Who Should I Name as My Beneficiary?

Posted on November 17, 2012 by Chris Huntley

Who should you list as a beneficiary when you buy a life insurance policy?

This is an important question and the following should help guide you in making this very key decision.

What is a Life Insurance Beneficiary?

When you buy a life insurance policy, you will be asked to name a beneficiary. A beneficiary is one who will receive the death benefits and/or the cash value accumulation of the policy (only applicable for permanent insurance policies such as whole life, universal life and variable life insurance policies), upon the death of the insured person.

You have two options when choosing a beneficiary. Your first option in choosing a beneficiary can be one or more persons which could be your spouse, your eldest child, spouse and children, some other relative or any other person you designate. Your second option is to choose an entity such as your estate, a trust, or a charitable organization.

What’s the Difference between Choosing a Person or an Entity as Beneficiary?

There are differences in how the benefits will be treated by choosing a person over an entity.

Choosing a Person as Beneficiary

When you select a person as a beneficiary, all the proceeds from a life insurance policy are paid directly to that individual or apportioned to the person’s named (if more than one). The benefits paid are given as a lump sum and are not generally taxable. A person who is the beneficiary can also spend the funds in any manner they choose.

You do not have to draw up a will to ensure they receive your life insurance benefits. This is one nice feature about life insurance. You get to quickly and simply name who gets the money without the need for lawyers and lawyer fees.

Additionally, you also have the option of changing the beneficiary. However, there are two types of beneficiary types which are either revocable or irrevocable beneficiaries. A revocable beneficiary means you can change the named beneficiary anytime during the life of the insurance policy. An irrevocable beneficiary means that both the owner of the policy and the beneficiary must agree to make any changes to the policy beneficiary.

Choosing an Entity as a Beneficiary

Some life insurance owners may decide on an entity to act as their beneficiary. The most common choices include the estate or a named trust, such as the family trust with a lawyer acting as trustee.

A will is normally required and recommended for this situation. If you do not have a will, it is possible a state-appointed trustee might assume responsibility in determining how the proceeds will be doled out and to whom. If you do draw up a will, it is also highly recommended that you keep it current and make changes as they occur.

The reasons why some people opt to use an entity as a beneficiary normally entail the following reasons:

To set up a trust if you have young children, or to ensure the funds are paid in a specific manner, or to be paid out when they reach a certain age.
To ensure that the life insurance proceeds are designated to some other party or parties. This could be some combination where a family member, close friend and/or one or more charitable organizations are designated to receive funds which should be clearly specified in the terms of your will.
You may also need to name an estate as beneficiary if you have no spouse or children.

The legal aspect of how funds are distributed is also somewhat different when choosing an entity as a beneficiary. This includes:

All insurance proceeds are paid to the estate. This in turn becomes part and parcel of the probate process.
How the money is paid will be determined by the terms you have designated in your will.
These insurance proceeds must also be available to creditors if there are any outstanding debts.
As the insurance proceeds may be distributed through probate, there are usually lawyer probate fees involved. The amount may vary from state to state, but the maximum is usually in the neighborhood of 5% of the total amount of the estate.
If you wish to change your beneficiary in this instance, you will have to use your lawyer and will need to change the terms of the will.

Primary Beneficiaries vs. Contingent Beneficiaries

The difference here is quite clear. You primary beneficiary is the person (or people) who is intended to receive the death benefit upon the insured’s death. If things don’t go as planned, though, and the primary beneficiary(ies) predeceases the insured, or dies at the same time as the insured, for example in the case where a husband and wife are killed together in an accident, then the contingent beneficiary(ies), also known as secondary beneficiary, receives the funds.

One key point to make here is that if two or more primary beneficiaries are selected, and one or more of them is dead upon the passing of the insured person, the money will be distributed to the remaining primary beneficiaries, rather than any of the funds going to the secondary beneficiaries.

Some Key Points to Remember

It is vital that you make changes if your circumstances change. This could especially be important in a divorce situation or if your named beneficiary dies before you do. It is very important that you don’t procrastinate making beneficiary changes.

If you name more than one beneficiary, make sure they are individuals who are compatible because horrendous legal battles have broken out between family members who were named as beneficiaries.

Also, never buy an insurance policy as a third person, or what might be described as a 3 way policy. What I mean is that you should never buy a policy where you become the owner of a policy but have bought the policy for another person such as your daughter, and a third individual is named as the beneficiary, such as her husband. In this instance, it is very likely that the beneficiary will be considered as receiving a gift from the purchaser of the policy by the tax people and the proceeds will be taxed.

Give some careful thought to who you want to name as a beneficiary, and consider the pros and cons from the above information to make an informed choice. As always, call us with any questions or for a life insurance quote at 877-996-9383.

Why Consider “10 Year Term” Life Insurance?

Posted on May 24, 2012 by Chris Huntley

The most affordable type of life insurance is 10 year term.

This insurance is perfect for a young family, who needs some protection, but can’t afford to pay much. It’s also great for short term needs.

It’s amazing how much life insurance someone in their 30’s or 40’s can purchase for less than $20 bucks per month if they’re in good health, and applying for 10 year term.

10 Year Term Explanation

Most term policies actually guarantee coverage up to age 95 or longer. However, the premiums are only guaranteed to stay level for the first ten years. That means your premiums will stay fixed during the initial 10 years, and in most policies, will rise annually thereafter.

There are various term lengths, such as 20 or 30 year term, which means the premium stays fixed for a longer duration, and remember, the lower the term duration, the lower the premiums. For more information on alternatives to the ten year term, see our post on Types of Life Insurance.

10 Year Term Life Insurance Quotes

Age	$500,000	$1,000,000
30 Year Old Male	*$14	$21
40 Year Old Male	$17	$28
50 Year Old Male	$43	$78
60 Year Old Male	$117	$217
70 Year Old Male	$339	$625

*Note: All prices are MONTHLY as of 2/17/12, based on healthy, preferred plus, non smoker, and are subject to change.

Using Term for Buy/Sell Agreement or Key Man Insurance

Many business partnership arrangements require term life insurance on each partner, in the event that if he or she dies, the remaining partner/s will have liquid cash from the life insurance benefit to buy out the decedent’s family and or heirs of his or her share in the company.

10 year term life insurance is a popular choice for buy/sell contracts, since it’s the most affordable, and most businesses figure they either won’t be working together that long, or will probably restructure the ownership agreement by the end of 10 years anyway.

Estate Planning using Term Life Insurance

With the current “Band-aid” on estate taxes and the exclusion amount, some people aren’t sure what their long term estate tax implications could be. A 10 year term policy with a conversion to permanent insurance may be a good solution for high net worth individuals whose estate value is approaching the current taxable threshold, but now quite there.

For example, a married couple with an 8 million dollar estate, with a properly structured AB Trust or bypass trust, may not owe any estate taxes if they were to both die in 2012. However, if the current estate tax exemption (currently 5 million per individual) were to drop to, say, 3 Million per individual, then this couple would have an estate tax problem.

Since we don’t know what the future holds for estate tax legislation, some affluent families are purchasing 10 year term as a “wait and see” type strategy. If the exclusion amount gets permanently set at 5 million per individual, or if estate taxes are done away with completely, then these wealthy individuals may decide to drop their coverage.

On the other hand, if the exclusion amount is permanently decreased, at least the policyholder will already have a policy in place (the 10 year policy), and could decide to convert it to a permanent policy such as guaranteed universal life or whole life.

You may also want to see this article for more information on using life insurance to avoid estate taxes and life insurance trusts.

Companies Who Sell 10 Year Term

Just about every company offers a guaranteed level 10 year term policy. In my opinion, the 3 companies who are most consistently among the list of “low price leaders” for term insurance are Banner Life Insurance, ING-Reliastar Life Insurance, and Genworth Life Insurance.

Keep in mind, however, that some companies commonly show up in the top 3 in price quotes, but aren’t quite as lenient in underwriting, so it’s harder to actually qualify for their best ratings. Two companies that come to mind here are Savings Bank Life (SBLI) and Ohio National. On the contrary, you have a company life Prudential, who is usually not in the top 10, but maybe top 15 or 20, but are very fair on underwriting .

Apply for Term Life Insurance

To get started, simply call us at 877-996-9383 or get an instant quote using the form on the right.

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What Women Need to Know about Life Insurance

Posted on December 16, 2011 by Chris Huntley

At Huntley Wealth Insurance, we help males and females alike purchase affordable term and whole life insurance to provide valuable protection for their families, businesses, and estates.

While the name of this particular website intends to attract a male audience, we DO provide quality advice and pricing for women needing life insurance as well.

Why Women Need Life Insurance – And Why They Typically Don’t Have It

At Huntley Wealth, approximately 30% of our life insurance clients are women. This statistic speaks to the importance of the working wife and/or mother in modern times.

Today, many women provide a valuable, irreplaceable income for their families, which, if lost due to sudden death, would leave these wives’ and mothers’ families having to cope with one less income.

That’s where life insurance comes to the rescue. Life insurance is commonly used to insure future earnings. For example, if a woman earns $75,000 per year, and will do so for the next 20 years, she might purchase a 20 year term life insurance policy with a death benefit in the range of $1 Million to $1.5 Million. If the death benefit earned 5%, her surviving husband or children could draw 50K to 75K from the death benefit to pay bills, the mortgage, and provide for needs without the funds ever depleting. What would the surviving family have done without these funds?

The problem with modern families is that women generally have less life insurance than men, according to MetLife’s most recent “Employee Benefits Trends Study” in 2011. The study also showed that women are more concerned about the impact their sudden death could have on their families than men, which is wonderful, and in my opinion, as a man with a wonderful, loving wife, I can certainly understand that. So why aren’t females properly insured?

The key problems, or myths, I think, revealed in this study and others have to do with cost and simplicity of the life insurance process. A study from Nielsen/Claritas proved that 44% of high income women (earning in excess of 50K per year) believe that life insurance costs more than they can afford. Furthermore, 67% of the same women believe that selecting a life insurance product is a complicated process.

Life Insurance Costs Too Much

In most cases, life insurance is very affordable… dirt cheap even! First, women pay less than men for life insurance, since their life expectancy is longer on average. If you are in good health, let’s just say you can probably afford life insurance at some amount. For example, I’ve provided quotes below for $500,000 of coverage. Of course, your coverage could cost even less if you purchase a lower face value.

Quotes for Female, Excellent Health, $500,000 Coverage, Non Tobacco User

Age 10 Year Term 20 Year Term 30 Year Term

Female Age 30 $13 $18 $27 – Per Month

Female Age 40 $16 $26 $42 – Per Month

Female Age 50 $35 $59 $97 – Per Month

Female Age 60 $78 $148 $213 – Per Month*

*Note that these quotes are available as of 12/15/2011 and are subject to change. Rates quoted would apply to female, non smoker, who can qualify for best class health classification.

The Life Insurance Process

For those of you who believe selecting a life insurance product is complicated, please allow me to outline the steps to selecting, applying for, and purchasing a life insurance policy.

Speak to a knowledgeable independent agent about your health history. If you take any medications or have a history of medical conditions, a good agent will know which companies will rate you at the best health classification, which will save you money. Your agent should also be able to quickly and clearly explain the types of life insurance and how much is appropriate for your needs. This should take about 10-15 minutes over the phone. Call an agency like Select Quote, Accuquote, or our agency, Huntley Wealth.
The application process is straight forward. At our agency, we take information (address, drivers license, legal name, beneficiaries, etc.) over the phone and send the application to our clients to sign.
After completing and signing the application, most insurance policies require a medical exam. The cost of the exam is paid by the insurance company. The exam typically includes blood and urine specimens.
After the medical exam, you’ll be approved typically in 2 to 6 weeks. The time it takes to approve you primarily depends on whether or not medical records will be ordered from your attending physician’s office.
Once approved, your agent will forward your policy to you. You send payment, and sign a form showing you received the policy. Once all requirements are received by the insurance company, your policy will be in force, or effective.

The Met Life study reported women who do have life insurance typically are unaware of the type of coverage (i.e. term, universal life, or whole life) that they possess, and undervalue the amount needed to properly insure their lives to meet their families’ financial needs. Please don’t fall into this category. If you have a policy and aren’t sure what benefits it has, or if you need life insurance, please call us to review your needs at 877-996-9383.