Posts filed under 'economic meltdown'
Since the financial meltdown of 08 began I have been gently screaming my head off for those millions of folks whose life insurance is tied up in whole life and traditional universal life to have it reviewed. Get a reality check!!!
There are only a handful of factors that impact whether a non guaranteed life insurance premium stays the same or increases. Technically I suppose it could decrease but since I haven’t seen that happen, ever, I suspect right now is not the time to begin watching for that occurrence.
Just for review sake, those factors that can change the rate are interest rates, company experience in investments and ratings, and mortality experience. The interest rates we are talking about is the interest that companies are earning on the cash value it takes to keep one of the aforementioned policies afloat. Since no one is making money on their investments currently, it’s safe to assume that their assumed interest rate may not be making ends meet. That’s one hit.
On the company experience point, well let’s just say there aren’t a lot of enjoyable company experiences going on right now. Many company ratings have been downgraded because of their exposure in the real estate market. If ratings go down, companies are required to carry higher reserves. On policies with non guaranteed platforms the additional funding will come from you, the policy holder. Coming soon to a mailbox near you is a rate increase that your agent said would never happen 10 years ago.
The only good news out of the three is that mortality experience continues to improve, but by no means is it going to offset the downsides.
There is one other piece of good news, but you need to act quickly. Term insurance and universal life with a no lapse external guarantee are still great values and because they are completely guaranteed (no assumptions), once locked in it is good for as long as you need it. But just a word of caution. If you hang out to see if my predictions come true and then try to bale and go the other way you may be too late. By then the cash value that once held your current policy together will be gone and, because of the reasons stated above, you will either find that the products mentioned above have disappeared or gone up in price, making switching much less attractive.
Bottom line. If you have permanent insurance or want it in your portfolio, this is no time to see how things ride out. It’s not like a stock that may eventually come back. Once it goes it may as well have been pushed off a cliff. Don’t let it happen to you. Get an independent agent to review your life insurance today.
January 8th, 2009
There are probably plenty out there that believe I wake up to the mantra every morning, and the truth is that I sometimes believe “if only I can blog loud enough”……..
We are in some horrific financial times and I’m thinking that very few out there have missed the economic meltdown going on. Even the most optimistic of experts believe it’s going to take some years for a full recovery.
So, let’s look seriously at a way to lower your monthly expenses and cover your downsized nest egg. I know this is going to tip some boats, but consider for a moment the idea of cashing out of your whole life or universal life policies and replacing them with lower cost term insurance. With the freed up cash go out and snarf up some of the best stock deals anyone has seen in a very long time.
I can hear the permanent insurance gurus screaming already, but let’s be real. Most universal life policies in force today are in trouble. They were in trouble before the economy was in trouble and now they are heading for the dunking tank and not looking back. As for whole life, you shouldn’t have bought it anyway. It’s overpriced and is not a “savings plan” or “retirement plan”. It is an overpriced life insurance policy. If you have $500,000 of whole life with $250,000 of cash value and you die, you get exactly the same amount of money as if you had a $500,000 term insurance policy.
Bottom line. So, consider it. Money in your monthly pocket. Money to invest at a time when investing looks like a good idea. And you’re finally rid of that bad idea for life insurance that you bought and have been to embarrassed to admit that it was truly a bad idea.
December 17th, 2008
With people climbing every mountain top looking for answers to how to save their retirement from the economic meltdown that has consumed us for the past few months, it amazes me that the financial guru’s of the world are leaving out one of the easiest and most important things you can do to put your retirement plan on at least some semblance of solid rock.
We keep hearing that this is not the time to sell. In fact, they say, that if you have any money, now is the time to be buying stocks and mutual funds. Well, whoever “they” are don’t seem to get it that this meltdown has sucked the marrow out of our money bags. We’re not looking for good deals. We’re looking for a way to keep our retirement from going down the crapper.
We’ve been told that if we have time before retirement that this economic downturn will eventually go the other way and we may regain all we’ve lost if we’ll just sit tight and not freak out. For those whose retirement is imminent that isn’t good news, but for those of us who have 10 or more years to weather this thing out, there’s really only one piece of the puzzle left to consider.
What happens if you die next year and your wife (or wives, your husbands) are left without your income to live on and are forced to tap that pathetic shell of an investment portfolio to live on. That, to me, is where the huge danger lies. I believe the long term will be ok, but if you bank on that and don’t have life insurance to cover the shortfall until things recover, well, does the game Russian roulette ring a bell.
If there was ever a time when 10 year term insurance ought to be flying off the shelves, it’s right now. For people who have lost hundreds of thousands or millions from their portfolios and they know that retirement isn’t going to be pretty until the lost is found again, this is a no brainer. 10 year term is cheap and if the experts are even halfway close to right, within 10 years you won’t need that insurance anymore.
Bottom line. All of the tactics in the world aren’t going to mean squat if you aren’t here helping your spouse survive until things turn around. Create your own bailout with life insurance.
November 14th, 2008
