The global economic crisis is causing all of us to review our outgoings and to reconsider whether we really need to spend on items we used to take for granted such as life insurance. However, whilst many of us are eager to reject the idea of life insurance as a necessity at all, we all know that the best way to really save and benefit from the security it offers is to be a healthier person. So how healthy are you? And could you be benefiting from kicking some of those indulgent vices into touch?
Smoking
Whether you are a smoker or not can make a huge difference to the amount you spend on life insurance premiums. UK No Smoking Day occurs on the 11th May and highlights the many benefits of quitting, and aside from the obvious health implications, the financial ones via savings on your life insurance are also very great. According to The Guardian, stopping smoking for a year when you reach the age of 40 can result in premiums 50 percent lower than they would be for a continuing smoker. Taking actual costs into account, an individual could save over £100 a month.
Alcohol
Similarly, alcohol consumption can affect life insurance prices also. This information increases in significance when we consider how much is adequate to drink in health terms. The Telegraph reported last December that insurers were being forced to push up prices after increases in cases of liver cirrhosis, heart problems and cancers which may be linked to alcohol consumption – whilst statistically 20 percent of UK men and 30 percent of women are said to drink ‘hazardous’ amounts. 50 units, i.e. an amount that is considered harmful can result in £300 extra on premiums over a year. Yet, an article at bytestart.co.uk highlights the importance of re-taking a liver-function test should you cut down, as this will likely be taken into account during a life insurance review.
Obesity
Being obese to the point that it affects your health, and with levels of clinical obesity increasing faster in the UK than anywhere else, insurance companies are beginning to take note. Statistics form whatprice.co.uk look at the average 40 year old (at 12 stone) compared to an obese person of the same age and who will weigh 18 stone. Cover that is worth £100,000 would cost 50 percent more for the latter individual, but they may even be at risk at not being granted cover at all.
Whilst the recession is causing many of us to cut back on spend, and to re-assess the financial aspects of our lives, by acknowledging the savings made by those with a healthier lifestyle it seems that 2009 might be the best year to focus on our health habits as well as our money habits. And if you are healthier now than you have been since buying life insurance, review your policy and compare prices – and keep them informed even if you have just joined the gym. It might be worth more than you had realized.
On a health-binge? Why you should review your life insurance policy
Life Insurance – It Just Got Interesting!
For the majority of our lives, the subject of life insurance has traditionally been one that each of us has probably wanted to ignore. It is often regarded as tedious, frustrating, dull, and not altogether essential – at least until you reach that age. On another level, despite its importance and the inherent sensibleness that is evident when an individual is seen to have taken out a policy, it is still very difficult to make the subject of life insurance seem interesting, positive and relevant – without seeming preachy.
Of course, all that is about to change. Drawing influence from a blog post at wnyc.org entitled: Life Insurance…Not So Dull After All, the interview contained therein highlighted the fact that, aside from what it might mean from person to person in regards to when/whether they should be thinking about it, life insurance on an industrial and business level is one of the most important factors in regards to the recession – and consequently one of the most discussable subjects for the press.
In that post, expert Aaron Elstein points out the likelihood of further bailouts for American life insurance (many insurers remain in a strong position) companies due to certain investments in bonds (i.e. mortgages) which have declined in value. In turn, such declining bonds will be sold at a loss and certain insurers will be losing money – and, in simple terms, may well struggle to pay out claimants without government aid. If that doesn’t sound like the makings of a John Grisham novel, further life insurance-orientated news stories seem like the stuff dreamt up by Hollywood scriptwriters.
The Los Angeles Times (and other places) reported on April 8th of the story of two middle aged women who’ve been arrested and accused of life insurance fraud on a grand scale. The women (aged 60 and 66, and thought to have worked with others) are said to have bought life insurance policies in the names of fictitious people, waited until the policies had matured, held fake funerals, and then received the payouts from their own beneficiary bank accounts.
The couple are facing several charges and are said to have carried out two fake insurance claims for individuals called Jim Davis and Lara Urich, leaving agents etc stunned at the lengths some will go to. The Times stated: “the defendants are accused of faking the cremation of a "Laura Urich" and collecting $5,000 in funeral expenses and $50,000 in insurance death benefits through two purported beneficiaries, according to court records.” Aside from being an important thing to consider when each of us reaches that certain time in our life – in 2009, it seems that life insurance could be the most intriguing subject of the time. And a great reflection of life in the 21st Century.
Centenarian Life Insurance: The future of the insurance industry?
As the world population increases, it has become less of a surprise that economically developed countries have begun to experience the trend of an aging population. This has resulted in the increase of life insurance policies that are specially tailored to the needs of older people.
Such policies, usually sold as final expense insurance (but sometimes referred to as preneed or prepaid insurance), have been introduced by some insurers in order to give older members of the public the opportunity to buy insurance as they may not be able to afford a standard life policy. Final expense insurance policies typically offer immediate cover (although, a vesting period isn’t uncommon) which does not expire over a certain time, and the payout is usually used for funeral expenses such as travel and hearse hire.
The benefits of final expense insurance for customers, as well as companies eager to make themselves stand out from the pack, are quite obvious – so what does the future hold for the industry? According to a press release sent out by specialist life insurance company, Life Insure, they have embarked on an unprecedented move – to offer an insurance policy exclusively for those aged 100 or over.
On first reading, the notion seems absurd but possible at the same time. For someone who writes about the insurance industry frequently, I have seen many interesting trends and gimmicks develop in this highly competitive market, and one insurance company offering cover for a small but growing target market does seem like quite a good idea. Suffice to say, I was a little disappointed to find that the policy does not explicitly exist in reality – and was most likely a PR stunt. This conclusion was further enhanced by the comedic tone of the release and the overly senile responses of the centenarians who attended the product launch. (‘Gary Foss was more concerned with taking a nap’!)
That said, the prospect did get me thinking. Whether such policies do or do not yet exist, it doesn’t seem too far fetched to believe that they will do soon enough. The fact that the population is aging is one thing, but as a marketing aid – being the first company to seriously offer centenarian life insurance will no doubt be a very positive step indeed. Not to mention a sign of changing times!
Life Insurance - A Short History
With the recent economic meltdown, the insurance industry has become the subject of news reports and articles all over the world as the US government offers more and more bailout capital to fledgling companies. As I write this (2nd March 2009), AIG, including their subsidiaries American Life Insurance Co. and American International Assurance Co., have been given $30 million and this led me to write this article: A Short History of Life Insurance.
Whilst the act of insuring dates as far back to 5000 BC, life insurance is said to have originated in Rome with funeral expenses being covered by “Burial Clubs”. In his book, The Roman Cult of Mithras, Manfred Clauss describes the ‘Collegia’ whose primary function may have been ‘to provide a decent burial for their deceased members,’ at a time when many would have had limited financial resources.
Insurance all but disappeared in Rome as the civilization fell in 450 AD. However, in the East similar insurance arrangements have lasted since 1000 BC, such as ‘community insurance’, and similar ‘burial societies’ established by Buddhists. Such schemes were also established in England. These were called ‘friendly societies’ in which donations were kept for emergencies.
In late 17th Century, and against the trend of the rest of Europe, life insurance began being promoted – particularly in London. At this time of growing sea-expeditions and importing/exporting, Lloyd’s Coffee House (a café frequented by sailors, shipbuilders, and merchants) became the hub for reliable shipping news and communities of sailors who would insure cargoes etc.
Lloyd’s Coffee HouseToday, Lloyds of London is still an important British insurance market. The developing English insurance model (that was further consolidated by Nicholas Barbon who opened a buildings insurance office after The Great Fire of London) soon became adopted worldwide.
The Great Fire of LondonIn the US, the first life insurance company available to anyone was established in 1761, though it wasn’t until the New York Fire disaster of 1835 that the public began to fully understand its importance. Public liability insurance arrived with the birth of the automobile at the end of the 1800s.
New York Fire disaster of 1835By the turn of the 21st Century, the USA became the second biggest market for life insurance premiums after the EU. In late 2008, after the collapse of the US housing bubble, financial institutions began to feel the knock on effect of the “Credit Crunch”, the first being the mid-sized UK bank Northern Rock, followed by the subsequent bankruptcy of the financial services firm Lehman Brothers. This caused the governments of the US and UK to intervene with certain companies caught up in the crisis, including AIG who have recently reported the biggest net loss in history at $61.7 billion for their last quarter.
Life Insurance – There’s more to giving up smoking than just getting healthy
March the 11th sees the 25th anniversary of No Smoking Day, a day of national recognition and support for those who want to try and give up.
Over the past 25 years the campaign has grown from an awareness day organized by a group of individuals with an interest in health, to becoming a fully registered charity in 1991, and onward to employing a full-time staff and becoming one of the best-known days of its type. In light of the ongoing global economic difficulties and the ‘credit crunch’, this year the campaign is more geared towards how smokers can save money if they give up – alongside the well-known health benefits.
So how can giving up smoking at this time help you save m
oney?
The first financial saving to consider, is what you might save on a day to day, week to week, or year to year basis, if you were to give up smoking now. According to myfinances.co.uk, the average packet of cigarettes costs £5.67 in the UK.
If we assume that the average smoker gets through a packet a day, a week of non-smoking will save you £39.69, a month of non-smoking will save you in the region of £177.75 – yet over an entire year you will be set to save a massive £2,069.55.
It is fair to acknowledge that not everyone who wants to give up smokes £5.67 worth of cigarettes everyday, but during these times of belt-tightening and cutting back, the prospect of saving over a thousand pounds after a year of non-smoking must sound tempting to anybody.
However, savings from giving up smoking don’t stop with the cost of cigarettes. As life insurance companies become more and more competitive whilst frugal customers threaten to cancel their policies, now is the best-time for non-smokers to benefit from slashed monthly premiums in comparison to their smoking peers. Savings of up to 50 percent on payments can be made for non-smokers, whilst comparison website moneysupermarket.com estimate a 30 year-old male smoker will spend over £8,000 more on life cover than a non-smoker of the same age.
The financial benefits of giving up around the 11th March go even further though. With the growth of No Smoking Day year on year, many businesses, including supermarkets and shops, have tried to get a piece of the action. Supermarket giant, Asda are discounting prices of nicotine patches and gum in an offer to help their visitors stop at this time. It certainly seems that, in terms of saving money from stopping smoking, March 2009 may well be the perfect month to give it a try.
Life insurance, the last thing on our minds
So where are us Brits cutting back when it comes to our monthly spend? And when it comes to some of the things we’ve been idly paying for until now, are we in danger of forgetting how essential these things actually are?According to firstrung.co.uk, in a recent survey 42 percent of those asked said that should they be forced to cut back on one monthly payment, they would stop paying into their savings accounts. Additionally, from a survey of families carried out by creditchoices.co.uk, 37 percent would claim to reduce their savings, in a move to seemingly ignore the consequences this could have for the future.
That’s not to say that we are not also cutting back in less essential areas. In the same survey just over half of people asked said they would stop spending money on leisure activities and holidays. However, this is not only due to the fact that we have less credit due to the crunch, but also because the price of raising a family has increased at a significant rate recently – 4 percent in a year, and a full 38 percent in the last five years.
This is where the respective meanings of ‘essential’ and ‘non-essential’ seems to be getting a little foggy, for it doesn’t seem illogical to me that I would consider paying for a holiday as not essential. However at the same time, the statistic of just 52 percent of families choosing to cut back in this area suggests there is a great portion of people who would disagree with me.
Similarly, whilst I would consider life insurance to be closer to the ‘essential’ end of the payment spectrum (especially where raising a family is concerned), there are a fair amount of people who are eager to stop those payments despite the risk to future security. Interestingly, there is a significant difference between those asked in the ‘individuals’ survey discussed by firstrung.co.uk, compared to those asked in the ‘family’ survey by creditchoices.co.uk. The former survey reports that five percent would neglect their life insurance policies, whilst 23 percent are said to be reducing or cancelling life insurance in a family situation.
So is this percentage difference because of the greater need for families to cut back in more areas, or because of a gradual change in what we as a nation prioritize when it comes to spend? Essentially, do we feel more obliged to have a holiday now than we did in the past? It’s a complex question, but it seems to be a worry to some in the business who are also arguing that long-term financial security such as life insurance is more important now than it has been in the past. To those people, even the thought of cutting back in such an area does not seem sensible at all.
Life Insurance for Storm Chasers
Storm chasing is the recreational pastime of seeking out extreme weather conditions with the aim usually being to satisfy a personal interest by photographing or videotaping the phenomenon.
Storm chasers gather near approaching storm Although storm chasers rarely get paid for the activity, and are usually meteorologists or scientists acting in their spare time, the countless amount of documentary evidence they have produced has often gone on to benefit researchers, governments, and the authorities. So, if not affecting life insurance directly, do storm chasers receive higher premiums?
Tornadoes are the icing on the storm chaser’s cake, and although spotting one is not the most important goal of chasing, to be able to track and monitor the unpredictable nature of tornado for a significant period of time is considered a great achievement.
Subsequently, the areas of the world (most notably, the mid-south east of the US) that experience frequent tornado activity are popular destinations for storm chasers. Risk-wise, although not as powerful as hurricanes, they are certainly more frequent (approximately 1000 per year). Therefore it is standard procedure in these areas to check whether your homeowner’s insurance covers tornado damage and to expect higher premiums because of it.
Thunderstorms are much more likely to be successfully ‘chased’ than tornadoes. Interestingly, despite the arguably high frequency of thunderstorms, the average chance of an American being struck by lightning is 1 in 576,000, yet expectedly, the chance for a chaser to be struck is far greater.
So far no storm chasers have died, and it seems that the old adage of the car being the safest place to be has proved quite true as those that have been struck have been outside in close vicinity to wire fences and pylons that have conducted unexpected strikes.
Hurricanes, although rarer than the above, are no-doubt more dangerous and combine all the risks of the above. As a result of this, high risk areas are prone to needing hurricane insurance and this can include most of the US.
A typical storm chasing vehicle Many of the most awe inspiring chaser photos are of flash floods and coastal areas during a hurricane as a cause of high precipitation and wind. This leads to the biggest risk for chasers, it not being the storm itself, but driving through severe wet weather (core punching) which can include heavy rain or even hail and making it incredibly treacherous for any driver. To date, the only recorded chaser death was caused by a car accident.
Visit the Official Storm Chaser website for more information on storm chasing.
Life Facts
Ironically, more money is spent each year on alcohol and cigarettes than on Life insurance.
Not the most interesting fact but you might like these facts of life....
02) At the end of every party there is always a girl crying.
03) One of the most awkward things that can happen in a pub is when your pint-to-toilet cycle gets synchronised with a complete stranger.
04) You’ve never quite sure whether it’s ok to eat green crisps.
05) Everyone who grew up in the 80’s has entered the digits 55378008 into a calculator
06) Reading when you’re drunk is horrible.
07) Sharpening a pencil with a knife makes you feel really manly.
08) You’re never quite sure whether it’s against the law or not to have a fire in your back garden.
10) Nobody ever dares make cup-a-soup in a bowl.
11) You never know where to look when eating a banana.
12) Its impossible to describe the smell of a wet cat.
13) Prodding a fire with a stick makes you feel manly.
14) Rummaging in an overgrow garden will always turn up a bouncy ball.
15) You always feel a bit scared when stroking horses.
16) Everyone always remembers the day a dog ran into your school.
17) the most embarrassing thing you can do as schoolchild is to call your teacher mum or dad.
18) The smaller the monkey the more it looks like it would kill you at the first given opportunity.
19) Some days you see lots of people on crutches.
20) Every bloke has at some stage while taking a pee, flushed half way through and then raced against the flush.
21) Old women with mobile phones look wrong.
22) Its impossible to look cool whilst picking up a Frisbee.
23) Driving through a tunnel makes you feel excited.
24) You never ever run out of salt.
25) Old ladies can eat more than you think.
26) You can’t respect a man who carries a dog.
27) There’s no panic like the panic you momentarily feel when you’ve got your hand or head stuck in something.
28) No one knows the origins of their metal coat hangers.
29) Despite constant warning, you have never met anybody who has had their arm broken by a swan.
30) the most painful household incident is wearing socks and stepping on an upturned plug.
31) People who don’t drive slam car doors too hard.
32) You’ve turned into your dad the day you put aside a thin piece of wood specifically to stir paint with.
33) Everyone had an uncle who tried to steal their nose.
34) Bricks are horrible to carry.
36) Knowledge is knowing a tomato is a fruit; Wisdom is not putting it in a fruit salad.
Life Insurance Terms Glossary
When choosing your life insurance policy you will come across a host of bewildering terms. The following brief glossary is intended to help you steer your way through at least some of the maze.
Critical Illness Cover
Either as an add-on to a term life insurance or as a standalone insurance, critical illness cover will offer you and your dependents protection by paying out a lump sum (or occasionally a regular income for a pre-determined period) should you be diagnosed with a specified critical illness during the term of the policy.
Convertible Term Assurance
This is a type of life assurance that provides the policyholder the benefit of converting a normal, level term insurance to include a whole life, investment or endowment insurance element, which effectively provides a form of savings or investment that matures when the policy comes to term.
Decreasing Term Assurance
Over the course of the insurance term, the guaranteed sum assured steadily decreases. This type of insurance is traditionally used to cover the declining balance of outstanding repayments on a mortgage loan. Most lenders will insist that some form of life assurance is in place to protect their lending in the event of the borrower’s death.
Family Income Benefit
These insurance policies pay a regular – and tax free – fixed monthly or annual income to your family in the event of your death within the agreed term of the insurance. They are especially attractive to policy holders with young families and can be arranged as an add-on to a term life insurance or as standalone insurance.
Guaranteed and Reviewable Premiums
Policies with these types of premium are just as they say on the label: the cost of premiums can either be guaranteed throughout the term of the policy (and are sometimes called level premium policies) or they can vary as the rate of inflation varies, by linking the price of premiums to movements in the Retail Price Index.
Income Protection
This type of insurance covers payment of a proportion of your salary for a given time if you are temporarily unable to work because of sickness or injury. The length of time payments are receivable depends on the policy term – commonly two years, or up to age 60 or 65.
Increasing Term Assurance
This is a convenient way to compensate for the adverse effects of inflation over the term of the insurance by providing for an increasing value in the sum assured.
Indexation
Index-linking allows both premiums and the sum assured to be increased in line with the Retail Price Index.
Level Term Assurance
This is the simplest, most straight forward, no-frills life insurance. You pay the agreed premium and the insurer in return agrees to pay a fixed, guaranteed lump sum if at any time you should die during the term of the insurance.
Mortgage Protection Assurance
This is a form of life assurance intended to ensure that your mortgage is fully paid off in the event that you died before you had had the opportunity to pay it off.
Renewable Term Assurance
This arrangement gives the policy holder an option to renew the insurance at its expiry date and continue without having to provide a medical report.
Terminal Illness Benefit
As the name suggests, this is very similar cover to that offered by critical illness cover, as described above. In this case, however, payment is made in the event that the policy holder is diagnosed with a terminal illness within the term of the insurance.
Total and Permanent Disability
Similarly total and permanent disability cover offers protection in the form of a lump sum (or occasionally regular monthly) payment if the policy holder suffers a total and permanent disability during the term of the insurance.
Trust
A Trust is a way of putting something valuable (in this case your life insurance policy) aside to ensure the money goes to the people you want it to when you die. If the policy isn't owned under trust it automatically becomes part of your estate, thus increasing its exposure to inheritance tax. Putting the policy in the name of a trust can help to avoid inheritance tax.
Waiver of Premium
This can be offered as an optional policy cover that providies continued life insurance coverage without further premium payments if the policy holder becomes unable to meet their premiums due to injury, sickness or unemployment.
Terminal Illness cover
This type of cover also pays out if you are diagnosed with a terminal illness (terminal illness benefit does not typically apply in the last 18 months of the policy, and life expectancy must typically be less than 12 months).
Life Assurance
Interchangeable with Life Insurance (see def.) Life cover that provides a guarantee or promise of cover in the case of certain event that will happen e.g. death.
Life Insurance
Interchangeable with Life Assurance (see def.) Life cover that provides guarantee or promise of cover in the case of certain event that might happen e.g. death.
Death in Service
Lump sum cover provided by an employer. This is in the event of an employee's death whilst in employment. Typically a multiple of salary e.g. 4x salary.
Whole of Life
Whole life insurance is the most common variety of permanent life assurance, providing a guaranteed amount of death benefit and a guaranteed return on cash values. Premiums are also fixed and guaranteed not to increase.
Financial Services Derectory UK - UK Directory of financial services and indepent financial advices.
How do I protect my families money?
Here are 10 things you can do to protect your families wealth from the simple creating a will to the less obvious like discounted gift schemes.
1.Make a will
Without a will, the State decides who receives money and assets in your estate. When this happens in England and Wales, your spouse takes the first £125,000 as well as your personal possessions and an interest for life in half the balance. The rest goes in equal shares to your children.
By making a will you could, for example, transfer some of your assets to children, grandchildren or others after your death within the £300,000 nil-rate band which would mean these bequests were IHT-free. All transfers between spouses are IHT-free but simply passing all assets to the surviving spouse means the IHT allowance of the first spouse to die is wasted and an extra £120,000 extra tax may be paid when the second spouse dies.
You could also use your will to set up a family trust but recent legal changes may mean your will needs updating. It is important to revise your will whenever your circumstances change - for example, when there is an addition to the family.
2.Change ownership of your home
Couples usually own their home jointly, meaning you both own the entire property. You should change ownership to become tenants in common so that you each own half of it.
David Rothenberg of accountants Blick Rothenberg explained: 'If you own it jointly, the house automatically belongs to the other person when you die. "By severing the joint tenancy you can give your share away to someone else when you die."
It is simple and cheap to do. A lawyer should charge around £100 to do it. But it is very important to consider the risk such a bequest might present to the security of tenure of the surviving spouse.
3.Equalise other assets
Equalise your estates. By having most of your cash, savings and assets held jointly or in one name only, the other person will not be able to use up their IHT allowance in their will.
Accountant Charlotte Black of Brewin Dolphin said: "If everything is held jointly it causes a problem as there is nothing to pass on when the first person dies."
Where husbands and wives or other members of civil partnerships trust each other sufficiently to equalise assets, they may even achieve immediate tax savings through making more use of the personal allowance for income tax - currently £5,225 per person aged under 65 - and capital gains tax - £9,200 per person during the tax year which ends on April 5, 2008.
4.Give with warm hands
You can give money and assets away before you die but there are strict limits under the IHT regime. Each person can give away £250 a year to any number of people as well as £3,000 in total annually to different people.
If the £3,000 allowance wasn't used last year you can give away another £3,000 this year. So, for example, couples who have made no use of this gift allowance can give away £12,000 in total this year.
There are no limits on the amount you can give away regularly out of your income, but it must not reduce your lifestyle.
Mr Rothenberg explained: "The Revenue is getting quite tough on this - so it's important to keep records of your expenditure as your income has to remain sufficient to cover your expenses. And record what you've given away."
5.Put your life cover in trust
When you die your life insurance will automatically pay out to the beneficiaries without having to go through the IHT regime if it is held in trust. The death benefit passes directly to them without being counted towards your estate. The life company - or, for example, the insurer which issued a with-profits endowment - will give you a form to complete to do this and it is usually free.
6.Check your pension arrangements
Employers' pensions are normally written in trust meaning any death-in-service lump-sum payment passes directly to whoever you nominate. Pension benefits for a widow or widower do not affect IHT though they will be subject to income tax.
Personal pensions should be written in trust, too, so that the pension pot can pass tax-free to whoever you wish. This must be done before you have to buy an annuity at 75 and cannot be done if you are in poor health - so it makes sense to consider action sooner rather than later. For example, as Mr Rothenberg said: "You can't change it if you are at death's door."
7.Consider tax-efficient investments
Several investments are free of IHT after they have been held for two years. These are shares quoted on the Alternative Investment Market (AIM), forestry land, farming land - provided you farm it, rather than rent it out - and partnerships or shares in a private business.
However, the favourable tax treatment should not blind you to the risks in these investments, particularly AIM shares. Small or recently formed companies are often more vulnerable to setbacks in a particular sector and may have smaller reserves to help them survive difficult conditions. There is no point losing capital to avoid tax.
8.Think of a PET
Potentially exempt transfers (PETs) are gifts of assets, cash or property you make before you die but you have to survive for seven years before they become IHT-free.
After three years, the beneficiary may get some tax relief which can increase each year until the seven years is up. However, if the gift is less than the nil-rate band the whole amount is added back into your estate when calculating how much you owe in death duties.
Mike Warburton of accountants Grant Thornton explained: "The tax relief is a discount on the tax, not the transfer itself. A single gift of £300,000 six years before the death of the donor will save nothing because the gift would all be within the nil rate band. This is frequently misunderstood."
You can't give your house away and continue to live there to diminish IHT liabilities, as the Revenue will regard it as remaining in your estate. But you can give it to a child who lives with you, said John Liddington of lawyers Speechly Bircham. He explained: "The child must live in the property until you die or go in to a home and you must both contribute to the running costs in order not to fall foul of tax rules."
9.Discounted gift schemes
These are single premium life policies which pay you an income for life and you give the policy itself away. Because it is paying a fixed income, the value of the policy is reduced. The actual discount is based on your age - the older you are the more valuable it is - so you have to be under 90 years old to use this type of scheme. However, it is important to understand that HM Revenue & Customs has pursued a strategy of challenging tax avoidance schemes in the courts which may continue in future.
10.Set up a trust in your will
Homeowners usually have the majority of their wealth tied up in their property. Without a trust, you cannot give away your share of the family home safely.
In this instance, the trust only comes into existence when you die. You will your assets and share of your house (held as tenants in common) to the trust up to the value of the nil-rate band, currently £300,000 and due to rise to £350,000 by 2010.
Then the trustees sell the share of the house back to the surviving spouse in return for an IOU. When the second person dies, the loan is repaid, thus using up the first person's nil-rate band.
It may sound simple but trusts are complicated and need a specialist to handle them. For example, earlier this year, the family of an Oxford don and his wife had to pay £60,000 in IHT when their trusts were considered to fall foul of IHT rules.
The problem was that Dr Patrick Phizackerley gave half his house to his wife, who then willed it to a trust on her death, and the trust lent him the share back until his death. However, the Special Commissioners, who settle disputes between taxpayers and the HM Revenue, ruled the scheme did not apply as Mary Phizackerley had no income and had not contributed to the house.
Mr Liddington said: "Since he'd given her half the house and then loaned it back to him via the trust after her death, he was considered to have lent his gift back to himself so the loan was not deductible for IHT."
- Write a will and/or check that your existing will is up to date
- Consider changing the legal form of ownership of your home
- Equalise your assets so that both partners make use of tax allowances
- Make gifts sooner rather than later
- Put life assurance policies in trust and outside IHT
- Check pension death benefits
- Consider investing in tax shelters
- Think of a PET - or Potentially Exempt Transfer
- Discounted Gift Schemes may help - but beware pitfalls
- Set up a trust in your will
What happens if a smoker lies on a life insurance policy
With life insurance, there are three different premium classifications: standard, preferred or preferred plus. By not smoking (or having not smoked for at least 5 years) and being in excellent health, you will be awarded with a lower life insurance rate because your chances of dying sooner are reduced.
If for instance, you are classified as "normal healthy," meaning you haven't used nicotine in at least three years-then you would fall into a standard classification with a life insurance company. Under this standard classification you would pay a normal life insurance rate for your age, as opposed to a smoker, who would pay a higher insurance rate because they are tagged a potential risk. Something to think about the next time you light up a cigarette!
Are you considered a smoker?
In the world of life insurance, by answering "yes" on your application to the questions, "do you smoke?" or "do you consider yourself a smoker?," you would be considered a smoker. The same goes for answering yes to the questions of "have you used tobacco products, cigarettes, cigars or chewing tobacco within a specified time?" By insurance standards, even if you smoke socially or just once a year, you are considered a smoker. For the occasional smoker, you should answer the question as best as you see fit.
The cost of smoking
Research shows that smokers pay at least three times the premium of nonsmokers-which is what motivates many people to lie on their life insurance applications.
To lie, or not to lie
With life insurance, a nonsmoker's application is due to be reviewed more thoroughly than a smoker's life insurance policy, because the premiums are so different.
It is possible for smokers to "cheat" the system, because nicotine clears out of your system within 72 hours after smoking your last cigarette. Cotinine is the primary metabolite of nicotine, and the most common identifier of nicotine levels. If the urine test is given 72 hours after your last cigarette, the nicotine level may be low enough to escape detection. This is theoretically possible for even the heaviest of smokers.
You passed! Now what?
The policy between you and your insurance company is a legal contract, so it is important that you do not lie about your smoking habits. If you were caught lying during the underwriting process, your rates would be bumped up to a smoker's rate when your policy is approved. No insurance company is going to come right out and says they are going to drop your policy if they found out that you were lying. However, some life insurance companies will place random phone calls to applications who are questioned on a multitude of things, even smoking. The survey is designed to weed out liars by listening for inconsistencies in the applicants' answers.
What happens if you are caught?
The worst thing that could happen if you are caught is that your life insurance policy will be issued at a higher rate.
What if you start smoking after the policy is issued?
Many life insurance companies go by the "don't ask, don't tell" idea. It is important to be truthful when filling out your life insurance policy, but if you start smoking after it's issued, you are not required to tell your insurance company. If you die, and your life insurance policy labels you as a nonsmoker, when indeed you began smoking, your death benefit will not be jeopardized.
If you are interested in purchasing a life insurance policy or would just like to get some life insurance quotes, visit the Post Office at http://www.postoffice.co.uk/portal/po/jump1?catId=19300223&mediaId=61000695
Cashing life insurance
Thinking of cashing in your life insurance? Cashing a life insurance policy can be costly business! In recent years cashing a life insurance policy has become a very common practise. It used to be that most life insurance policies were left in force in order that the intended beneficiaries could receive the face value of the insurance policy upon the death of the insured.
Ever since the inception of the aids virus, people with the disease have searched for ways to get their hands on cash to pay medical bills and in some cases just to live. Thus, if these people have life insurance policy with large cash values they end up cashing a life insurance policy or selling their life insurance policies.
Even the people who are receiving structured settlements from life insurance or an annuity are cashing their settlements in return for an immediate lump sum. These companies that buy these settlements or policies are enjoying a real bonanza...but the person with the terminal illness and their families are really losing in the end.
These investment companies buy life insurance policies from terminally ill people for a percentage of the face amount of the policy. The investment company pays all premiums for as long as the insured stays alive and collects the death benefit upon his or her death. The investment company is called a viatical company. Selling the policies can be referred to as "viatication".
In some situations people who are not terminally ill also sell their policies. In their situation their health has declined and they are in need of cash. These are referred to as life insurance settlements.
Instead of cashing a life insurance policy or selling your life insurance policy it may be prudent to take a loan from your policy if the "loan value" is sufficient to meet your financial needs. Bear in mind that there may also be tax implications involved with cashing a life insurance policy or selling it.
Life Insurance
1 in 3 is the number of families who have no life insurance cover, critical illness insurance, or income protection cover in place. It is very important that people understand exactly what they are buying. Speak to a life insurance and protection adviser who will highlight appropriate policies. People should view income protection, critical illness, life insurance, private medical insurance and mortgage payment protection insurance as a basket of goods, choosing which are most relevant for them at any given moment.
When buying insurance, you can be overwhelmed by an information avalanche. To protect your future from poor choices today, try searching in terms of the 5 W's:
Who?
The classic argument to avoid life insurance runs, "If I die, why do I need money?" You don't -- but your family, your business or your favorite charity might. So anyone with dependents, human or otherwise, might need life insurance. Of course, if you don't need to protect anyone else, insurance is not a wise way to spend money.
What?
People approach life insurance with predisposed notions. They might be oriented to term insurance, yet don't have a good argument as to why. Any kind of insurance is a contract with requirements on both sides. Unfortunately, too many people think life insurance is a commodity, like going to the grocery store and picking up a piece of fruit to judge."
"Term" insurance forms the base of every life insurance policy. Think of it as renting a safety net: The owner pays a fixed premium toward a concrete payoff over a specific time. If you die during this period, the insurance company pays the promised amount. When the policy reaches its deadline, the coverage vanishes.
Some insurers offer convertible policies that allow a return client to take out another policy at the rate of a healthy person, but you pay a higher premium for the privilege. Insurance companies also offer three variations of permanent life insurance - that is, insurance that covers you for your entire life.
"Whole life" offers term insurance's set payoff for a set premium, except this policy doesn't come with an ending date. You'll pay the premium for the rest of your life, unless you decide to cash in and receive the cash value as a lump sum.
With "universal life", the insurance company separates the investment and death benefit portions, socking your investment dollars into its choice of bonds, mortgages and money market funds. Then your investment fund pays for the cost of the set death benefit. And, according to LIFE, no matter how badly the investments pan out, the insurance company guarantees you a minimum return.
You, as the policyholder, can change the premiums and death benefits to suit your current budget, so this appeals to younger crowds.
Finally, if you buy variable life, the death benefit payoff depends on your success in picking investment opportunities with the money (although the insurance company does cough up a guaranteed minimum death benefit at your death if you screw up too badly). These policies must be registered with the U.S. Securities and Exchange Commission.
Where?
Approximately 90 percent of life insurance is sold at the kitchen table; a growing 7 percent to 10 percent is sold over the Internet, according to AccuQuote's statistics. In either case, caution should prevail. This is not something you want to screw up and leave someone in the lurch.
When?
If you buy a term policy, there's no penalty to committing today. Just as homeowners refinance mortgages at lower interest rates, life insurance policyholders can cancel a policy at any time to replace it with a less expensive equivalent -- providing their health remains stable, of course.
Why?
Life insurance provides instant liquidity to meet the obligations that become due upon your death. It's a pool of money to complete what you can't finish. It's also not taxable income. Of course, don't make it your sole investment strategy. Other vehicles' returns beat permanent insurance products hands down!
How much?
When pondering coverage, buyers first should inventory their assets:
- job insurance perks
- social Security benefits
- IRA accumulations
- stocks
- bonds
- savings accounts
"We don't want to think about these objectives because it's unpleasant for ourselves. It's easier to flip on a computer, say I need £125,000 and discover it costs X amount per month! Many buyers arrive at coverage numbers using the popular formula of four times their annual current salary. Wrong.
Too frequently people go into this half cocked with numbers they literally pull out of the sky. Taking a simple multiple of your current earnings is so nonspecific, it doesn't add up.
You should rely on a capital assessment to determine coverage need.
I typically tell people during the accumulation phase of their financial life that now is the time you can start cutting back on life insurance. Instead, build up your capacity to self-insure. Otherwise, here I am five years down the road with pay raises, and I'm still using a multiplier of four times whatever my income is. I'm basically buying more life insurance than I need."
As yourself this question "If I wrote you a cheque today for the amount on your insurance policy, would you work for me for the rest of your life at no pay?"
Next, is the price you pay reasonable? Insurance companies use life expectancy tables and risk classes to determine rates, then factor in underwriting costs. They consider mortality rates over time, so isolated events, such as the Sept. 11 attacks, don't significantly impact rates.
Today, Internet speed means companies compete on rates by the minute, so overall life insurance rates have plummeted nearly 60% from their costs just seven years ago. Yet a 40-year-old in good health seeking a 20-year term policy can find quotes ranging from £18 to £100.
The middle of the pack is almost double what you need to be paying, and believe me, plenty of companies in this level sell tons of life insurance. However, a few extra pounds for an A-plus-rated firm makes sense. Niceties like convertibility and quick claims processing stack up, too. In other words, cheapest isn't the only consideration.
Anything within £15 and £30 annually isn't worth the savings to deal with a poor company!
People often say, 'When I buy life insurance I'm betting against myself.' That's the worst expression I've ever heard,"
Drinkers face Life Insurance price rise
Middle class drinkers who consume more than their recommended weekly intake of alcohol face paying higher life insurance premiums. The changes are likely to hit middle-aged, middle class consumers, particularly women, experts said.
Official guidelines say women should drink no more than 14 units of alcohol a week, and men 21 units – with one unit equivalent to half a pint of beer, a shot of whisky or a small glass of wine.
But the reality shows that many drink far more, with 10 million adults – 20% of men and 30% of women - drinking at a level which is "hazardous" to their health.
Insurers say they are reacting to increases in health-related problems such as cirrhosis of the liver, heart problems and certain cancers. A woman who drinks 21 units a week, not far above the Government's guidelines, could end up paying an extra £50 a year.
A man drinking 35 units, equivalent to two and a half pints of lager a night, could pay extra premiums of up to £100 a year.
And a man who admitted consuming 50 units a week could see his premiums double from £150 to £300 because his drinking would be categorised as "harmful". Very heavy drinkers could be refused cover completely. Most life insurance firms are now checking doctors' notes for signs of alcohol use in order to make sure claimants are not lying about their alcohol use.
Several companies admit refusing to pay out claims if they have evidence that they were drink-related. Companies including the AA, Norwich Union, Legal and General and Direct Line said they will increase premiums for drinkers.
A spokesman for the AA said: "Heavy drinkers are more likely to suffer from liver disease, high blood pressure and strokes. They are also more likely to have an accident, possibly fall into the road, and they are more likely to be involved in a fight."
Malcolm Tarling of the Association of British Insurers said: "Insurance companies are simply making a normal judgment of risk.'"
New Year Resolution - To Check Your Life Insurance Policy
Have you got life insurance? If so, make sure one of your New Year resolutions is to check to see if you are not paying over the odds for your life insurance premiums.
The cost of life insurance has fallen by around 40% over recent years which means that many customers could be wasting thousands of pounds by not reviewing their protection policies.
Life insurance customers should use the new year as a reason to get their finances in order, and compare life insurance quotes to ensure they are not getting overcharged to better prepare themselves for what could be a tough 2009.
Last year saw the price of life insurance and critical illness insurance continue to fall, which means now is a good time buy. With the rising level of unemployment, income protection insurance is also becoming more important than ever, and, according to research from MoneyExpert.com, more than a third of Brits believe payment protection insurance to be an important purchase as a result of the current economic climate.
While income protection insurance has remained relatively static in price, it is still possible to save money and it could prove to be a valuable investment as the economic crisis tightens and more businesses topple under the weight of a recession.
Those who gave up smoking for their new year's resolution last year and have stuck to it for 12 months should review their life insurance policy and inform their insurance company; while this does not guarantee a cheaper premium, because it also depends on age and health, it could potentially cut hundreds of pounds off the cost of cover.
Over the average term of a life insurance policy for a 35 year old male in good health, there could be a saving of £1,239 between the most expensive and cheapest policies, a £3,039 difference between the cheapest and most expensive critical illness insurance policies, and a huge disparity of £8,769 between the cheapest and most expensive income protection insurance cover, so an individual could save as much as £13,000 over the terms of their insurance policies.
There are a number of steps that customers can take in the new year to freshen up their finances and save a bit of money. The first thing is to actually take action. Don't wait until New Year's Day 2010 comes round before you start thinking about saving money on insurance premiums again. However, it is important to remember that price should not be the only consideration when choosing a protection product and customers should look at the policy that offers the best value for money rather than simply the cheapest.
Life Insurance for Astronauts
Everyone knows that when it comes to buying a life insurance policy, high risk jobs such as acting, working on an oil rig or being an aircraft pilot will all push up the price quite considerably. What, then, does this mean for astronauts - those heroes among us who choose to get blasted into the atmosphere in a matter of seconds? Let's have a look at the risks.
I suppose we must at first, at least, consider the lift-off element of space travel. Humans are physically limited by the amounts of G-forces they can endure and it would be possible (but very slow) to reach space whilst undergoing just one G, therefore it is usual for lift-off to push to between five and seven Gs with the aim of reaching space in just eight minutes. It is no surprise then that one of the biggest space fatalities happened during the take-off of space shuttle Challenger in 1986.
Interestingly, once in orbit, they are moving just as fast. But risks for the astronauts actually get worse when one considers the amount of radiation in space. Not only can cosmic radiation have an effect on blood marrow, whilst weakening the immune system and increasing the risk of infection - it can also have an affect on the medicines taken along. After recent reports, NASA are currently studying the damage that radiation can do to on-board pharmaceutics. Testers have found a "significant degradation" in certain medicines including Augmentin and Bactrim.
The affect of weightlessness is also not without adverse effects - despite it seeming to be one of the most alluring factors of space travel. Tests have shown that astronauts who have experienced weightlessness for significant amounts of time have been known to develop loss of bone density, a lacking in muscle strength and endurance, postural instability and aerobic capacity. It is suggested that if an astronaut was to ever travel to Mars, his/her endured bone mass loss due to weightlessness would mean upon his arrival he or she would simply collapse.
So if space travel is so dangerous, how much does life insurance cost for astronauts? Insurance specialist Ed Hinerman claims that a person who becomes an astronaut will need to be reassessed and will most probably have to start paying a flat extra on every thousand pounds of his policy. He states that if one was to pay £2,000 a year, an astronaut may have to pay over £16,000 per year flat rate. It must really be worth it.
Visit Post Office for term life insurance quotes and to buy a simple, cost effective life insurance policy, offering you a way to pay off your mortgage or leave your family a cash sum when you die.
Post Office Life Insurance for over 50s
The Post Office has announced that it is to offer customers over the age of 50 the chance to buy life insurance over the counter.
While the Post Office already offers a multitude of over the counter products and services, including travel insurance, this marks the first time it has sold life cover in this way.
The new package, called Over-50s Life Cover, will offer instant protection from the moment it is purchased and will not require UK residents between the ages of 50 and 80 to undergo any medical checks.
Duncan Caesar-Gordon, the Post Office's head of protection, said: "In a time of such uncertainty people need peace of mind more than ever, which is why we are now offering instant protection over the counter."
Last week a survey by Barclays revealed that many people in the UK were cutting back on life insurance payments in order to save money during the credit crunch.
Life Insurance Starts at 50
It's inevitable that when you enter that bracket of the over 50s, your financial future starts to loom large. Pensions in particular are just over the horizon, and it's usually at around this time that you start to truly assess the provisions that you've put in place for such a time as when you retire (either that or you curse your lack of forethought!).
But alongside this imminent financial upheaval, there is the question that's beyond that, thankfully still out of palpable reach - life insurance.
Inevitably, ones own mortality starts to be felt in more and more of your life, and consequently, thoughts turn to providing for your nearest and dearest in the event of your death. Although it's easy to shrug off the notion of dying, it pays to consider taking out a policy, or reassessing your existing one, at this stage - potentially before any personal circumstances change. Age, sex and health are the major contributing factors to how expensive the premium on your policy will be, so of course, when you start in to your fifties, insurers will change their offers to fit that watershed, half-century moment.
Many companies will offer a specific over 50s life insurance, with particular rates and guarantees entailed. Often there will a guarantee of acceptance without any medical check - mainly because your age has become the largest factor in deciding how much your premium will be - though it pays to be entirely honest with your insurer.
Closet smokers who are in denial will find it's too late, post-death, to convince your insurer that you only smoke occasionally - by which time the pay out may have been denied. However, due to your being over 50, the policy will be particularly easy to arrange, although it is still worth shopping around for the best offer for you.
Most insurers will incentivise their product, and it may have repercussions on the way that your bank or building society - if you decide to take out a policy with them - will treat you as customers.
Wrong Cover Life Insurance?
According to the Association of British Insurers, more than half of British households have no life insurance—and of those who do invest in some protection, a large number have too little insurance, too much, or are simply paying for the wrong type of life cover. Simply having a policy is no longer enough.
There is a large range of options for life insurance, and it’s important to choose life insurance that will meet your current needs and provide adequate protection for your family.
You could be paying too much money for the wrong cover if:
- You’ve gotten married, had children, taken out or paid off a mortgage, divorced or retired without reviewing your policy
- You haven’t reviewed your policy within the last five years
- You bought any type of life insurance without first determining exactly what type of policy you needed
- You bought the life insurance cover that a salesperson told you was necessary, rather than seeking independent financial advice.
Choosing the Right Policy
Choosing life cover that will suit your lifestyle and family circumstances requires some careful consideration before you start shopping for policies. Depending on whether you’re married or divorced, have young children or adult children, are working or retired, your insurance needs are quite different.
Consider the following example. Let’s say you’ve just gotten married, and you and your spouse don’t plan to have children for around ten years. For the first ten years of your married life, the type of insurance you get may very well depend mostly on what you can afford. You won’t need a long term insurance policy, because your insurance needs will change when you start having children.
As a young couple with no children, a joint term policy is both cost effective and sufficient for your needs. However, when you have children, you will most likely want to increase the value of your policy, opt for two separate policies rather than a single joint policy, and also consider switching to whole life insurance. When your children become financially independent, you’ll again want to review your cover, and you may find that your insurance needs have reduced at this time.
One important point to note is that it’s better to seek advice from an independent insurance or financial adviser. An independent broker is in a much better position to shop around and find you the best prices, whereas a broker who represents a single provider is unable to provide this benefit—and sometimes they’re more likely to pressure you into choosing a policy that won’t meet your needs. You can find a database of independent financial advisers in the UK at www.unbiased.co.uk.
If you are certain about your life cover needs, you could also consider a discount broker such as Life Saver who will rebate some or all of their commissions to reduce the premiums you pay. Many of these brokers do not offer advice so this option is not suitable if you are unsure which product is right for you.
Insuring yourself for the Right Amount
How much should you cover yourself for? This depends not only on what you can afford, but also on your current lifestyle and expenses. A good rule of thumb is to choose a policy that is worth around ten times your annual income, before tax. However, if you have young children or a mortgage, you may want to consider a higher sum—for example, you might add the value of your mortgage to the sum assured if not already covered by another policy.
Note, however, that depending on your circumstances it may be more prudent to opt for a separate policy to cover your mortgage. If you don’t have much money to spare for insurance, choosing a decreasing term mortgage policy is a good option—this keeps your premiums lower, as the amount you’re insured for decreases as the mortgage is paid.
Action Steps
- Review your life insurance if you have had a policy for more than five years or if your personal or financial circumstances have changed.
- Take advice from an independent adviser if you are unsure about the type, amount or term of your policy.
Why Get Life Insurance?
Surfing the web has made the process of applying for life insurance a lot easier than days gone by. You can now get life insurance application processed in a matter of minutes rather than days.
Life insurance is a tricky subject as nobody wants to think the worst and especially if you are healthy and feel no need for it. However, life is very fragile. You only have to look in your daily newspaper every week to see those who have passed away and they are of all ages, not just the elderly. Life can be taken without a moments notice and leave your loved ones struggling without your financial help, especially if you have a mortgage or other financial commitments. This is why life insurance is so important.
Why Get Life Insurance?
Ignoring life insurance could put your family in a desperate financial position during a time when they are grieving at your passing. The last thing you want is for them to worry about money and paying the bills.
The massive choice of life insurance policies online can be overwhelming so here are some tips on how to decide what is the best life insurance cover for you.
- Ensure that you know exactly what you want. If you do not define your goals before you go looking for life insurance, you may end up selecting the wrong policy.
- Life insurance isn’t restricted to family men and women alone as business partners can also take out life insurance. If you want to ensure that your business stays afloat even after your death, you can take life insurance. As long as you have a beneficiary, life insurance is definitely not a wasted effort.
- The beauty about life insurance lies in the fact that the beneficiary will obtain a large amount of cash to continue the lifestyle he or she was living before. The life policy you buy can eventually be used by beneficiaries to pay off a mortgage on the home. Life insurance ensures that your family has the life that they have always been used to.
Term life insurance policy encompasses a contractual agreement between you and an insurance company in which you agree to pay a certain amount as premiums for a number of years. If you die before your term life insurance is up in a term life insurance, your recipient will receive the amount that the policy is worth.
Whole Life Insurance
A whole life insurance is one that covers you for the duration of your life. With a whole life insurance, you get to save some cash and use the cash for useful things such as your child’s education in college. Whole life insurance gives you the opportunity to gather more money through compulsory savings.
Shop around online for life insurance using a combination of price comparison sites and independent websites to get the best product at the best price for you.