The North Carolina Department of Insurance (NCDOI) governs North Carolina Life Insurance and its industry. In NC we have available to us most life insurance products, the only exception is that the NCDOI is tough on guaranteed issue life insurance products. A guaranteed issue life insurance product is a policy that basically accepts everyone no matter their health conditions. These policies of course have very high premiums and also usually have a waiting period of at least 2-3 years before they pay out a full claim. We do have some final expense products available in NC, but not as many as I have found in neighboring states for example.
NC's current Insurance Commissioner, Wayne Goodwin, has done an excellent job in office and I have been fortunate enough to meet him and see him speak to a group I was in. I could tell that he truly cared about his constituents and doing what was best for them was his top priority. The NCDOI oversees everything from Property Insurance, the Senior Health Insurance Information Plan or (SHIIP at www.ncshiip.com), all forms of life, health and accident insurances, to even bail bondsmen licenses. We are well protected in North Carolina.
As for North Carolina Life Insurance, the products available to us are put into 3 major categories.
1. Term Life Insurance
2. Universal Life Insurance
3. Whole Life Insurance
The first category is term life insurance. A Term life insurance policy is designed to last for a specific duration or term period. The most common term periods are 10 - 30 years. Term is the least expensive of all life insurance products and is the most common insurance sold online today. A person could purchase much more coverage through a term policy for a much lower premium to cover the risk of death for a time period important to them. The most common situations that I see are the 20 - 30 years that children are young and still very much dependent on their parents and when someone has a mortgage. Lastly, there is also a return of premium term life insurance product that will return 100% of the premiums that you pay into the term policy at the end of the term period.
The next major category is universal life insurance, this category can include current assumption universal life, indexed universal life, and guaranteed universal life. A universal life policy or UL for short is designed to be a flexible premium contract and can build cash value. A UL is a form of permanent insurance and differs from whole life insurance in the flexibility of the policy. If your UL has built up sufficient cash value, then you may choose to let it pay its own premium's from its accumulated cash value, or you may choose to withdraw the premiums that you have paid into the policy. When a UL pays for itself, it does not loan against itself and a withdrawal is not a policy loan so neither option charges you an interest rate. You do have the option to take policy loans with a UL.
The last major category is whole life insurance. A whole life insurance policy is also designed to be permanent coverage and is the first form of life insurance to come into existence. A whole life policy has guaranteed premiums and a base interest rate. You can choose different payment schedules, single pay, 7 pay, 10 pay, 20 pay, pay to 65 and pay to maturity are all examples. If you have what is called a participating whole life policy, then the policy will usually pay what is called a dividend. A dividend is basically an annual return that you receive from the life insurance company based on the profitability of the company for that year. A dividend can be allocated in several ways. A dividend can accumulate in a dividend account for withdrawal or future payment of premiums, a dividend can lower your current premium or a dividend can purchase additional life insurance regardless of insurability. Generally, we recommend a Mutual Life Insurance Company for your whole life needs. A Mutual Life Insurance Company is owned by the policy holders and usually offers a better dividend scale.
There are many great North Carolina Life Insurance products available to us here in the Tar Heel State. For a free evaluation of your situation and free quotes for your North Carolina Life Insurance feel free to contact me. We represent all major life insurance carriers and our team has over 60 years of combined experience. We have the ability to show a multi-quote of top life insurance companies and we can shop your NC Life Insurance to find you the best rates and policy for you, no matter where you are in NC. If you wish we can even mail you all the necessary paperwork.
Aarow Financial Group is your source for Life, Long Term Care & Disability Insurance Planning in NC.
Showing posts with label NC Life Insurance. Show all posts
Showing posts with label NC Life Insurance. Show all posts
Tuesday, June 12, 2012
Thursday, February 10, 2011
Universal Life Insurance
Universal Life Insurance
Universal life insurance (UL) is a form of permanent life insurance just like whole life insurance. Unlike a whole life policy however, a universal life policy is a flexible premium life contract. This means that a universal life policy will pay for itself out of the policies' cash value, if enough present, without any direction from or loan fees to the policy holder. (A whole life policy can pay for itself, if set up properly at issue, but the policy owner needs to request from the issuing company, at each billing cycle, that the whole life policies' dividends pay the premiums due.)
Just like whole life coverage a universal life policy will build cash value on a part of the premiums paid into to the policy. The rate of growth of the cash value depends on the investment history of the issuing company. The amount of premiums paid into a UL that is credited with a return depends on the net amount risk to insurance carrier. The net amount at risk is the difference between a UL's cash value and the net death benefit. For example, if you were to purchase a UL policy for $250,000 at age 35, then the costs for year 1 would be based on an annual renewable term (ART) policyinside the UL contract. The costs for a term policy for $250,000 on a 35 year old happened to be $200 for the first year and the policy holder paid $1,000 into the policy. So, the additional $800 of the premium paid into the UL was credited with a return based on the issuing companies investment history for that year. In year two the net amount risk to the carrier is reduced by the amount of cash value in the contract, in this example the insurance company paid a 7% return on the remaining $800, crediting $56 dollars to the cash value. The new net amount at risk to the insurance carrier in year 2 is $250,000 - $856 (the cash value + the prior years return) = $249,144. This process compounds annually and can really add up fast. This will reduce the net amount at risk, the cost of insurnace and fatten up the policies' cash value. Just like whole life insurance, a UL policy builds cash value on a tax-free basis and can even be accessed tax-free if done correctly. The annual renewable term policy that is the "chassis" of the UL does ratchet up each year with your age, this allows the insurance carrier to offset the risks of an aging group of policy holders, but these increases in age considerations are offset by the cash value building and the net amount at risk reducing. The morale of this story is to find a good agent that can explain the moving parts inside a universal life policy and that will review the policy regularly with you. A UL policy that is set-up correctly is a very powerful cash accumulation and tax-advantaged tool. The death benefit is tax-free and can be much higher than the cash value in the contract.
Listed below are the different forms of UL coverage:
Current Assumption Universal Life (UL) - explained above, credits the policies' cash value with a fixed interest rate that is on par with market interest rates. A good current assumption UL will have a floor of guaranteed interest, to make sure that some kind of return is realized each year. For example, a current assumption UL that we recommend today has a guaranteed rate of 3%, but is currently crediting 2010 low interest rates of 4.5%.
Indexed Universal Life (IUL) - participates in market indicies, one of the most popular is the Standard & Poor's 500. The S&P 500 is an indicie of 500 of the largest capitilized companies traded on the New York Stock exchange and the NASDAQ. An IUL policy is credited with the growth of the indicie that it is attached to, subject to a cap rate. (E.g.- If the S&P 500 increases 20% in a year and the policy cap is 12%, then the policy is credited 12%.) Just like a current assumption UL, a IUL usually has a floor, or guaranteed rate of return during the negative years. An IUL that we recommend today has a 12% cap rate and a 1% floor.
Guaranteed Universal Life (GUL) - is a guaranteed UL product. Most GUL's are not designed to build much if any cash value; this keeps the premiums lower. As long as the policy owner pays the premiums as scheduled the death benefit is guaranteed to the age illustrated or the policy's maturity date. We currently recommend a GUL that has no cash value and premiums so low, that we refer to it as "term till death".
Just like whole life coverage a universal life policy will build cash value on a part of the premiums paid into to the policy. The rate of growth of the cash value depends on the investment history of the issuing company. The amount of premiums paid into a UL that is credited with a return depends on the net amount risk to insurance carrier. The net amount at risk is the difference between a UL's cash value and the net death benefit. For example, if you were to purchase a UL policy for $250,000 at age 35, then the costs for year 1 would be based on an annual renewable term (ART) policyinside the UL contract. The costs for a term policy for $250,000 on a 35 year old happened to be $200 for the first year and the policy holder paid $1,000 into the policy. So, the additional $800 of the premium paid into the UL was credited with a return based on the issuing companies investment history for that year. In year two the net amount risk to the carrier is reduced by the amount of cash value in the contract, in this example the insurance company paid a 7% return on the remaining $800, crediting $56 dollars to the cash value. The new net amount at risk to the insurance carrier in year 2 is $250,000 - $856 (the cash value + the prior years return) = $249,144. This process compounds annually and can really add up fast. This will reduce the net amount at risk, the cost of insurnace and fatten up the policies' cash value. Just like whole life insurance, a UL policy builds cash value on a tax-free basis and can even be accessed tax-free if done correctly. The annual renewable term policy that is the "chassis" of the UL does ratchet up each year with your age, this allows the insurance carrier to offset the risks of an aging group of policy holders, but these increases in age considerations are offset by the cash value building and the net amount at risk reducing. The morale of this story is to find a good agent that can explain the moving parts inside a universal life policy and that will review the policy regularly with you. A UL policy that is set-up correctly is a very powerful cash accumulation and tax-advantaged tool. The death benefit is tax-free and can be much higher than the cash value in the contract.
Listed below are the different forms of UL coverage:
Current Assumption Universal Life (UL) - explained above, credits the policies' cash value with a fixed interest rate that is on par with market interest rates. A good current assumption UL will have a floor of guaranteed interest, to make sure that some kind of return is realized each year. For example, a current assumption UL that we recommend today has a guaranteed rate of 3%, but is currently crediting 2010 low interest rates of 4.5%.
Indexed Universal Life (IUL) - participates in market indicies, one of the most popular is the Standard & Poor's 500. The S&P 500 is an indicie of 500 of the largest capitilized companies traded on the New York Stock exchange and the NASDAQ. An IUL policy is credited with the growth of the indicie that it is attached to, subject to a cap rate. (E.g.- If the S&P 500 increases 20% in a year and the policy cap is 12%, then the policy is credited 12%.) Just like a current assumption UL, a IUL usually has a floor, or guaranteed rate of return during the negative years. An IUL that we recommend today has a 12% cap rate and a 1% floor.
Guaranteed Universal Life (GUL) - is a guaranteed UL product. Most GUL's are not designed to build much if any cash value; this keeps the premiums lower. As long as the policy owner pays the premiums as scheduled the death benefit is guaranteed to the age illustrated or the policy's maturity date. We currently recommend a GUL that has no cash value and premiums so low, that we refer to it as "term till death".
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