Bloomberg, The Wall Street Journal and others have recently published articles saying how terrible it is that insurance companies are putting death benefits payable to beneficiaries into interest-bearing checking accounts as opposed to paying out the proceeds. This is a terrible misrepresentation of what actually happens and how this works.
Yes, for many companies the automatic settlement is to put the money in an interest-bearing checking account, but if the beneficiaries select a check for the proceeds, it is paid out as soon as the paperwork is processed and approved, sometimes in a matter of days. And in fact, most beneficiaries do request a lump-sum payout. According to Genworth, this number is as high as 90% of the beneficiaries.
As my friend David Woods, former CEO of NAIFA and the LIFE Foundation, states, “These articles charge that the companies are paying 1% and earning 5%. But the reality is that the money is available just as it is in a checking or savings account, right now. There is no checking or savings account in the world paying 5%. Even five-year CDs are in the 2% to 3% range.”
Most beneficiaries, if they take the death-benefit proceeds in a lump-sum check, will deposit them into a checking, money market or savings account, or CD, which at today’s rates, pays very little. Why are they going to do this? Because they need time to heal and make the proper financial decisions. Keeping the funds liquid and available is a most appropriate decision.
To the best of my knowledge, no beneficiaries have lost any of these death-benefit proceeds to financial mismanagement in one of the insurance-company checking accounts, and the beneficiaries can take the money out at any time by writing a check, no strings attached, no surrender charges and no fees. And this is a bad deal?
What do the banks do with the money they hold in deposits? They lend it out or invest it at much higher rates than they pay to their customers on their checking, savings or money market accounts and CDs.
The insurance industry is looking out for the best interests of its clients.
Long-term financial health encompasses a lot more than just making sure you’re saving smartly for retirement. Decisions you make, or fail to make, about how you safeguard your future with proper amounts of financial protection are also important. The type and amount of insurance you have now, from life to health to disability to long-term care, and even auto, impacts the amount money you’ll have for retirement.
Imagine, for example, what a protracted illness would do to your finances over the long term if you didn’t have in place the right kind of health insurance or disability insurance coverage (if that illness left you unable to work). Here-and-now insurance decisions can make a lasting mark on your financial future, for good or bad.
A smart thing for you to do is take the National Association of Insurance Commissioners’ online Insurance Intelligence Quiz and test your knowledge. Most who have taken the quiz have gotten a failing grade on it! See how you stack up.
Once you get your score, be sure to follow through and educate yourself on the questions you got wrong. LIFE has a wide range of information to help you make smart insurance decisions, and a great place to start is with the Insurance 101 videos. It’s easy: Just sit back, relax and let the experts explain it to you.
Life Insurance 101
Health Insurance 101
Disability Insurance 101
Long-term Care Insurance 101
Auto Insurance 101
Homeowners Insurance 101
Insurance Fundamentals
Put yourself ahead of the majority of Americans by making informed insurance decisions. It’s a smart thing to do for your financial future.
I spend time visiting and reading other finance-related websites and blogs to see what is up in the world of personal finance. While The Insurance Word blog mainly offers information on how insurance, life, health, disability and long-term care, helps you form a smart and solid financial foundation, we do know that there is a lot more that goes into building a healthy financial life.
Most of the time I see good advice being offered on these sites and blogs, although from time to time I do run across bits of “wisdom” that make me raise an eyebrow. But on the whole, I think they serve an important service: They get people to think about their finances and financial lives in a way they might not have done before.
LearnVest is new to the scene, launched just last November (and is still in beta), but it has made an impression on me. It was started by Alexa von Tobel, who took a leave of absence from Harvard Business School, to address this specific problem:
“There is no formal education for personal finance. Barring the extremely rare exception, personal finance is not taught in high schools, colleges, or even by most parents. How do we typically learn about our finances? Unfortunately, through our own financial mistakes and blunders, which have the potential to set us back before we even had a chance to get started.”
And while most of the information on the site is targeted at women half my age, I do subscribe to their daily email: LearnVest Daily, which I have found engaging and on point, addressing concerns large and small that young people have as they navigate their financial lives. I’ve even benefited occasionally from money-saving (or generating) tips.
I know many of our blog readers are like me, regular people trying to get and keep a handle on what can be an overwhelming topic at times, their personal finances. But I also know we have financial advisors and insurance agents who read this blog.
So, I’d like to do a soft-turn and appeal to you, the professionals out there, to help out with this important task of educating young people about their finances. While websites and blogs are an important avenue to learning, nothing can replace the personal touch, a “teacher” leading the way. And if you are an advisor or agent, you need to start seeing yourself as a personal finance teacher to the upcoming generations.
You can do something about this. LIFE’s NextGen3 is multimedia insurance education program to help educate high-school students about the basics of life, health and disability insurance, as well as financial planning fundamentals. The program has already reached 23 million high schoolers, and this new edition is aimed at raising that number much higher, but we need your help. You can be the conduit to bringing this free program into your local schools, and to your next generation of clients. For more information, you can contact Julie Lattanzi at the LIFE Foudation at jlattanzi@lifehappens.org.
Tuesday, February 2nd, 2010 | Colleen Hughes | |
They dangle from our key chains, encircle our desks, hang on our walls and sit on our mantels. Through photographs, our loved ones are all around us, even when we are not physically with them. Their pictures serve as constant reminders of what matters most in our life.
To encourage people to share their greatest expressions of love, the LIFE Foundation launched on Jan. 15 its Crazy4Love Photo Contest as part of its Insure Your Love campaign running through Valentine’s Day. Dozens of people have already uploaded their pictures to Tumblr.com capturing the first moment with a newborn baby or their first blushes as a newly engaged or wedded couple.
The moments captured in many of these photos also are pivotal life events. In addition to the joy and happiness they bring, they often come with promises to care and protect. One very important way to protect those we love is through life insurance. Share your greatest expression of love for those dearest to you in your life at www.insureyourlove.org. You may win a weekend getaway with your loved one and learn a little more about the connection between love and life insurance.
I was flipping through a recent issue of Real Simple, when I ran across a short article, a Q & A, really. The column is called “Right on the Money,” and it focuses on ethics when it comes to your money. The question a reader asked was, “When filling out an insurance application, can I stretch the truth about my health?” The article explained in around 200 words why this is not a good idea, that it could lead to a future claim being denied.
When I thought about this, I realized that all that space was really unnecessary. “Stretch the truth” is a euphemism for lie. Lie. So, really, the question should have been changed to say, “When filling out an insurance application, can I lie about my health?” When stated this way, the answer needs just one word, “No.”
