Posts from the ‘Estate Planning’ Category

Jan 27

More on Par Policies a.k.a. “Participating Whole Life Insurance”

Introduction

This article continues the conversation begun in my last article on Par Policies. For those of you who haven't read it or have quickly repressed the details from your memory, here's a brief recap. Par Policies are a type of permanent life insurance that allows policyholders to reap some of the insurance company's rewards in exchange for taking on some of its risks. You take on these risks by paying a higher initial premium. The insurer doesn't expect its costs each year to be as high as it assumed when calculating your premium, so policyholders typically get some of their extra premium dollars back each year through something called a "policy dividend." How much do you get back? This is stated as a percentage and is called the "dividend scale." I'll now talk a bit more about this delightful thing and will see where the conversation goes from there.

Jan 21

Doing the Perm / Term Squirm – Part 3 Participating Whole Life Policies

Introduction

In some ways, life insurance is like fashion: today’s trend is next year’s embarrassment and next decade’s craze. Participating whole life (“par”) policies are a great example of this phenomenon. They have been around a long, long time but fell out of favour when universal life (a.k.a. “UL”) policies came into vogue. In fact, many of the larger companies even stopped issuing new Par Policies for several years until low interest rates, high investment management fees and rocky stock market returns made UL Policies a touchy subject in some circles and Par Policies an exciting “new” way to leave behind more for your heirs or to supplement your own retirement.

In order to spare you from having to endure 8 pages of info on this subject simultaneously, I'm going to break down my original article into small chunks so I can parcel it out to you in smaller doses. Here's the first installment.

Jan 8

Doing the Perm / Term Squirm Part 2: An Introduction to Permanent Life Insurance

If you’ve read my first article in this series, you probably know more than you really want to know about term life insurance. It’s now time to talk about the other side of the equation: permanent coverage. To recap, while term insurance is a simple tool with a few add-on features, permanent life insurance is like a swiss army knife that can do pretty much everything except make your bed and laugh at your jokes. Of course, whether this is worth the extra costs that can go along with these features and whether it is the best tool for your situation is an entirely different question. Sometimes, permanent life insurance can be a game changer. Sometimes, it can do a pretty good job but there might be other products or solutions that do an even better one. Sometimes, the wrong permanent policy can even leave you worse off than when you started. This article (and my ensuing) articles are designed to help you make informed insurance choices.

Nov 26

The Perm / Term Squirm: Deciding Between Permanent and Term Life Insurance Policies Part 1 – Term Life Insurance

Just so you know, I’m a big fan of life insurance, both permanent (“perm”) and temporary (“term”) policies. On the other hand, it is also important to pick the right policy for the report; sometimes a perm policy with lots of bells and whistles is the perfect solution but in others, buying a simple, inexpensive term policy is the way to go. In the end, it’s about figuring out what policy fits your needs and budget, rather than your advisor’s. Just don’t automatically assume that your insurance agent is on the take if she sings the praises of universal life or he extolls the merits of a participating whole life policy.