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Life Insurance as an Investment Tool

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Life Insurance as an Investment Tool

What is life insurance? It is an insurance contract that is established between the policyholder and the insurer that will pay a benefit upon death. There are various types of life insurance products on the market today. One type of life insurance is called permanent life insurance. Permanent life insurance pays a death benefit to the named beneficiaries and can be a great investment. 

Facts Regarding Life Insurance

According to a study by LIMRA titled “Life Insurance Ownership in Focus” more than 87 million Americans have a life insurance policy. The number of Americans that have life insurance is trending upward; however, the average amount of coverage has decreased. Approximately 70% of U.S. households have life insurance.

The Difference Between Term and Permanent Life Insurance

Term life insurance is much simpler than permanent or whole life insurance policies. The buyer agrees to make premium payments for a specific term or period. These policies are commonly purchased for terms of 10, 20, or 30 years. Term policies are fairly affordable and are most popular among households that have dependent children.

Term policies pay a specified death benefit if the insured party dies during the term of the policy. Buyers often choose a term based on when certain milestones are likely to occur. For example, parents may choose a term policy that extends to the estimated time their children will be graduating from college. A term policy can be very important so that dependent loved ones have financial support if you pass away.

A permanent life insurance policy also pays an amount to the beneficiary when the insured party dies. There is no other defined term or length for a permanent life policy. A whole life policy typically has a fixed premium amount. These types of policies often contain clauses preventing an insurer from revoking or otherwise terminating the policy unless premiums go unpaid.

Permanent life policies also have a savings component that builds cash value that the policyholder may borrow or withdraw from. As funds accumulate, they are invested in a tax-protected account. The investment portion of the policy may be subject to stock market fluctuations and the invested funds may generate dividends. Common types of permanent life policies include variable and universal life insurance.

Why Purchase Permanent Life Insurance?

Each consumer has a unique set of individual circumstances. Life insurance policies are fortunately not a “one size fits all” product. Many lower-income individuals immediately recognize that permanent policy premiums are beyond their financial means. These policies tend to be more expensive than term policies.

It is critical that consumers considering a whole life policy are prepared to maintain it. Those with a need for a life policy that exceeds 30 years often find it difficult to find a term policy. Those with a considerably younger spouse who want to ensure that they will have financial support should seek a permanent life policy. Children with permanent disabilities should also be considered when choosing a life insurance policy.

Variable Life Insurance

Variable life is a type of permanent life policy where the cash value and death benefit fluctuate based on the performance of invested funds. When the investments perform well, the earnings may be used to pay premiums or added to the death benefit amount. Variable policies may or may not have a guaranteed return rate. Keep in mind that the cash value may decline in years where investments perform poorly.

Universal Life Insurance

A universal life policy is a type of permanent policy that invests funds. The key aspect that differentiates universal policies is that they generally have a fixed rate of interest. The policies are quite flexible. The policyholder may choose to skip premium payments as long as the minimum required premium is paid during that year. Policyholder’s may have the option to tailor the amount of premium allocated toward the death benefit or cash value.

Indexed Universal Life Insurance

An indexed universal life policy allows the policyholder to maintain cash value in a “fixed account or equity index account.” The investment component is considered to be less risky than variable universal policies. The policyholder can typically pay a premium between a set minimum and maximum range. The cash value of the policy is usually accessible at any time without penalties.

Tax Benefits of Permanent Life Insurance

  • The cash value of a policy will increase tax-deferred as a retirement account would.
  • Withdraws from the cash value will usually be tax-free up to the amount you have already paid in premiums.
  • Life insurance policy beneficiaries can receive the death benefit without having to pay taxes.
  • Life insurance policy premiums are typically paid with “after-tax” dollars. 

Medical Examination Requirements

A life insurance company often will have applicants undergo a medical examination performed by a professional. You may be asked to complete a questionnaire. A full medical exam may include taking blood or urine samples and other various tests. This is part of the underwriting process that insurers complete when issuing policies.

There are “guaranteed acceptance” life policies available in the market as well. The premiums tend to be comparatively expensive and the death benefit may be restricted to a low amount. These policies are often viewed as being a poor overall value except for those with serious medical conditions.

Policy Waiting Periods

Some policies may have a waiting period. This is an amount of time that must elapse before the policyholder is eligible for the full benefits of coverage. These are commonly referred to as “elimination periods” or “qualification periods” during which you are paying premiums. For example, consider a policy with a two-year waiting period. If the policyholder dies during that time they may only be able to recover the amount already paid in premiums.

Comparing Life Insurance to Other Types of Investments

A permanent life policy is not the best option to choose exclusively for investment purposes. Although there are clear tax advantages, life insurance does not offer an employer match like a 401(k) or other retirement accounts. Those who qualify for Roth IRA’s may find these to be a superior option for investment purposes. It is recommended that you always consult a financial advisor or other professional.

Advantages to Purchasing Insurance Through an Independent Agency

If you have shopped around for insurance recently you have likely encountered an overwhelming number of options. Trying to compare policy options can be time-consuming. Unlike a captive insurance agent, an independent agent can offer policies from various insurance companies. These professionals are positioned to efficiently evaluate and identify the best options for your unique set of circumstances and goals.

Independent Agency Provides Life Insurance in Casa Grande

The Gebhardt Insurance Group is a well-established provider of insurance solutions and is locally based. We can help you save money on insuring your home, vehicles, business, and much more. Contact our team of professionals today at (520) 836-3244.

Life Insurance for Seniors Over 65

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Life Insurance for Seniors

It should come as no surprise that the costs of life insurance typically increase with age. Seniors should expect fewer coverage options and higher monthly premium prices. Life insurance companies view those ages 60 and over as a much greater risk. What are the best life insurance plans for people age 65 and over? The answer varies according to your individual circumstances and what benefits you are seeking.

What is Life Insurance?

A life insurance policy is a contractual agreement between the holder of the policy and an insurer. The insured makes premium payments in exchange for some lump sum death benefit payable to the beneficiary named by the deceased. There are dozens of types of life insurance policies. Term and permanent are the two primary types of life coverage.

Life Insurance Considerations

There are a host of considerations that seniors may factor into their policy selection as follows:

  • Whether there is a living spouse or not
  • Other assets that the individual has such as a home, retirement account(s), etc.
  • Any current debt and the amount(s) owed
  • If any children are still dependent financially
  • Any estate taxes that would apply upon death
  • Whether elderly parents or adult children who are disabled are relying on support financially       

Term Life vs Whole (Permanent) Life Insurance

A term life policy lasts for a specified time period of up to 30 years. Compared to whole life insurance, it may be seen as a temporary policy. Term policies are generally more affordable. The insurer may not ultimately have to pay a death benefit if the insured outlives the policy term.

A whole (permanent) life insurance policy remains in effect as long as the premium is paid and usually builds cash value. The insured party may use this cash according to the terms of the contract. These are typically much more costly than term policies.

Annual Premium for$500,000, 10-YearTerm Policy(Healthy/Non-Smoker)
Age 40Age 50Age 60Age 70
Male
$242$547
$1,476$4,523
Fe,ale$211$449$986$2,807

The above chart shows the large disparity in prices based on gender. Premiums for females ranged from roughly 13% to 38% less costly.

Age Limitations on Life Insurance Products

As you advance in age, there are fewer options available for term policies. These age-related limitations vary by company. Generally, the maximum term available for those 70 years of age is 20 years. At ages 75 and 80, the maximum terms decline to 15 and 10 years. Whole life policies for this age range are quite costly and are rarely offered beyond age 75. Seniors are also likely to encounter a requirement that they submit to a medical examination.

Concerns Regarding Medical Conditions

Seniors in their early 60s who are in good health may qualify for a term policy with a monthly premium of roughly $100. Being in good health allows access to better rates. This is partly due to the chance that the policyholder will live beyond the term of the policy. These healthy individuals may find that submitting to a medical exam lowers their rates.

MetLife typically requires applicants over the age of 50 to submit to an electrocardiogram and both blood and urine tests. New York Life often requires those over the age of 70 to undergo cognitive and physical testing. Prudential Insurance may reference a database showing any prescription drugs applicants take.

Avoid Buying Cash Value Policies Over Age 65

Universal life insurance policies are a form of whole life policies that accumulate cash. Policyholders can obtain a loan from their policy while still alive. These types of policies are generally not recommended for seniors. The premium tends to be high due to the cash value feature of these policies. In addition, they tend to have administrative or management fees that can approach 3%. The policies are often best for those focused on longer-term goals.

Burial or Final Expense Policies

Those well into their 70s will likely have few options. Those over 80 years of age may only be eligible for a burial policy. Burial insurance is a form of whole life coverage that exclusively pays “final” expenses. The death benefit in the policy is unlikely to exceed $40,000, with many in the $10,000 to $15,000 range. Typically they do not require a thorough medical exam. These policies are useful for seniors with health concerns who want ensure their family does not have to pay for funeral expenses.

Evaluating the Insurance Carrier

You may recall seeing advertisements, such as those with celebrity spokesmen, discussing life insurance policies with “guaranteed” acceptance. They commonly promote that no medical exam is required. The insurer knows that these policies are particularly appealing to those with health concerns. As a result, the policy premium is typically inflated and death benefits are generally limited.

You should feel comfortable that a life insurance company is stable and legitimate before purchasing a policy. It is often advisable to check their Standard and Poor rating or AM Best standing. Avoid purchasing policies that have extremely confusing terms and conditions. You should have a firm understanding of what the agreement entails.

The Advantage of Purchasing Through an Independent Agent

There are many types of life insurance products on the market from many carriers. A smart way to consider your options is by consulting with an independent agent. These insurance professionals are able to identify your needs and find policies that are suitable. An independent agent is not “captive”, meaning that they may offer policies from more than one carrier. This allows seniors more life insurance options and will help with finding an affordable solution.

Life Insurance Agency in Casa Grande

Our team of insurance professionals at the Gebhardt Insurance Group has provided life insurance to those of all ages for years. We also assist those locally with auto, homeowners, business insurance and much more. We encourage you to contact us today at (520) 836-5244.

Types of Life Insurance

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Types of Life Insurance

Those who buy a life insurance policy generally do so as a means of financial protection for their families. The beneficiary of the deceased will receive a lump sum benefit if the death occurs while the policy is active. Funds are commonly used for funeral and burial costs, debts such as a home mortgage, and future educational expenses of children. Life insurance coverage is broadly categorized as either term life or whole life (permanent life) insurance. Whole life policies make up approximately 60% of those sold within the market.

Overview of Types of Life Insurance Policies [1]
Term LifeWhole Life (Permanent)
Level TermTraditional
Decreasing TermUniversal
RenewableVariable
Non-RenewableVariable Universal

Term Life Insurance

These policies offer financial security for the beneficiary of the policyholder for a defined “term” or time period. In comparison to a whole life policy, they are considered a temporary option. It is the most simplistic and least costly option that may extend up to a 30-year-period. Those with minor children may maintain these policies until their kids have grown and no longer depend on them. Term insurance products are typically purchased exclusively for death benefit coverage. Unlike other forms of life insurance, they generally do not have a cash value component that may accumulate funds.

Renewable vs Non-Renewable

Most term policies extend over a multi-year period. A term of 20 years is quite common, after the time period has passed, the policy may be renewable. Establishing a long-term policy generally provides you with a stable premium cost that will not increase over time. Another advantage is if the insured party begins experiencing health concerns they already have existing coverage in place. Older adults and those will health issues are viewed as a greater risk and will have difficulty obtaining a new policy. Non-renewable policies end after the term and buyers will then have to shop for a new policy. When a term policy is renewed, the new premium is likely to be higher. This increase is likely because the insured party is now older. Renewals also may account for inflation and the rising cost of living.

Level vs Decreasing Term

Another distinction between types of policies involves whether they are level or decreasing. Most term policies have a level premium, but policies may or may not have a level death benefit. A level death benefit amount is clearly established when the policy is purchased and will remain unchanged throughout. Over 90% of term life policies issued are level. A policy with a decreasing level has a death benefit amount that is reduced at some interval over the policy term.

We will consider a scenario of a decreasing term policy that has an initial $250,000 death benefit with a 20-year term. This example has a 2% annual (yearly) decrease. We will track it at five-year intervals thus realizing a 10% decrease every five years.

YearsLevel Death BenefitDecreasing Death Benefit
0$250,000$250,000
5$250,000$225,000
10$250,000$202,500
15$250,000$182,250
20$250,000$164,025

Why Would Someone Select a Decreasing Term Policy?

Policyholders may consider a decreasing term policy if their primary concern is paying off a long-term loan upon death. One example is a home mortgage that is being paid off and the balance is steadily falling. The insured may have teenage children entering college soon and progressing into the workforce; therefore, their financial dependency is also diminishing. A decreasing policy is likely a more affordable option in most cases.

Whole (Permanent) Life Insurance

A whole or permanent life insurance policy also provides a death benefit as long as the premium is paid. It will also allow you to accumulate cash value depending on the type of permanent policy. A certain portion of the premium payments is invested. These funds may be invested in the stock market and potentially diversified similar to a mutual fund. If the investments perform well, the life insurance company may then pay you dividends based on earnings. These cash value arrangements often have great tax advantages. Many types of permanent life policies allow you access to the funds for purposes such as:

  • To make your premium payments
  • To extend yourself a loan at a lower interest rate than you could obtain in the market
  • As funding for other investment opportunities
  • For use as supplemental income in retirement

Whole Life vs Universal Life

Whole and universal life fall under the category of cash value policies. The distinction is primarily related to how premiums are paid and how cash accumulates. Whole life policies make the schedule of premium payments more simplified by using a set schedule. Whole life policies also generate a fixed return that “guarantees” you some cash value.

With universal life, the policyholder has some degree of flexibility in making their premium payments. The cash value component of the policy is more volatile and is dictated by short-term interest rates. Although a universal life policy may also have some “guaranteed” cash value, it is subject to changes in the investment markets. A possible disadvantage is that death benefits could decrease and policy premiums may increase in response to market conditions.

Variable vs Non-Variable

Variable life policies are highly volatile because premium funds are heavily invested in stocks, bonds, and other market funds. If these investments perform poorly the death benefit and cash value will decline. When investment performance is good there is a significant upside with strong increases in cash value. Policies deemed as non-variable are more conservative and not subject to the sizable extremes found in variable policies. They typically guarantee a minimum interest or cash value; however, lack the potential for large cash value gains from investment performance.

Variable universal life insurance coverage is a hybrid product. These policies use a variable cash value approach that has the investment-based risks and rewards. They also offer policyholders flexibility in their premium payments and death benefits that are typically associated with universal models.

Employer Plans

Larger employers often provide basic group life insurance policies to all employees. Many are paid entirely by the employer or have a small amount of employee contribution. These are generally small policies that rarely have a death benefit greater than $100,000. Usually medical exams and health inquiries are not required. Most of these policies are not sufficient for individuals with dependents. Many do offer the employee the option to add supplemental life coverage that is sometimes available at a good value. We will take a look at a couple standard plans offered by large Arizona employers.

  • The City of Mesa: Their standard program provides full-time employees with life coverage equal to their annual salary at zero cost.
  • The University of Arizona: Offers an Employer-Paid Life Insurance benefit with automatic enrollment for those eligible for benefits. It contains a $15,000 term policy that includes an additional $15,000 “seat belt incentive”. Also included is a $15,000 policy for Accidental Death and Dismemberment.
  • Hexcel Corporation: They have an office in Casa Grande that employs roughly 500 people. They provide a group life policy to employees at zero cost that has a $50,000 maximum benefit.

Buyer Considerations & Premium Allocation

Those considering life insurance obviously have many options to consider. You should consult with an experienced insurance agent who will help you find an appropriate plan that reflects your specific goals. Those looking to accumulate cash within the policy may choose a minimum level death benefit plan.

Enrollment Details & Tips

Depending on the policy that you are applying for, you may be subjected to a medical examination. This is more likely if your policy will provide significant benefits. All types of life policies will have a named person that is the beneficiary. You will need this individual’s social security number or other tax identification information. If the beneficiary is a minor child, you may establish a trust account for benefit distribution. Your policy premium should be an amount that is fairly affordable. This is particularly important if you choose a policy that may have rising premiums.

Independent Life Insurance Agency in Casa Grande

Would your family be faced with severe financial difficulties in the event of your death? Life insurance is a critical means of protection. At Gebhardt Insurance Group, we can help you secure a policy based on your current and long-term needs and goals. We represent many of the best life insurance carriers in the market and understand potential concerns about affordability. If you have an existing life insurance policy that has not been reviewed recently, we encourage you to contact us as well. It is very important to do so if you have had life changes involving dependents, marital status, income, or employee benefits. We can be reached at our office by calling (520) 836-3244.

Life Insurance Cost Calculator

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Many Americans overlook the importance of maintaining adequate life insurance coverage. It is common that people believe their premium amounts are much higher than they actually are. This is shown in a 2018 study by Insurance Barometer involving consumers in the United States.

Responders estimated that a term life policy for a 30-year-old valued at $250,000 was three times higher than the true cost. Data shows that Arizona residents are now recognizing the importance of life insurance with currently $520 billion in coverage statewide. The decision to purchase life insurance is an important choice, particularly among those who are financially responsible for loved ones.

Life Insurance Cost

According to the 2015 Insurance Barometer study by Life Happens and LIMRA, one of the most common misconceptions regarding life insurance is that it is too expensive to afford. In fact, despite the majority of the participants stating that they had a good understanding of life insurance, 80% overestimated the cost, with 1 in 4 believing the cost of life insurance to be upwards of a $1,000 per year or more.

The reality is, the peace of mind and financial stability that life insurance provides in a time of need is priceless. The best part is that it is totally affordable too!

For example, if you are a healthy 35 year old, your 20-year term life insurance plan worth $250,000 is only going to cost you approximately $23.90 per month. If you do the math, that means the amount you would put in over 20 years is $5,736. This is only 4% of the amount available in case the unthinkable happens! If that is not a good investment I do not know what is.

What’s even better is that there are a wide variety of life insurance plans available to choose from. This means that if need be, you can find an even more moderate plan for as low $13 per month. Who cares if it’s “not as nice”, any life insurance plan is still countless times better than no plan.

If you still don’t think you can afford life insurance or if you are unsure what the right plan is for you,  an our experienced life insurance agent can help you find the best option possible.

What is Life Insurance?

The Arizona Department of Insurance provides oversight within the life insurance market. The state statute defines life insurance as “insurance on human lives.” It involves the provision of benefits in the case of death, dismemberment or disability of an insured party. This form of insurance is part of a broader group of financial products and services called annuities. The insured pays regular premiums to the insurance company in exchange for a predefined death benefit if the insured dies.

Assessing the Need

Some questions that you should ask yourself to assess your need for life insurance include the following:

  • Would others experience financial hardship if I were to die suddenly?
  • Do I have a home mortgage or other large debt?
  • Are there concerns about paying for my child’s education?
  • What percentage of the family income do I provide?
  • Does my family have the money available to pay for my funeral and burial expenses?

Types of Life Insurance Policies

Term vs. Cash Value

A term life insurance policy offers coverage for a certain period of time. They tend to cost less and most do not build up future cash value. A term policy only pays a death benefit if death occurs during the term. Cash value policies typically span a lifetime and may increase in value tax-deferred. A permanent (cash value) policy may be “cashed in” for income while you are alive.

Renewable vs. Non-Renewable

Generally, term policies are “renewed” after the duration of the specified time period. The new policy may have a higher premium as you age. Non-renewable policies require the buyer to apply for a new policy after expiration.

Whole vs. Universal Life

Whole life and universal life insurance are both classified as cash value policies. Whole life policy premiums usually have a predetermined set payment schedule. Universal life policies have greater flexibility in the frequency of premium payments. Buyers must pay the minimum requirements to maintain either type of policy.

Variable Life vs. Non-Variable Life

Variable life policies invest premium funds in stocks and bonds and may accrue or lose cash value accordingly. Non-variable policies reduce the risks associated with market fluctuations by guaranteeing minimums. Non-variable policies typically do not benefit from rises in the investment market to increase value.

Employer-Based Plans

According to the National Business Group on Health, approximately 90% of large company employers offer some variety of accidental death coverage. Many employers simply provide a set amount of life insurance to all employees at no cost. A standard employer-provided life policy is likely to pay a death benefit that is insufficient in most cases. These policies generally do not require medical underwriting or exams and will typically terminate if you are no longer employed at that company.

Calculating Coverage Amounts

How much life insurance coverage is needed? This is a common question and the answer is dependent on the buyer’s unique circumstances. Craig Simms is a senior vice president with Vantis Life Insurance. He recommends that those with children obtain sufficient coverage to pay off their mortgage and children’s college education. There truly are many potential considerations such as current debt level, spousal income and medical costs. One common expense to consider following an individual’s death is the cost of a funeral. The National Funeral Directors Association recently provided costs associated with this:

Median Costs (U.S.)[1] 2014 2017
Funeral with Viewing & Cremation $6,078 $6,260
Funeral with Viewing & Burial $7,181 $7,360

Buying a Policy

Purchasing life insurance through an experienced agent is recommended. Some policies require the buyer to complete a questionnaire of medical questions or in some cases, have a medical examination. You will need to name a beneficiary when beginning a policy and will need their Social Security or tax identification number. As your circumstances in life change, you should reevaluate your policy with an insurance professional.

Life Insurance Agency in Casa Grande

No one wants to dwell on the idea of dying prematurely. Purchasing life insurance is a process that may be critical to secure the financial future of your family. The insurance professionals at the Gebhardt Insurance Group can assist you in choosing a policy that offers sufficient coverage and affordability. Contact our office today at (520) 836-3244 to receive a life insurance quote.

Guest Post: Seniors Can Keep Their Health and Finances Robust

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Health and Finances Robust

As seniors approach and begin retirement, it’s a great time to take stock of your financial situation. Managing your money in retirement can differ from when you are employed full-time, so it makes sense to reassess your situation. Here are a few tips to get you started.

Budget Carefully

Your income in retirement will likely be much lower than it was in your biggest earning years, so you’ll need to plan for that. You and your spouse should develop a written budget (if you don’t already have one), so you know exactly where your money is going. This will help control your spending and identify areas where you can save even more money. You should also make sure to plan and communicate with your partner. You might have different visions and goals for your retirement years, so it will help to take the time to get on the same page.

Your Home

One asset that might give you a chance to better your financial situation as a senior is your home. It’s always a good idea to be aware of home price trends in your area and how your home matches up to the trends. Homes in Tucson, Arizona, for example, have sold for an average price of $210,000 in the last month.

If your home value has increased significantly, and you can get a good price for it, this may be a good chance to sell your house and pad your bank account a bit. This could give you some room to breathe, especially if your budget is tight and your home seems to be putting a strain on your finances. Downsizing will give you a smaller space to manage and create some room in your budget.

Beware Friendly Strangers

Seniors are often thought of as easy marks to get their money taken away from them, so it’s vital that you and your family keep a close eye on your financial affairs. The first warning sign to watch out for is confusing double talk filled with complex ideas that neither you nor even your younger friends can understand.

You should also be on the alert for excessive friendliness (calling repeatedly, for instance) and pressure to sign a document immediately, without taking the time for an appropriate review. If you don’t receive statements in the mail or unfamiliar details start surfacing, you should also check into things further. You should also put fraud safeguards in place on your accounts such as an alert for large withdrawals.

Get Help From Your Kids

As you get older, you may start to notice signs of cognitive or mental decline. If this begins to happen, you should ask your adult children to step in and help manage your finances. This will help your bills to be paid on time and will help ensure your kids know how best to help you, especially if something unexpected were to happen.

Get a Life Insurance

Life insurance is critical for all senior citizens. Having a life insurance policy can help you protect your legacy and your loved ones. It can protect your family from ongoing and immediate financial needs, funeral expenses, medical bills, and other debts, such as mortgage. Whether you’re preparing for retirement or are already retired, it’s never too late to consider purchasing a life insurance policy or expanding your existing coverage.

Your senior years are a fantastic time to enjoy life and the fruits of your labors for so many years. Following the tips above to manage your money will help you to make the most of what you have. Enjoying retirement doesn’t have to be just a dream; it can be a reality for you.

Photo from Pixabay

Speed Kills – One of The Top Contributor of Road Accidents

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Penalties for Driving Without Insurance

For many years, speeding has been proven to be a leading factor in traffic deaths throughout the world. According to statistics from the department of transportation, one-third of all traffic deaths in the United States have been affected by speeding. The effects of traffic deaths also go beyond the loss of life and grieving by the family. Studies have shown that countries can lose 3-5 percent of their GDP due to car accident deaths through insurance claims, loss of work, and other financial factors. Speeding is a cause of death that can be easily solved without any new technology or cure, yet it still happens on a regular basis.

So why is speeding such a major factor in accidents and deaths on the road, compared to any number of other factors? Speeding while driving provides a higher risk of causing an accident for a wide variety of reasons. Drivers who speed have less time to react to changing conditions, such as changes in road quality, weather, or other driver’s movements on the road. Speeding makes for worse accidents when they happen due to the faster velocity of the impact. Its effects can also be multiplied by distracted driving or tired driving.

Fortunately for drivers, steps have been taken by many countries around the world to curb the danger created by speeding drivers. Most nations have implemented reduced speed zones in areas near schools and on narrow roadways. Speed bumps and speed tables have been added to areas where speeding has been known to be an issue. Higher fines have been put in place for speeding in sensitive areas such as construction zones and school zones to keep pedestrians safe. All of these factors further incentivize drivers to drive slower and drive more carefully.

In a world where others are speeding, what can someone due to keeping themselves safe from the danger? There are many actions a common driver can take in order to protect themselves on the road. The obvious first step is to not speed yourself. While others may choose to speed on the road, you do not have to speed with them. When you drive the speed limit, you bring a bit more safety to everyone on the road.

Driving defensively and having the right auto insurance is the best way to go. Avoid common distractions such as using your cell phone or constantly changing the radio settings while driving. Be mindful of other drivers, where they are around you, and their speed in relation to your own. Practice the 3-4 second rule, which states that you should stay at least 3 to 4 seconds behind the vehicle in front of you, and no closer than that. There are many aspects to defensive driving that can keep you much safer on the road, no matter how anyone else drives around you.

Also be sure to take care of your vehicle in terms of maintenance. While this may not seem to relate directly to speeding drivers, it is good practice to regularly maintain your car so nothing goes wrong with it while you drive. If you ignore issues like weak brakes or a bad engine, you could find yourself causing a hazard on the road, making it all that much more likely that you can cause an accident. Combine this with speeding drivers trying to avoid you as your car breaks down, and your chances of an accident are multiplied greatly. Always be sure you take care of your vehicle maintenance.

Despite all of these facts on the dangers of speeding, things are improving. In 2003, the United States saw approximately 13,000 deaths related to speeding. By 2012, that number had reduced to approximately 10,000. Awareness of speeding as a cause of death is growing, as more Driver’s Education classes emphasize the dangers, as well as the driving tests. Car manufacturers also have upgraded the quality and number of airbags in their newest vehicles, and are now building vehicle frames and windows with stronger materials.

The best way to keep yourself safer on the road is to simply not speed yourself. Plan to leave earlier for your destination so you don’t need to hurry. Anticipate the traffic you will be in and drive accordingly. Every step you take to change your own driving habits keeps you just a bit safer no matter what the other drivers may be doing. If these aren’t good enough reasons, save yourself the cost of the accident, the loss of fuel economy, and the price of a speeding ticket, too.

Defensive Driving: Limit Your Risk of Accidents While Driving

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Defensive Driving

You may have heard of defensive driving, but what is it? Defensive driving is all about doing what you can to limit your risk of accidents while driving. Paying attention to the road, being mindful of other drivers, and maintaining your vehicle are all essential to having a safe trip. No matter your age, it’s always a good idea to brush up on your defensive driving techniques. Here are a few good tips to keep in mind for the next time you hit the road.

Defensive Driving Tips

Follow the 3-4 second rule

The 3-4 second rule says that you should always stay at least 3 to 4 seconds behind the driver in front of you. Some say it is good practice to drive behind other at least 1 second per 10 miles per hour. So if you drive at 60 miles per hour on the highway, you should have at least 6 seconds worth of buffer between you and the next car.

This rule makes it safer for you in the event that you need to stop quickly. You never know when the driver in front of you may hit their brakes, and you need to be ready. The more time you have to react, the better for everyone.

Avoid distractions

There are plenty of things vying for your attention all day, and the distractions don’t stop while driving. Music from the radio, a ringing cell phone and billboards on the road are just a few things that could pull your attention from the road. When your focus is off of your driving, you run a higher risk of accidents.

It is best practice to not use your cell phone in any way while driving (in fact, it’s illegal in many areas). Set your radio before starting to drive and leave it alone, or adjust it from the wheel. Don’t try to read every sign and billboard you pass by if it’s going to take your eyes off the road. Always remember the most important part of driving is the driving part.

Be aware of your surroundings

With all of these distractions, it can be easy to forget to keep track of things around you. How many cars are near you? Are they slowing down? Is there a construction zone up ahead? Know what’s going on so you can react quickly and efficiently. Conditions are constantly changing due to vehicles, weather, and quality of the road itself. The more you know about your immediate surroundings, the better.

Watch out for the other guy

More specifically than being aware of your surroundings, be mindful of the other drivers. Some drivers will switch lanes suddenly without using a signal. Others will speed up or slow down just as quickly. Others could sway in their lane and come to close. Just because you are driving defensively does not mean they are, too.

Even when you are surrounded by good drivers, something unexpected can happen. Car issues can arise for the other drivers and you will have no idea why they cut you off. If you are driving safely, you will have time to react to these kinds of problems.

Watch out for changing road conditions 

In addition to distracted drivers, changing road conditions can cause problems, too. The road can become very slick when it begins to rain. Heavy downpours can start suddenly. Even leaves in the autumn can cause tons of issues on the road. Beyond this, you can find yourself in a construction zone, in a neighborhood with tight roads, or at an intersection with a broken traffic light.

Car conditions can also lead to problems. Be sure to keep up with car safety maintenance so as to not break down. If your tires are not properly inflated, you could have a hard time controlling the vehicle. If you haven’t had an oil change in a long time, your engine could stall. If your brakes are old, you could lose the ability to stop quickly. Taking care of your car maintenance is an essential aspect of defensive driving.

Follow the law

It may seem obvious, but following the law is a good idea when driving. Speed limits are there to keep drivers safe from moving too quickly in areas where they may need to have time to react and slow down. Driving drunk will obviously make it harder to stay focused. Driving without insurance is also against the law for your own good, as the cost of car repairs and injuries can be overwhelming. Always follow the laws of the road, even the ones that don’t directly affect your driving and last but not the least don’t drive without insurance. For best insurance rates call us and we will determine what’s best for you.

Be sure to use common sense

We all know our own abilities and limitations behind the wheel and we should always act accordingly. Know when you are too tired to drive. Know how much music you can handle while driving. Know what types of roads you are confident with driving.

In addition to these, be sure to use your turn signals whenever you change lanes or make a turn. While traveling through a green light, take a quick look to ensure no one else is ignoring their red light. Generally, you should have an awareness of what’s going on within a 50-foot radius around your vehicle at all times.

A lot goes into defensive driving, but every bit is well worth it. You’ll have fewer accidents (major or minor), lower car insurance rates, and lower car repair bills. Most of all, you’ll be able to enjoy your vehicle for years to come.

Important Reasons Why Life Insurance Makes a Great Christmas Gift

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Life Insurance Makes a Great Christmas Gift

Christmas time is here again. It’s the time of sharing and giving. And yes, time to think of a great gift for a friend or a loved one.

Finding something special for someone can be stressful. Aside from the fact that it is difficult to really find the right gift for someone, there’s the Christmas rush to worry about. It is hard to brave through the crowd of shoppers at this time of the year.

This year, why not give something different than the usual? Instead of buying the usual gift like clothes, decors, utensils and such, why not give something more useful and practical? Times are hard and people would appreciate receiving something that they can really benefit from. For this reason, life insurance would really make a great Christmas gift. It may not be your so-called “traditional” gift, but it’s definitely a gift worth giving.

With this, we have made a list of some reasons why life insurance makes a great Christmas gift. They are listed here in no particular order:

  • You get to avoid the Holiday rush

Christmas is a time for joy and happiness. It should be anything but stressful. It’s not, however, the case, especially when you go the store or a mall to buy some presents. The hustle and bustle of the season can sometimes just be too much. And the lines can go on forever.

If you give life insurance as a gift, you get to avoid all these! You don’t need to line up, or wait for hours, or brave through the crowd just to buy a present. You can sit comfortably in your home and call an agent. It’s as easy as that.

  • It’s a gift for everyone

You won’t go wrong if you give life insurance as a gift. At least, you won’t have to worry what to get to your loved one or friend. It may not be something that everyone expects to receive as a gift, but at least it’s unique and practical, something that anyone will surely love and appreciate.

  • It’s for the family

Life insurance does not only benefit the recipient, but also the recipient’s family. In that regard, insurance is the kind of gift that is really for the whole family. This is something that everyone will benefit for the rest of his/her life. It also helps protect his/her family in case the inevitable happens without a warning. It’s that practical.

This is true. In fact, the average monthly insurance cost is only as low as your Netflix subscription. The rates will still vary, of course, depending on several factors and on the amount of your coverage. The point is that it isn’t that expensive as it sounds.

  • It secures the future of the recipient’s family

College is expensive. If your recipient has children, then a life insurance will help him prepare for that, especially if the worst happens. Having a life insurance allows the person to prepare for the worst and to help their loved ones have a better life even if they are no longer around. And by giving insurance as a gift, you’re little help will go a long way.

Again, back to the question, this year why not give something different than the usual? Life insurance is not just a unique gift, but a practical one as well. Put a new meaning into the holiday spirit. Help your friend or loved one prepare for unforeseen financial hardship in case something bad happens. It’s always better to be prepared.

In case you decide to give life insurance as a gift this holiday season, make sure that you approach a professional who is reliable, knowledgeable and experienced. Make an appointment with Gebhardt Insurance.

Life Insurance Basics

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Life Insurance Basics

“Even death is not to be feared by one who has lived wisely” – Buddha.  Life and death are difficult topics but one simply can’t exist without the other.  Planning for death can be a wise way of ensuring financial security for those left behind.  Life insurance can make sure that death does not impact your family or business financially.  If you would like to live wisely and plan for the inevitable, there are many different types of life insurance that can protect your loved ones and allow you to invest in your future.

What Is Life Insurance?

Life insurance consists of a contract between the policy holder and an insurance company.  In exchange for premium payments, a life insurance company will pay out a predetermined amount to a designated beneficiary in the event of the death of the insured.  Life insurance comes in many different forms and is a valuable planning tool for many people with a wide range of insurance and investment goals.

Why Do You Need Life Insurance?

Life insurance is an important income replacement tool.  If you have anyone that relies on you financially, you should consider a life insurance policy.  For instance, if you have minor children and you are the primary income provider for the family, a life insurance policy could provide financial stability for your children in the event of your death.  Life insurance can extend much further than just protecting your children.  If you have elderly parents that rely on you to financially provide for their housing or care, a life insurance policy can guarantee their situation and lifestyle for years to come.  Life insurance policies are also common for business owners.  If you own, or are a major stakeholder in, a business, a life insurance policy can provide peace of mind for other owners or stakeholders.  If you were to die unexpectedly, the payout from your policy could provide financial solvency while the remaining members of the business decide how to best move forward.

What are Your Life Insurance Options?

There are many different variations of life insurance so choose carefully when considering which is the best for you.  The two most common types of life insurance are term and permanent.  Term insurance extends coverage to the insured for a set amount of time.  This could be one year or thirty years depending on the length of the contract.  Term insurance typically has the lowest premiums because if the insured dies after the term of the contract, the policy doesn’t have to payout.  If you are considering term insurance, make sure you understand every portion of the contract.  The length of time that you are covered is just one important piece of a life policy.  With most term policies, the payout and premium amounts stay the same throughout the length of the contract.  Term policies are typically the most straightforward.  You have a contract for a set amount of time and you pay a set premium in exchange for a predesignated payout if you die within the time frame established in the contract.  If you die after the insurance policy expires, you do not receive a payout and the insurance company keeps all of the money you have paid in premiums.  Term life insurance does not have a cash value component, which helps keep the premiums low but means the policy has no value after it expires.  If you don’t like the possibility of paying for a benefit that your loved ones may never receive, there are other life insurance options that may be a better fit.

Permanent life insurance has a cash value component that you won’t find with a term policy. These policies are also designed to last for the entire lifetime of the insured as long as the premiums are kept up.  There are many different variations of permanent life insurance but here are the most common:

  1. Whole Life Insurance

Whole life insurance is a good fit for people that want investment returns as well as a death benefit in place for their beneficiaries.  Whole life insurance contains a death benefit and investment component.  As the investment component grows, the insured can borrow against or withdraw money from the policy for things like college or major purchases and still retain a guaranteed death benefit amount within the policy.  Traditional whole life policies have premiums and death benefits that are set and do not change.

  1. Variable Life Insurance

Variable life insurance lives up to its name, by varying the amount of cash value and death benefit available to the policy holder depending on the investment performance.  The insured is still entitled to a death benefit but a portion of the premiums are allocated to various investment vehicles.  This type of policy is not for the faint of heart as your premiums, cash value and death benefit amounts may change depending on how your investments are performing.  Variable life policies can be subject to additional fees and surrender charges so please speak with a knowledgeable agent prior to signing a contract to make sure that this is in fact the best fit for your investment and insurance goals.

  1. Universal life insurance

Universal life insurance is very similar to variable life insurance in that it has an investment component, cash value and death benefit.  The primary difference is the investment component and how it impacts the policy.  Universal life insurance offers a fixed interest rate while variable life insurance rates fluctuate depending on how the investments are performing.  One of the biggest benefits of this type of policy is that it offers you a tremendous amount of flexibility.  You may be able to use your cash value towards paying your premium or adjust your death benefit amount.  Again, there are potential positives and negatives with this type of policy and it is advisable to meet with an experienced insurance agent when choosing the best insurance for your needs.

The first step when considering life insurance is to establish your long term financial goals.  Once you have identified your needs and budget, work with a skilled agent to pinpoint the best insurance vehicle for you.  With so many options, there is an insurance product available to meet your needs and provide you with financial peace of mind.

How Does Term Life Insurance Work?

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Life insurance can be used to protect your loved ones from a sudden loss of financial support. It can certainly bridge the financial gap and help your loved ones get back to their feet after your loss. The proceeds of life insurance can be used to cover immediate expenses.

These may include unpaid medical and hospital bills, funeral expenses, mortgage payments, meeting business commitments, even meeting college expenses for the children. In addition, life insurance helps maintain the family’s standard of living during such a difficult time.

It lets a person leave an inheritance. Moreover, life insurance can improve one’s credit rating. Life insurance in itself is a financial asset and may then help increase your credit score.

There are three basic types of life insurance- term life insurance, whole life insurance and universal life insurance.

The first of these three is term life insurance. This is also known as “pure” life insurance. This policy pays out the death benefit if the named person dies within the defined term. The most common terms are 10, 20 and 30 years. If the named person dies after the term expires, then there will be no payout.

This type of life insurance is typically the least expensive way to purchase a substantial amount of death benefit per premium dollar basis over a specified period of time. It meets coverage needs up to thirty years.

The disadvantages of this type of life insurance though include having no savings feature and having no lifetime coverage. Also, if the term of your policy is about to expire and you need to renew your policy, you might be shocked at how high your premium has increased, especially if your health has declined.

It may even be possible that you will not be able to renew the policy because you no longer find it affordable. Hence, experts suggest that on deciding the terms of your insurance, you have to consider the term length.

Term life insurance policies also have maximum age issues. Experts say if you’re past the age of eighty, it will be very difficult for you to get term life insurance.

There are two kinds of term insurance. There’s the “annual renewable term”. This has a term of one year (coverage), which you can renew annually. This has the lowest annual premium, but the amount of premium may increase as you age.

Hence, if your goal is to keep your initial costs down but you believe your earnings will increase significantly in the future, it is best to have this kind of policy.

There’s also the “level premium term” which you can buy for a specific multi-year period- 5, 10, 20 or 30 years. This kind of policy allows you to lock the amount of premium for a given multi-year period. Hence, this can be a smart way to insulate you from increasing amount of premium.

How much will it cost you? Well, the amount of premium that you will pay will depend on several factors- your age, health and the amount of your death benefit. Obviously, the younger and healthier you are, the lower is your life insurance premium. In the US, the most popular option for a term life insurance is a 20-year policy, worth $250,000.

The average annual life insurance cost of this policy for a 25-year-old non-smoker is $331. This will increase to $433 if the age increases to 40 and will increase to $2,495 for a 60-year-old. The amount of premium will be doubled to tripled if the person insured is a smoker.

How big should your life insurance be?

As a rule of thumb, your death benefit should be equal to seven to ten times of your annual salary. You can actually determine it in another manner.

First, determine the amount of income you wish to provide your heirs and beneficiaries after you die. From this amount, deduct all other income sources that they will be able to tap- retirement accounts, pensions, social security, etc.

For the remaining gap, this is the amount that you will fill with life insurance.

The second type of life insurance is whole life insurance. This has no predefined term, provides death benefit over the “whole” life of the insured as long as premiums are paid. Further, it accumulates cash value which the insured can withdraw or borrow against during their lifetime.

Its disadvantages, though, include inflexible premiums and a considerably lower rate of return than other investments.

Finally, the third type is universal life insurance. This policy has a cash value that is determined by short-term interest rates rather than the stated long-term interest rate of a whole life policy. Premium payments in excess of the cost of the policy are added to the policy holder’s interest bearing account. The disadvantages of this policy include decreased death benefit or increase in premium if interest rates decline.

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