The government’s bailout money is not up for grabs. Large insurance companies that qualify for the government’s bailout money have made applications. So far Hartford life, Prudential and Metropolitan are some of the ones that have made the application. They may be eligible for billions that may help bolster their corporate bond positions. Most insurance companies make money on the spreads that they get from buying corporate bonds and government bonds. Just like a bank makes a spread on the money they payout on Cds and savings accounts versus the amount they charge on loans. Insurance companies make money the same way – on their portfolios.
The problem was when the recession – depression hit many companies either stopped their interest payments on their bonds or outright defaulted. This has put a crunch on some insurance companies that may have been leveraged to highly. This new seed of investment help from the government should help these companies buy up more corporate and government bonds. While it still makes sense to have insurance companies as a part of an overall investment plan it also makes sense to diversify between different companies and different insurance products. You also want to check your state to find out what the actual coverage is in case an insurance company does go into receivership. As an example in Florida the amount each person is covered for is $100,000 for an annuity contract.
What is cash value?
Term insurance charges an increasing premium (annually or in bands) to reflect the fact that the insured is aging and, each year, more likely to die. Cash value life insurance has a level premium that is larger than necessary in the early years of the policy to offset the increased costs of insuring the individual in the later years. This excess premium is invested and kept in an account known as the cash value account. In the event that you surrender the policy before death, this excess premium and its earnings are returned to you.
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What is life insurance?
A contract
Technically, life insurance is a contract between the policy owner (which can be you, “the insured,” or a separate party) and an insurer. The policy owner agrees to make premium payments, and the insurer agrees to provide a specified sum to a designated third party (the beneficiary) upon your death.
Tip: Contracts, including life insurance contracts, are governed by state law.
And a will substitute
Because proceeds are paid directly to the beneficiary, life insurance can bypass the probate process, saving both expense and delay.
Purchased for four primary reasons
Life insurance is one of the biggest players in the estate planning game. For some, it is the only way to ensure that family members will be able to support themselves after the death of the primary wage earner. For those with larger estates, life insurance can provide the funds needed to pay estate taxes (and other costs) without liquidating estate assets. For those with a business interest, life insurance can be used as a vehicle for business succession. Finally, for those with a generous spirit, life insurance can permit you to make charitable gifts.
Advance planning needed to avoid taxes
Although life insurance proceeds are generally received by the beneficiaries income-tax free, they may be subject to estate taxes if you do not plan in advance.
For more information on estate planning or life insurance to pay estate taxes you can go to http://kenhimmler.com.
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What is life insurance?
Life insurance is a legal contract between an insurance company and a policyowner and is governed by state law. Under the terms of the policy contract, the policyowner pays premiums in exchange for the promise of payment of a specified amount of money to a named beneficiary when the insured dies. The policy itself contains provisions specifying the rights and obligations of the parties under the contract.
The specific purpose of life insurance is to replace the economic loss resulting from a person’s death using money from a pool of funds to which many people contributed a relatively small amount.
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What is cash value?
Term insurance charges an increasing premium (annually or in bands) to reflect the fact that the insured is aging and, each year, more likely to die. Cash value life insurance has a level premium that is larger than necessary in the early years of the policy to offset the increased costs of insuring the individual in the later years. This excess premium is invested and kept in an account known as the cash value account. In the event that you surrender the policy before death, this excess premium and its earnings are returned to you.
Cash value, by any other name . . .
Since cash value life insurance, also known as permanent life insurance, comes in many product varieties, people often get confused. Whole life, variable life, universal life, and variable universal life are among the most common cash value life insurance products found in today’s marketplace. All of these policies operate in much the same fashion. (For the purposes of this discussion, where they differ is in how the cash value is invested.)
For more information on other life insurance such as life insurance to pay estate taxes, you can go to http://kenhimmler.com.
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