Teresa Kuhn's Expert Author Email Alerts
Sign up to receive email alerts of Teresa Kuhn's latest articles from EzineArticles.com!

Email Address:

Tuesday, November 24, 2015

Recent COI Increases Reveal the Weaknesses of Universal Life Insurance

By Teresa Kuhn, JD. RFC, CSA
President, Living Wealthy Financial

There’s a certain amount of trust and faith required when entering into a business relationship, as well as a fair amount of reliance on companies to follow accepted practices and do the right things for their clients.    

And, while most of us realize that the way products are marketed may be the polar opposite of how they actually work, we continue to have faith that what we are being told about the things we buy is at least somewhat truthful.

As some of the most trusted and respected entities, American life insurance companies have been successful mostly because ordinary people have put so much faith in them and their promises.  

Throughout our country’s history, people have bought insurance policies that last for years, often entire lifetimes.  They do this believing that the insurer would never violate their trust by failing to honor the original policy terms or by doing things that would harm them financially.   

Most people, for example, never expect the company to suddenly exercise a provision in the contract that would have an adverse financial consequence for them.

Unfortunately, however, such trust may no longer be justified. 

Except for whole life insurance policies, most other permanent life insurance policies have a right to increase the cost of insurance built into their contracts. 

In the past, most people did not pay much attention to this particular provision simply because insurers realized it would be bad business for them to use it.   Increasing the cost of insurance (COI) was just something that was seldom, if ever, done.

Recently, though, unprecedented types of premium increases have begun to hit consumers.  These rate hikes call into question the trustworthiness of insurance companies and threaten the entire industry.

At least four major insurance carriers have published significant rate hikes with no warning to consumers.

These rate hikes result from increases in the cost of insurance (COI) companies charge their existing customers.

For those of you who may not know what COI is, it is the pure insurance protection portion of a policy and is tied to mortality risks.

In the past, COI increases have been unthinkable and consumers have relied on the implicit and explicit promises of  life carriers that they will never have COI increases.  The breaking of this promise by four big insurance companies virtually guarantees that others will follow.

There’s nothing subtle about these premium increases, either.  Policy holders are getting bills with anywhere from 40% increases in premiums to over 100 percent!   Such increases come at a time when health insurance, automobile, and other insurance premiums are also increasing.

The impact on older Americans, especially those over age 65, is tremendous.   This is because the highest COI rates occur as people approach and surpass their expected mortality.
So why are these carriers suddenly starting to raise these rates and what can you do to avoid having this happen to you?

To understand the reasons for this situation, you need to know a little bit about how life insurance works.

Nearly all permanent life insurance policies, including indexed universal life, whole life and variable life, use projected COI to help determine how the policy will be priced.
Even “guaranteed universal life” contains a mortality component  found on the company’s side of the risk equation.

If an insurance company’s projections are off and more insureds die than expected in a particular group, the company can pass those additional costs along to their policyholders. 

This has always been a possibility, but until this year, COI rate hikes were very rare.  Insurance companies realized that doing this would create massive PR headaches and potentially tarnish their public image. 

Now however, major insurers such as Transamerica say they can no longer afford to maintain public perception at the expense of profitability.   

The company recently revised COI costs for a huge block of universal life insurance business written in the 1990’s and now requires all proposals for these policies to be illustrated at the guaranteed mortality rate, guaranteeing large rate increases.
Another large issuer of universal life insurance, 

Voya Financial has also notified many of its’ universal life policyholders  about coming rate increases.

AXA , which is the largest insurance company in the world, also recently increased COI rates for a block its’ universal life policies.   These policies, in addition to being singled out due to bad mortality rates, were also chosen according to premium payment patterns.   

Universal life and flexible premium policies let owners choose how much they pay each year, provided there is sufficient cash value in the policy.

In addition to adverse mortality rates, the Fed’s stubborn insistence on maintaining ZIRP (zero interest rate policies) has had a negative effect on customers’ abilities to fund policies.

If you have one of these types of policies and you’ve experienced rate increases such as those above, you should contact our office.  We’ll suggest alternate strategies that may help you offset some of these increased costs. 

As an advisor and agent, I can’t believe that insurance companies would have such callous disregard for their loyal policy holders.  The consequences of increasing COI are not reflected in a bunch of numbers on the company balance sheet, but rather in the daily lives of people, especially older Americans who must somehow deal with this blow to their budgets.

On a positive note, I work hard to ensure that none of my clients will ever experience such devastating impacts on their budgets.  At Living Wealthy Financial we are extremely selective about the companies we use to implement our Bank on Yourself® strategies.

We know that other permanent life solutions shift the risk back onto the insured, which in effect means the INSURED is now responsible for making the insurance company’s guarantees work.  How crazy is that?

Sure, whole life might not seem as “sexy” as these other types of insurance, but how much of your savings can you afford to risk?  I would guess your answer is “none.”  If that’s the case, then you need a strategy that reflects the true purpose of insurance- to pass risk from the INSURED to the COMPANY, not vice-versa.

If you are working with a stock company, versus the mutual companies with whom I work, then you should know that those stock companies are geared toward making decisions designed to maximize their shareholder’s wealth…not yours.  That means that in the long run they are not too motivated to do what works best for policyholders.

PS: If you have a policy that is with a stock company, and you’d like us to analyze it and make recommendations, at absolutely no cost or obligation to you, then call our office now at (800) 382-0830 or visit our website at http://livingwealthyfinancial.com/

Friday, August 28, 2015

The Three Scariest Words Affecting Your Retirement...

by Pamela Yellen
Bank on Yourself.com

There are three words that could have the biggest impact on whether you enjoy a comfortable retirement... or you have to struggle and 
forego life's luxuries – and even life's necessities.

But almost no one is talking about these three words. 
And there's a good chance you've never even heard of them.

These three words could have more impact on your retirement lifestyle t
han living longer than you expected... or than being forced to retire sooner
than you planned (which happens to nearly 50% of Americans, 
according to the Employee Benefit Research Institute).

The three words may sound a little technical, but I'm going to 
make them brain-dead simple to understand.

The three words are: sequence of returns. 
Specifically, the "unfavorable" kind.

It's a fancy way of saying that retirees who have 
a big portion of their assets in equities and 
mutual funds face the very real risk 
that the market will fall as they are 
withdrawing money from their accounts.

Many people plan to use the widely recommended "4% rule," 
which advises retirees to take out no more than 4% of the 
value of their retirement accounts (adjusted for inflation) each year. 

Studies show that rate of withdrawal has a good chance of making
 your money last as long as you do.

 (It should be noted that more recent studies show 
that a 3% annual withdrawal is the maximum needed
 to make your money last.)

That means that if you have $100,000 in your retirement accounts, 
you can safely pull out $4,000 a year using the 4% rule. 

If you have $500,000, you can withdraw $20,000 a year, 
and if you have $1 million in your account, 
you can take out $40,000 a year.

If you haven't thought much about what kind of lifestyle withdrawing 
4% a year from your accounts would give you, I'm guessing you might
 be feeling a little queasy right about now.

Oh! And don't forget to take whatever you'll have to pay 
in taxes that you deferred in your 401(k) 
or IRA off the top of that number!)

It's easy to see that if we experience another market crash of 
50% or more – as has happened twicesince 2000 –
 as you're nearing or already in retirement, 
it could have a devastating impact on how much 
you can withdraw each year.

If your million-dollar 401(k) suddenly becomes a 201(k) worth 
$500,000, withdrawing 4% will provide you only $20,000 a year, 
instead of the $40,000 you had planned on.

But here's where it gets really sticky... timing is everything...
When you run the calculations, you discover that the impact of a
market decline in the first few years of retirement is even worse 
than in later years.

It turns out that when you begin to take withdrawals,
market volatility has a far greater impact than rate of return.

An unfavorable sequence of returns may make you have 
to cut back significantly on your retirement lifestyle,
or force you to work longer than you had planned.

The BIG problem, of course, is that there is no way 
to accurately predict when the next market crash 
will happen, or where the markets will be 
when you are ready to retire.

We may be at the beginning of the next major crash... 
or several years away from it. Nobody knows for sure.

One way to protect yourself from this very real threat to your 
retirement lifestyle is to diversify your assets.

What if a portion of your savings were in an asset that is 
guaranteed to grow by a larger dollar amount every year? 

That would be a favorable sequence of returns that translates 
into financial peace of mind for life.

Such an asset exists, and it's called Bank On Yourself.  
It's never had a losing year in more than 160 years!

It also lets you fire your banker and become your own 
financing source for your cars, vacations, a college education, 
business expenses and more.

And the best part is that it's easy to find out UP-FRONT 
what your bottom-line guaranteed numbers and results 
could be if you added Bank on Yourself to your financial plan.

To find out how a custom-tailored plan could help you reach
 your financial goals and dreams  
without taking any unnecessary risks. 

– just request your free Analysis right here

Friday, August 14, 2015

Are you financially illiterate? Pamela Yellen discusses the truth about money that no one is teaching...

by Teresa Kuhn, JD, RFC, CSA
Authorized Bank On Yourself Advisor(TM)

For a long time now, I have been encouraging my clients, friends, and family to take charge of their own financial destinies by becoming more educated about how money really works.

It's always shocking to me when I read the latest studies demonstrating just how few Americans grasp basic financial concepts.  Even well-educated Americans who consider themselves to be savvy in the area of personal finance often fail when given simple money tests.

Pamela Yellen recently joined the Living Wealthy Podcast to discuss her short, simple, but ultimately revealing new money quiz and the alternative to Wall Street offered by the Bank On Yourself system.

Check out the interview here:

Also, be sure to take the Financial IQ Quiz yourself.

PS: We'd love to know what YOU scored.  Call our office M-F 8AM-4PM Central time and tell us your score.  We'll send you a free packet of information full of great money advice.  
(800) 382-0830

Sunday, August 2, 2015

One Way To Guard Against Identity Theft

by Teresa Kuhn

Each year, over 15 million United States residents have their identities stolen.  

The resulting financial losses have been estimated at nearly $50 billion annually.

According to the US Department of Justice  approximately 7% of all
American adults have experienced identity theft with the average loss per incidence at $3,500.00.

As the technical expertise and savvy of would-be identity thieves increases, so does their ability to extract information from government and corporate databases, even those with high-level security.  
Breaches of these databases occur much more frequently than you might expect, making your risk of identity theft even greater than before.

For several years now, I have recommended that my clients take advantage of the legal access and identity theft protection offered by LegalShield.(R) 

LegalShield Platinum Council member Larry Smith says that as the danger of identity theft has grown, LegalShield's product has become stronger and more effective, offering features that other identity products can't match at a price nearly anyone can afford. 

 In June of 2015, security powerhouse Kroll International partnered with LegalShield to launch "IDShield," an innovative solution to guard against identity fraud. 

"Everyone needs this, says Smith, "and the monthly cost is such that anyone can afford it.  Your financial information is vulnerable and you need to protect it as best you can."

Learn more about the legal and identity services offered by LegalShield by going here:

Saturday, May 30, 2015

Funding Your Family Vacation (..without using credit cards..)

by Teresa Kuhn, JD, RFC, CSA
President, Living Wealthy Financial

One of the keys to achieving a sound financial future is to learn the the art of living well while avoiding the kind of debt that will destroy your retirement plans.

It's understandable that parents want to give their children experiences they will remember and treasure the rest of their lives.  That's why places such as Disneyland 
Park in California and Walt Disney World Resort in Florida are continuing to draw record crowds despite an iffy economy.

Unfortunately, the costs of these adventures have increased dramatically.  For example, a typical 7 day Disney resort package for a family of four runs right around $4,000, not including transportation and the obligatory souvenirs and snacks once inside the park.  You could easily drop over $8,000 on that one trip.

That's why the temptation to use plastic to finance vacations is so seductive.  After all, it's hard to save that much money and the kids are growing up fast, so....

I encourage my clients to think twice about putting any big ticket items on a credit card, even vacations.
Instead,I tell those who are managing their cash flow using the power of Bank On Yourself to consider financing their vacations themselves, provided they have enough money saved in their policies, of course.

What's at stake is big in terms of both unnecessary interest and lost opportunity costs.  Many credit card companies charge 18% or more in interest.   Look at the chart below and see how much a "budget"  $4,000 vacation really costs when you put it on credit and pay it off in 3 years.  As you can see, you've wound up paying over $1,200 in interest alone!

Imagine, then, loaning yourself the money from your specially-designed whole life policy, setting your own interest and repayment terms, and paying yourself the interest instead of the credit card company.

Wouldn't you enjoy your vacation more if it didn't include the stress of having a large debt hanging over your head?

Plus, by paying yourself back with interest, you are helping your BOY policy grow... and that's always a good thing for you and your entire family.

If you want to learn 

To learn more about becoming your own source of financing, call our office M-F at 
(800) 382-0830

Tuesday, May 12, 2015

Bank on Yourself for Fabulous Vacations

                         photo courtesy of Tammy de Leeuw

by Teresa Kuhn

As someone who values experiences over “stuff,” I can certainly appreciate it when my clients want to use their Bank on Yourself policies to create unforgettable memories for their families and friends.

Whether it’s a Caribbean cruise or a trip to Disney World, once in a lifetime vacations can be less expensive and stressful when you plan ahead, research your destination,  then add the power and flexibility of your Bank on Yourself plan to the mix.

When you use BOY to finance your vacation instead of credit cards, you accomplish some very important things:

  • You avoid paying tons of extra fees and interest charges by not relying on plastic.
  • You arrange repayment on your own terms.  
  • If you have to miss a payment due to unforeseen circumstances, your credit report won’t get dinged.
  •  Using BOY makes you more aware of your spending so you don’t caught up in mindless transactions that sap your cash.
  • Using BOY means you won’t have to tap into your emergency fund, college fund, or retirement savings to finance your dream vacation.

5.       Financing your dream vacation with a Bank On Yourself policy helps you accumulate more cash in your account…faster.

Bank On Yourself is hands-down the most creative way I know to finance memorable family adventures without adding more debt (and more stress) to your life.

If you’d like to find out more about how you can use the Bank on Yourself system to finance vacations, cars, houses, and other major purchases, visit our website at www.livingwealthyfinancial.com.

Or call toll free: (800) 382-0830

FILE UNDER #savingfordisneyland, #bankonyourself, bank on yourself policies, financing your own vacations, banking on yourself, #livingwealthyfinancial, best-financial-advisors-austin

Tuesday, April 28, 2015

Saving vs. Investing: It's important to understand the difference...

by Teresa Kuhn, JD, RFC, CSA

Most of us understand the idea that saving and investing are two completely different, yet complementary, mechanisms for achieving a solid financial future. However, given the enormous amount of painfully misleading information doled out by financial entertainer-types and journalists; advice that does not take into account the distinct functions that both investing and saving serve, it might be a good idea to review a few of the main differences between these two concepts.

Investing differs from saving in four essential ways that you can remember with the acronym RAIN.

R= Return. While the potential return on investments can be high, so is the risk. Most savings vehicles offer less return on investment in exchange for not having to risk your principal.

A=Access (or Availability)  Investments are generally not liquid.  This means that getting your money out in the event of an emergency can involve loss of gains in the form of penalties.  Viable savings vehicles, on the other hand, provide liquidity, use, and control of your money.

I =Inflation.  Good investments offer some hope of overcoming the deleterious effects of inflation on your wealth. Depending on the savings method chosen, many savings plans offer some protection against inflation, though that is not their primary function. 

N=Negligible risk.  Great savings plans mitigate or eliminate risk and provide peace of mind, which is something the majority of investment opportunities cannot promise.  

Certainly this is a somewhat condensed discussion of these two ideas. My point is that you need BOTH in your overall strategy and you need to know the different approaches to take at various times in your financial life. 

The ability to draw a clear distinction between saving and investing will assist you in critically evaluating the arguments against specially designed whole life insurance.   Much of what has written against the concepts presented by Bank on Yourself centers around the criticism of BOY as an "investment strategy," rather than as a tool for cash management.

Most of you who know me realize that I have NOTHING against legitimate investing.  In fact, I do it myself and encourage my clients to do the same.  The key phrase here is "legitimate."  You see, Wall Street has conjured and concocted a lot of suspect, even downright risky schemes for taking your money.  They slap some pretty ribbon on a load of toxic products, call them investments, and use marketing dollars to make them seem legitimate or even sexy.

Having a Bank on Yourself plan firmly in place as your "cash hub," allows you to safely build and manage your money so you can take advantage of true investment opportunities when you come across them.  

If you don't have a plan in place yet, or you have questions you need to answer, please call our office today at 1-800-382-0830.