Living Benefits

Insurance DefinitionMost people think of life insurance as something that is useful only after death. However, this is not always the case. There exists a life insurance option that can be used in the case of dealing with a chronic or terminal illness as well. This option is called Accelerated Death Benefits, or Living Benefits. The money involved in this life insurance policy is paid to the policy owner before death if he or she suffers from a chronic or terminal illness. It can be added to a current insurance policy at no extra cost, and helps patients and family keep on top of medical bills and be prepared for scenarios such as premature death. 

There are a various number of health-related circumstances that would qualify a policyholder for Living Benefits. For example, someone with a terminal illness, with a projected death date taking place in or under 24 months, is eligible. Additionally, any chronic illness that has been proven to reduce life expectancy would make a person qualified. It is important to note that such chronic illnesses would include medical conditions such as AIDS or heart disease. Another factor that would qualify someone for Living Benefits is if that person contracts some sort of illness that requires extreme measures to treat, such as an organ transplant. Also in the category of someone who can file for Living Benefits is an individual with a condition that necessitates long-term care, as he or she is no longer able to complete normal daily activities. Finally, Living Benefits are also available for those who live in nursing homes.

An Accelerated Benefits policy is adopted either by being added to your insurance premium, or included in a policy for a small amount of money. If the premium option is selected, your policy will not be cancelled, which is a fear for many who contract serious illnesses. It will not replace your long term benefits, so much as ensure that other life insurance savings will not be depleted by a need to pay for long term care. The money from this policy can be paid monthly or in a lump sum, depending on your insurance provider.

Of course, Accelerated Benefits are more often added on to certain life insurance policy over others. For example, Universal Life Insurance policies are more likely to have Accelerated Benefits added onto them than other insurance policies, as are several other permanent life insurance options. They may also be available through group term and permanent life policies. Accelerated Benefits are monitored very closely by insurance providers and come with qualifying conditions that trigger early payment.

In such uncertain economic times, it is necessary to maintain a certain level of financial control. Life insurance is here to protect against risks, and Accelerated, or Living, Benefits help families and individuals do just that.

For more information, head over to The Next Generation Insurance Agency, LLC.

When Premiums are Raised

Insurance Anyone in the insurance industry can attest to the fact that U.S. low-interest rates have become something of the norm. Unfortunately, these low rates have cause insurance companies to panic. The panic has had some serious ramifications. For example, policyholders of Transamerica are now suing the company due to unprecedented hikes in their monthly payments. The company raised the cost of monthly payments in order to keep up with low interest rates, but this came at the cost of customer satisfaction. Allegedly, the premiums of some policyholders practically doubled. This put the policyholders in a tough situation. They had to immediately decide whether or not to surrender their policies. This situation has raised the question among many life insurance policyholders of if outgrowing life insurance is going to become the new norm.

Policyholders are considering ‘outgrowing’ their insurance as the policy either lapsing or becoming unaffordable before time of death. The premiums have always been raised when the insurer’s health gets worse. If the insurer is pronounced terminally ill, or experienced another health trauma, their monthly payments may go up. However, the worry now is that premiums will increase whether or not the health status of the insurer is altered.

For those who are concerned, it is helpful to know the exact terms of whatever life insurance policy they hold. More often than not, life insurance policies are not reviewed in full. They are complicated and legal, and therefore mostly glanced over and put away. This is an issue because all beneficiaries of a life insurance policy should be aware of its full contents. There are several different life insurance policies in existence, and each means something different.

Term insurance, for example, is specifically death-related. It is the temporary life insurance option that costs less than others because most policyholders outlive it. Term life insurance is helpful in the event that one does not live to reach retirement age. On the other hand, whole life insurance and universal life insurance both have an investment component, which will pay no matter the time of death. The latter two are the types of policies in which premiums had to be raised in order to keep up with costs. This was due to the fact that Transamerica guaranteed annual interest rates of no less than 5%. This was their mistake.

In order to combat an unexpected rise in premium or loss of life insurance, every policyholder must keep in contact with their insurance company. Know exactly what policy you hold, and ask the insurance company questions about your policy often. You want to be able to see problems coming before they arrive.

5 Cases In Which Senior Citizens Might Still Need Life Insurance

It is easy to think that life insurance is of no use to you as you get older. Perhaps you are retired, own your home outright, and have children who are now self-sufficient. While many people get insurance as a way to protect themselves and their loved ones if they die prematurely, there are many other financial situations to consider. You also may want to reconsider the amount of life insurance you need and the cost of your policy, regardless of your age. Before you stop making payments, or you allow your policy to lapse, you should consider a few reasons why you might still need life insurance as a senior citizen.

1) If you have dependents

Whether it is a sibling, a younger spouse, a disabled or non-adult child, or even a parent, you may need to provide ongoing support for someone you love. The most common reason that an income-earner would need life insurance is that he or she has dependents who rely on him or her financially.

2) If you’re in debt or still have a job

You may want to consider life insurance if you are still making payments on credit card debt, student loans, or real estate deals. One highly recommended option is a term life policy, which expires when your payments end. This is a smart idea because it gives you coverage until you are debt-free. It also makes sense, if you are continuing to work, to supplement your savings, even if you’re only working a part-time job. You may require life insurance if your part-time job earnings are helping to meet monthly costs for anyone else. This depends on the amount you earn and the amount you need to save in order to make up income needs.

3) If you own an illiquid estate that is subject to taxes

Insurance will also be necessary if you have a family business, depreciated stock or valuables that you don’t want your family members to sell or pay taxes for inheriting. In this case, a permanent or cash-value life insurance policy is the way to go. These types of policies can provide your heirs with an immediate source of cash.

4) If you’re leaving behind a charitable legacy

Many people consider leaving a generous sum of money for their favorite organization or their alma mater. If you are planning on doing this, you can utilize a life insurance policy to help benefit you as well as the recipient. If you don’t want to make annual donations, you can leave a financial legacy with the help of a life insurance policy.

5) If you want another investment

If you have a lot of savings and tend to be risk-averse, cash-value life insurance can be an investment. Life insurance could be a great way to diversify your investment. The tax-free growth and advantages that come with life insurance are bound to be very helpful.

Life insurance doesn’t have to end for senior citizens. If you’re in one of these situations, it would be a smart idea to look into life insurance options that may be right for you.

Reasons for Getting Rejected by Life Insurance

Money

There is no doubt that, at some point in your life, you will be looking into life insurance options. While there is much to consider when thinking about purchasing a life insurance policy, it is also worthwhile to consider for what you will be eligible. Unfortunately, life insurance providers have the ability to decline you coverage for a number of reasons, many related to health or income. This is why it is beneficial to start considering life insurance when you are young, in order to cut bad habits out of your life as you get older.

For example, one of the reasons a company can deny you insurance is alcoholism. Alcoholism is a condition that incurs lasting health damage. If your liver is only slightly deteriorated at the time of your application, insurance companies understand that the deterioration will get worse. They therefore will see you as a liability and can refuse you coverage. In this scenario, a person must dedicate him or herself to becoming sober. After a period of sobriety that shows the sobriety will continue, he or she may be granted life insurance.

Another reason to deny a potential customer is obesity. The weight itself is not so much concerning to companies; it is the health complications that accompany being overweight that make insurance companies nervous. Being overweight can lead to cardiovascular problems and, while it may not result in a complete rejection, an overweight person will definitely have to pay higher premiums on their insurance policy. If you are thinking about insurance, taking your health into account, and making changes if necessary, is recommended.

Of course, not all life insurance rejections stem from factors that can be altered.

A reason to get rejected that is not related to health has to do with income. Some insurance companies do not award life insurance to anyone who has an income below a certain bracket. Unfortunately, the companies use this method to contain costs. The companies must also be able to match the insurance policy with a person’s assets, and the policy a person wants may not always coincide with his or her income.

Furthermore, life insurance applications can be denied based on the applicant’s profession. Life insurers will be less likely to approve applications for people who work in dangerous industries, such as in the airline or roofing industries. Power line installers and truck drivers are not safe either.

Overall, there are several reasons life insurance companies can deny an applicant insurance. The best advice, if you are thinking about applying for a life insurance policy, is to make whatever lifestyle changes that you can to make you more eligible.

Alphabet to buy AIG? Analysts think it’s a good idea.

American International Group, or AIG, is one of the nation’s leading insurance companies. Over the past several months, analysts from Citigroup have discussed the idea of a possible merger between AIG and Alphabet, the parent company of Google. On paper, connections between the two seemed unfathomable, but upon further inspection, the partnership could be a positive one. If Alphabet were to partner with a large investment bank and purchase the insurance company, they could turn it from various insurance policies to an insurance FinTech laboratory.

Founded in 1919 by Cornelius Vander Starr, AIG traces it’s roots back to Shanghai, China. Starting as American Asiatic Underwriters, the company expanded and, within the first two years of operations, evolved into a life insurance company. Within the next decade, various branches emerged throughout different parts of China and Southeast Asia, followed by the first official American opening in 1926. The company was renamed the American International Underwriters Corporation (AIU) and growth in Latin America occurred afterwards. The growth in these agencies was substantial, as World War II loomed on the horizon, which correlated to the decline of business in Asia. As a result of these historical events, AIU moved it’s headquarters to New York City from Shanghai, China after 20 years.

With its long history, AIG’s merger with Google seemed unlikely. Analysts acknowledged it was an event that most likely would not occur, but one that could benefit everyone. The copious amounts of data AIG owns could be appealing to Alphabet, while having a parent company to help protect AIG from battles that could arise over the upcoming years could benefit AIG.

According to an article published by Quartz, the analysts developed their proposal around two main points. The first was a modular finance model. This is would shift financial institutions from what they do – selling a portfolio of products to consumers – to using technology to develop offerings that were complex on a whim. The second addresses the lack of disrupting insurance companies. Many companies focused on tech shy away from companies that focus on insurance because of the strict regulations that come with their industry.

Alphabet obtaining AIG for their portfolio could address both points. There are several challenges if this occurs, such as issues with shareholders and banks, but it could be worth the risk. AIG’s CEO, Peter Hancock, spoke about how the company’s new modules. Nine in all, were based off Alphabet’s business structure.

 

Saving for Retirement

Piggie Bank

Saving for retirement can be confusing, but in this day and age it’s essential to start contributing to your retirement fund as soon as possible. Since there are numerous different types of funds out on the market, it can be hard to figure out which one or two will provide the best benefits for you. Here are the  5 most popular types of retirement funds.

1. 401(K)/ 403(B)
This is the easiest one to maintain as many companies offer it to their employees. If your company does have one, it’s the easiest way to start saving and investing for retirement. Your investment is automatically deduced from your payroll. One company benefit is that they will match your contributions up to a specific percentage. If this is offered to you, it’s recommended to take advantage of it. In 2015, individuals were able to save up to $18,000 pre taxed dollars.

2. IRA
An IRA is the  second most popular way to contrbute to a retirement fund. Any individual is able to open an account and contribute to it. You can only add in $5,500 a year, but you can contribute to other retirement funds if you have them. The money that you add into it will grow tax-free. If you don’t get a retirement fund from work, you will get a full deduction regardless of income levels. When you turn 70 though, there is a mandatory withdrawal rule.

3. Simple IRA
If you work in a company that has less than a 100 employees, this might be your best match. It allows you to set up an IRA with significantly less paperwork. An employer is obligated to make contributions that either match or not. In 2015, individuals were allowed to contribute up to $12,500 dollars.

4. Roth IRA
With all the types of IRA’s, it can be rather confusing to break it down. With a Roth IRA, you contribute with your after-tax dollars and get no tax-deduction for your contribution. The money added into is not taxable if you withdraw it after you turn 60 and grows tax-free in the meantime. However, to add to a Roth IRA, you must make less than $131,000 dollars as an individual

5. Health Savings Account
This might be one that doesn’t come to mind when people think retirement account, but it is one that will allow you to save your money tax-free. You can add up to $3,350 dollars a year and withdraw from it to pay for approved medical costs. If that money is not spent though, it is eligible to roll over with no consequences. If you withdraw it after 65, there is no penalty and must only pay the income tax. If it’s before 65 and any reason besides medical then you must pay an income tax and face a 20% penalty.
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Bowie Bonds

David Bowie is known as a performer who changed the worlds of music, art, and fashion. Unfortunately, he passed away from cancer at age 69, just after celebrating his birthday. The world now mourns because an icon was lost at such a young age. However, not many people are aware of how he revolutionized the financial world.

David Bowie took an incredible risk when he invented ‘Bowie Bonds.’ These were the first type of celebrity bond to ever enter the financial world. They are basically securities that are backed by assets. In Bowie’s case, the asset was him. Therefore, the bonds had an annual payment based on the revenue, both current at that time and future, from first 25 albums that David Bowie released. The star was able to accumulate money without waiting for future revenue to hit his bank account.

Bowie Bonds lit a fire under the performing world. Several artists took out celebrity bonds in order to do accumulate even a fraction of the wealth that Bowie had with his bonds. Bowie managed to raise 55 million dollars from future royalties, using this money to buy property, and even to start an internet provider and online bank. David Bowie, however, was not under the impression that celebrity bonds would be relevant for more than a decade. He knew the internet was going to take over the music industry, which would make celebrity bonds irrelevant. Sure enough, by 2007, his Bowie Bonds were liquidated.

Although Bowie Bonds were not around long term, David Bowie still changed the finance industry. The idea that assets backed by revenue that would be accumulated in the future was possible spread across the financial industry. This tactic even spread into the sports sphere, which shows just how influential the idea is. Although some financial experts still think such investments are too risky to be worth it, Bowie was able to make a lot of money.

David Bowie left this world as an innovator. He was always creating something new in a different sphere. With 150 albums under his belt and an incredible music career, it is no wonder he was inducted into the Rock and Roll Hall of Fame. However, his lesser-known achievement in the financial industry allowed him to invest in his future, and brought up a whole discussion about an artist’s right to his own music.

His dabbling in finance and small business just shows how much of a creator he really was. He will never be forgotten. Rest in peace, David Bowie.

AIG Restructures Management

Ever since Peter Hancock took over the role of Chief Executive Officer of American International Group, Inc., there have been some profound management changes. His most recent alteration included having the company’s Chief Financial Officer, David Herzog, leave the company. Herzog is being replaced by the Chief Risk Officer, Sid Sankaran. Another recent change is the stepping down of the Head of Commercial Insurance, John Doyle, with CEO of the Americas, Rob Schimek, taking over.

The reason that the leadership began to be dramatically restructured when Hancock took over last September had to do with AIG’s results. For years, the company has had high claims costs, and the company was forced to recover from a bailout around the year 2008. Hancock announced during that time that he wanted to dismiss at least 23% of the people in leadership positions.

He is following through with the plan, but whether or not the restructuring will be beneficial to the company as a whole is still a question.

Herzog’s departure was more of a shock than that of Doyle. Doyle was not getting expected results in his position, but Herzog was a real asset to the company. He was recognized as a great CFO by the United States Treasury Department, and helped pull AIG out of their bailout. Many experts believe that asking Herzog to leave was a mistake by Hancock. However, the rumor is that Herzog will take the millions he made in his position at AIG and retire, although he has not commented on the matter

Activist investors are trying to force Hancock to break up the company into smaller parts, and that is exactly what Hancock is trying to avoid. The investor Carl Icahn has been especially vocal on this matter. He has the idea that AIG should have a life insurance sector, a property coverage sector, and a mortgage sector, all separate from one another. Hancock has not adhered to this demand.

Many other changes are taking place on the leadership level of AIG. The leadership team as a whole is becoming a lot smaller, and those already in leadership positions are taking on more responsibility in the United States and overseas.

Will this leadership overhaul help AIG in the long run? Only time will tell. It is my opinion that AIG has been suffering, so large change is necessary to pull the company out of its slump. Whether or not Hancock is taking the right approach remains to be seen.

For more information on Hancock’s plan, check out Insurance Journal.

London Market Sees Potential Use for Blockchain

The London Market, which is the major international insurance market in the United Kingdom, is undergoing plans to modernize. Part of that plan may include the use of blockchain technology, the main innovation behind Bitcoin, to improve data access and reduce the costs that come with administrative paperwork.

Lloyd’s, a key participant of the London Market held a seminar last week in London to highlight several technologies, including blockchain that could improve or otherwise innovate areas of the insurance market. It’s all part of their plan to modernize the experience of insurance market participants called the Target Operating Model.

Blockchains, which record transactions and protect Bitcoins from double spending, could be used to increase risk-recording abilities, transparency, accuracy and speed in the insurance markets.

Shirine Khoury-Haq, Lloyd’s director of operations told CoinDesk in a statement: “Blockchain has the potential to improve the way insurers record risk, increasing the speed, accuracy and transparency of our processes. As part of the TOM consultation we will be interested to see how blockchain could help us resolve some of the challenges facing our industry.”

Two use-cases for blockchain were floated at the seminar. The first was for blockchain-powered “deal rooms” wherein documents would be securely shared and logged. The second was for a permissioned ledger for insurance markets. The ideas were presented by Michael Mainelli, executive chairman of Z/Yen, a think tank and venture capital firm and a professor at Gresham College.

The so-called “deal rooms” would completely revolutionize the way business is done in the London Market. Currently, markets rely on physical proximity to one another, personal relationships and paper documents to get deals done. The use of a digital deal room could make the London Market more attractive to international business, which would drive significant growth for both Lloyds and the market itself.

“If we were sitting in Hong Kong right now and decided to create a global insurance market,” Mainelli added. “We could build a quick deal-room and we would automate it from the start.”

A deal room based on blockchain would take out the need to trust an intermediary while providing an accurate record of the documents shared by all participants. The database would be unalterable and owned by nobody. It’s simply an accurate ledger of who sent what to who and when.

Other technologies were presented at the Lloyd’s seminar including peer-to-peer lending and alternative cross-border payments. The goal of the seminar was to simply debate the risks and rewards of technological disruption. The Target Operating Model is a five-year plan to “support the ease of doing business” in the London Market and technological innovations like this could be an important step.