and not buying your policy for resale.

Be wary of firms who promise “special deals” or preferred access to markets. Take your time and insist on complete understanding of you life insurance policy. Discuss it with your advisors and  your family.