Month: February 2020

Life insurance policies and annuities are two very different financial products that are often poorly understood. They are different from each other – in terms of how they work, whom they are best suited for, and the financial benefits they offer. 

Differences Between Life Insurance and Annuities

Death Benefits vs Living Benefits

The primary difference between a life insurance policy and an annuity is that the former is designed to provide you with death benefits whereas the latter is designed to provide you with benefits during your lifetime, although life insurance can also be designed to include living benefits. 

The primary purpose of most life insurance policies is to provide your family or designated beneficiary with a sum of money in case you die, usually to compensate for the financial loss they will suffer. An annuity, on the other hand, is to provide you with a regular stream of income until your death, so that you never run out of money to meet your day-to-day expenses while you are alive. 

Life insurance policy documents and annuity contracts can be very complicated for you to read and understand. If you are not sure whether you should buy a particular policy or annuity or if you think that the agent is not being honest with you with respect to the products they are trying to sell, it’s a great idea to consult a life insurance attorney who can provide you with the guidance you need. 

Target Consumer Base

Life insurance policies are generally marketed to young and middle-aged people, because the premiums become very expensive at older ages. 

Annuities, on the other hand, are often marketed to retirees or people who are about to retire. The annuity provides them with a monthly income that they can rely on for the rest of their lives. 

Mode of Payout

Life insurance policy death benefits are typically paid out in a lump sum payment. Most companies also offer you the choice of receiving a series of payments. The vast majority of beneficiaries prefer to receive a lump-sum payment in the event of the policyholder’s death. Life insurance death benefits are completely income tax-free under most circumstances.

Annuities, on the other hand, are designed to provide you with a monthly income for the remainder of your life. In fact, the very purpose of investing in an annuity is to make sure that you do not outlive your retirement corpus. 

Some life insurance claims are denied for various reasons. In such cases, rather than taking on the might of the insurance company by yourself, seek the help of a skilled life insurance lawyer who can recover the amount you are owed through negotiation, mediation, or litigation. 

Taxability 

This is one of the biggest differences between a life insurance policy and an annuity. The death benefit paid out by an insurance company is not taxable. The monthly payments from an annuity, on the other hand, are taxable. 

Highly Experienced Attorney for Life Insurance Claims in California 

Benjamin Blakeman has more than 40 years of experience as a lawyer, over 20 years of experience with life insurance, and 11-plus years as a certified mediator. He also has direct experience selling life insurance. He understands the life insurance and can provide you expert legal advice on life insurance, annuities, and financial elder abuse. 

THE FOREGOING IS NOT INTENDED TO BE EXHAUSTIVE AND IS NOT TO BE CONSIDERED LEGAL OR FINANCIAL ADVICE, NOR IS IT AN OFFER TO SELL LIFE INSURANCE OR ANY OTHER PRODUCT.

To schedule a consultation, call us at 1-888-270-0051 or complete our online contact form.

An annuity is a contract whereby an insurance company guarantees a series of payments over a person’s lifetime or a fixed period in exchange for a lump-sum payment made at the beginning of the period. The main purpose of an annuity is to provide you with a guaranteed stream of income that he or she cannot outlive. 

How Do Annuities Work? 

There are two basic kinds of annuities: immediate annuities and deferred annuities. Immediate annuities begin payments right away. Deferred annuity contracts have two phases – the accumulation phase and payout phase. During the accumulation phase, the owner deposits a sum of money – either a lump sum or a series of payments. 

Unlike a life insurance policy, an annuity does not require you to make payments for the entirety of the contract period. The owner of the contract can decide at any point to stop making further contributions and/or to convert the contract into a stream of payments (to annuitize).

During the payout phase, the insurance company makes payments according to the payout option elected. The most common options are payments monthly or annual payments paid over the lifetime of the annuitant or over the annuitant’s lifetime with a minimum guaranteed number of years. 

Annuity contracts and the laws governing them can be very difficult for the average person to comprehend. There are various types of disputes that can arise, such as disputes among different beneficiaries, disputes over the terms of payouts, or the amount due. If you have issues, you should not attempt to deal with the company directly or try to settle them yourself with the other parties. You should contact an experienced life insurance lawyer or attorney. 

What Are the Different Types of Annuities?

Fixed Annuities – You receive a specific amount of interest at regular intervals irrespective of market conditions. 

Variable Annuities – Your money is invested in a set of separate accounts operated like mutual funds and the account value fluctuates depending on market conditions. 

Indexed Annuities – The payout depends on a formula based on the performance of a stock market index. 

Variable annuities are generally not a good choice for risk-averse investors, as the returns can be negative depending on how the market performs. 

Indexed annuities pay returns based on a formula when the market goes up but have guaranteed minimum interest rates. The results vary widely, but not as widely as those of variable annuities.

There are risk disclosure requirements that relate to all annuities. If you are misled about the risks involved, you may be able to take legal action with the help of a life insurance claims lawyer to recover your damages. 

What Are the Benefits of Investing in Annuities?

• They can provide you with a regular, reliable stream of income – either for a specific period of time or until your death. 
• If you die while your annuity contract is in force, your beneficiary will receive a sum of money – either as a lump-sum payment or as a series of payments. 
• All income is tax-deferred until money is distributed.
• Unlike an IRA or 401(k), there is no upper limit for the amount of money you can contribute to an annuity. So, you can put away as much money as you want for your retirement. 

What Are the Downsides of Investing in Annuities?

• The rate of return on fixed annuities is quite low, so the payout might not be sufficient to meet your financial needs. Variable annuities, on the other hand, are risky and cannot provide you with reliable cash accumulation. 
• The commissions, fees, and charges associated with annuities can be substantial. 
• The majority of the money you invest in an annuity is locked in for a period of time known as a surrender period. You have to pay a surrender charge for withdrawals over a set percentage (usually 10% per year). 

Experienced Life Insurance Lawyer in California for All Your Annuity Related Issues

Attorney Benjamin Blakeman is one of a very small number of litigators representing consumers who have actually worked in the life insurance industry selling both life insurance policies and annuities. This experience has prepared him for just about any issue relating to life insurance or annuity-related litigation matters. 

Need a life insurance attorney? Call us at 1-888-270-0051 or complete our online contact form, and we will be in touch as soon as possible.

Buying life insurance coverage is essential to secure your family’s financial interests in your absence. At the same time, it’s paramount to make sure that the policy you buy actually suits your needs. If you buy the wrong type of policy or if you buy your policy from someone who is more interested in his commissions than your family’s welfare, your family could suffer dire consequences. 

Given below are five factors you need to consider in order to determine the suitability of your life insurance policy. 

Length of Coverage

If you need life insurance coverage only for a specific period of time – anywhere from 10 to 30 years – a term life policy may be the best option for you. If you need lifelong coverage, you should choose a whole life, universal life, or variable life policy. 

Buying a policy solely based on the recommendation of one broker or agent could be a bad idea. Many life insurance salespeople make misleading claims in order to sell products that they tend to profit the most from, rather than recommending the right product for your insurance needs. You might not discover your policy is unsuitable for years, often too late to do anything about it. If you are in doubt whether your policy is suitable, get a second opinion, or contact a life insurance lawyer. 

Amount of Coverage

One simple way to calculate the amount of life insurance coverage you need is the DIME (Debt, Income Replacement, Mortality, and Education) formula. 

Debt – Mortgage, credit cards, personal and business loans, car loans, student loans, and other debts you have

Income Replacement – How many years do you need your income to be replaced after your death? 

Mortality – Your funeral expenses

Education – Your children’s educational expenses

Your policy’s face value should ideally cover all the expenses listed above. 

Underwriting Guidelines

Different insurance companies have different underwriting guidelines. Some companies, for instance, tend to categorize diabetics as high-risk consumers. Some companies tend to charge a significantly higher rate for people with a family history of certain serious illnesses. Some companies tend to charge a higher rate for people who travel a lot. 

A life insurance broker who sells for many different companies may be able to find a more favorable offer if you are categorized as high-risk because of lifestyle, hobbies, or occupation.

Conversion Feature

If you choose to buy a term policy or a group policy from your employment, make sure it can be converted into a whole life or universal life policy if needed. If your insurance needs change in the future and if you need lifelong coverage, you can simply convert your existing policy without underwriting, instead of buying a new life insurance policy, which might be impossible if you have health issues later on. 

Insurance Company Ratings

There are three rating agencies that rate life insurance companies for financial strength. There is rarely a good reason to purchase life insurance from a company with less than one of the highest ratings. If an insurance company has weak financials or has a reputation for denying or delaying claims, you are better off purchasing insurance elsewhere even if the cost is greater. 

How a Life Insurance Lawyer Can Help You

Sometimes, your claim might be rejected by your insurer for no fault of your own. In such cases, you have the right to take legal action against the company and recover the claim amount in full. An experienced life insurance claims attorney can help you recover the settlement amount you are owed through negotiation or litigation. 

Legal Help for Life Insurance Issues in California 

Benjamin Blakeman has more than 40 years’ experience as a lawyer, over 20 years’ experience with life insurance, and 11-plus years as a certified mediator. He also has direct experience selling life insurance. He understands life insurance and can provide excellent legal advice on life insurance, annuities, and financial elder abuse. 

THE FOREGOING IS NOT INTENDED TO BE EXHAUSTIVE AND IS NOT TO BE CONSIDERED LEGAL OR FINANCIAL ADVICE, NOR IS IT AN OFFER TO SELL LIFE INSURANCE OR ANY OTHER PRODUCT.

If you are ready for a consultation, call us at 1-888-270-0051 or complete our online contact form.

A life insurance policy is meant to provide financial security and support in the event of a tragedy. It ensures that your family does not have to depend on a third party for their financial needs in your absence. 

When it comes to life insurance policies, you have a wide range of options to choose from, each of which provides you with a specific type of coverage and may vary in terms of being the best fit for one person or another. So, before buying a policy, it is important to compare the different options available and choose a policy that fits into your budget and meets your life insurance needs.

Different Types of Life Insurance Coverage Available

Term Life 

This type of coverage is designed to last for a specific period of time, after which it expires or becomes completely unaffordable. If you die – either as a result of an illness or in an accident – while your policy is in force, your family will be paid a sum of money, which is commonly referred to as your policy’s face value or death benefit. 

Term life is the most affordable and the least complicated type of coverage you can buy. Still, some insurers are known to deny or delay claims from time to time. In such cases, an experienced life insurance attorney can recover the amount you are owed from the insurance company through negotiation or litigation. 

Whole Life

This type of coverage is designed to last until your death. It expires only if the required premiums are not paid. Every time you pay the premium, the policy’s cash value grows. In addition, dividends are paid which can be used to increase the face amount. When you die, your family will be paid your policy’s face value, which will ordinarily be greater than the initial amount. You can also borrow money or withdraw cash from a whole life policy. 

Whole life policy documents can be extremely complicated for the average person to read and understand. So, if your claim is denied by your insurance company, or if there are any other issues, you should contact a life insurance claims attorney who can help you to resolve those issues and necessary, file suit to recover the amount you are owed. 

Universal Life

This is a cash value policy but differs significantly from a whole life policy because neither the premiums nor the interest is guaranteed; therefore, it may be necessary at some point to increase the premium payments in order to keep the death benefit in force. 

Variable Universal Life

These policies are extremely complex combinations of life insurance and investments in mutual fund-like instruments that rise and fall with the performance of underlying securities. The cash value portion of the policy does not grow in value at a fixed rate. Instead, it can be invested in a variety of accounts. So, if the market performs well, the policy will accumulate cash value rapidly. If it declines, the policy’s cash value will drop significantly and you may have to deposit more funds to keep the policy in force.

Due to their volatility, variable universal life insurance policies are not a good choice for risk-averse people, especially if they are older people. If an agent or broker advises you to buy a variable life policy – by making misleading claims or by deliberately refusing to explain the risks involved – you may be able to take legal action against them with the help of a life insurance lawyer. 

Simplified Issue 

This type of coverage is meant for people who do not want to undergo a paramedical exam. You only need to answer a set of questions related to your health and lifestyle. The downside is that these policies tend to be more expensive than regular life insurance policies. In addition, during the first two years, they are subject to post-claims underwriting, which will delay the payment of the claim. Any material undisclosed condition will result in the claim being denied.

Guaranteed Issue and Group Life

Guaranteed issue life insurance is meant for people who are unable to buy regular life insurance policies due to their age or health condition. If you can afford to pay the premium, you will be issued a policy – no questions asked. However, many of these policies have graded benefits, i.e. if you die within the first five years, your beneficiary will receive less than the face amount. 

Many group life policies issued through employment are also guaranteed issue. Such policies have special features that you need to understand before applying for them, and they are subject to completely different rules in case of disputes. 

Final Expense

This type of coverage is meant to pay for your funeral expenses. Premiums tend to be very high for the amount of benefit. 

UNDERSTAND THE DIFFERENCES BEFORE YOU BUY.

Cut Through Life Insurance Confusion With An Experienced Life Insurance Attorney

Benjamin Blakeman has more than 40 years’ experience as a lawyer, over 20 years’ experience with life insurance, and 11-plus years as a certified mediator. He also has direct experience selling life insurance. He understands the life insurance and can provide you expert legal advice on life insurance, annuities, and financial elder abuse. 

THE FOREGOING IS NOT INTENDED TO BE EXHAUSTIVE AND IS NOT TO BE CONSIDERED LEGAL OR FINANCIAL ADVICE, NOR IS IT AN OFFER TO SELL LIFE INSURANCE OR ANY OTHER PRODUCT.

To schedule a consultation, call us at 1-888-270-0051 or complete our online contact form.