What Whole Life Insurance

You may have heard the expression, “Buy ‘term’ and invest the difference.” While this axiom makes sense for many, there are times when whole life insurance is appropriate. It may sound odd, but a good question to ask is this: “Do I want to have life insurance when I die?” If you answer yes, then whole life insurance may be the better choice for you.

There are certainly arguments that favor term life insurance. For young families with children and others who need a large amount of inexpensive death benefit, term life is a great way to get low-cost protection. But because of the temporary nature of term insurance, only a very small percentage of contracts actually pay benefits. This is due to the great number of policy holders who cancel their policies or outlive the agreed-upon term period. Therefore, if you want to be certain that your policy will be in force when you pass away, and if you don’t know exactly when you are going to die, then permanent whole life is the solution.

There are several types of whole life policies. Selecting one depends on your unique situation and whether you want to accumulate cash inside your contract. Term insurance does not accumulate any cash or equity (it is akin to renting a home). Whole life, however, can accumulate cash on a tax-favored basis—if you pay more into the contract than is needed for pure death benefit protection.

Shopping for a permanent whole life contract that is primarily designed for maximum death benefit without the complication of adding cash value can be relatively simple, as it becomes a commodity type purchase. Based on your medical history, credit score, driving record, family history, and other factors, your premium will be a function of the perceived risk the insurer is taking. At that point, consider several strong insurance providers and compare policy costs. Depending on the carrier and the risk you present, there will be a range of prices within different policy types including:

• Traditional Whole Life
• Universal Life
• Variable Life

The good news is that if you aren’t concerned about accumulating cash inside your contract and instead are focused on maximizing death benefit, your decision is less about policy type and more about the cost of your guaranteed death benefit. One note regarding any illustrated death benefit: be sure to look at the guaranteed death benefit column (otherwise an amount based on an estimated rate-of-return assumption may never fully materialize).

The decision becomes more complex if you want to accumulate cash inside your contract­­­­ - which could be a smart idea if you want to accumulate cash on a tax-free basis. In this case, the policy type matters.

Traditional whole life insurance is fairly straightforward in its design. It invests your cash inside the contract into a fixed-return type of product. There will be a “guaranteed cash value” column on your policy illustration, and that is reliable—provided the insurer can honor its guarantee. This rate of return is set by the insurer, and while it can be reliable, it may or may not keep pace with market-based investments.

Universal life, in its basic form, has a guaranteed rate of cash accumulation. It can also offer a variable amount of cash accumulation through market-linked investments inside the policy.

Variable life, as the name implies, has a variety of investment options for your cash and hence has a wide range of potential returns. If you select this type of policy, you may see a wide range of returns on your cash.

One important distinction that plays into this equation is that with traditional whole life the premium is a fixed amount. But with universal and variable life the premium amount can be flexible. With a variety of carriers to pick from, a medley of policy types, flexible payment structures and various investment options, you have a complex decision. Then, the most important question to ask is this: “How much of my premium do I want allocated to the death benefit, and how much of my premium do I want allocated to accumulating cash inside my policy?”

If the goal is to maximize cash, design your policy to provide the least amount of death benefit your premium will buy. The main cost of an insurance contract is the death benefit. So if your goal is to maximize cash accumulation, it makes sense to have the least amount of cost—or least amount of death benefit—as a percentage of your premium. Yet many accumulation policies aren’t structured this way.

This is important because if you miss a few payments or reduce the size of your payments, you may wind up only paying for the death benefit portion and not adding to your cash value. Eventually, your cash value will be less than projected, and you may get discouraged and cancel the policy. You may think it’s the policy’s fault, but it was more likely a lack of communication or understanding by the agent, or a flawed policy design. In other words, commit only to a premium you feel comfortable maintaining throughout the life of the contract—if your goal is maximum cash accumulation inside the contract.

Remember to minimize the amount of death benefit you are purchasing while maximizing the amount of cash the IRS will allow into the contract. Yes, the IRS limits how much cash you can put into a life insurance policy, so be sure to talk with a knowledgeable, ethical insurance advisor when reviewing your options. Finally, make sure your premium amount is something you can commit to over the long term—otherwise you may only be paying for the death benefit when that was not your goal.

Special Needs Workers - Indonesia

Disability did not stop Andika Indra Saputra, 30, and Agus Rizkianto, 23, from leading an independent life. Saputra was born with cerebral palsy and Rizkianto is deaf. The two make a living creating Batik designs -- a traditional Indonesian dyeing technique.

The two workers employed by Zola Indonesia, a garment factory, showed off their skills to visitors at a batik workshop in Yogyakarta city, 500 kilometers (approx. 310 miles) from the capital Jakarta.

With his left hand, Saputra held a pen-like tool to apply liquid hot wax to a patterned fabric, while Rizkianto created a paddy rice and flower pattern on a scarf.

"This is a square pattern and I want to draw this pattern onto a pillowcase," Saputra told Anadolu Agency on Friday.

Both of them joined Zola Indonesia's batik workshop last year. Their work was displayed at a fashion show.

Saputra recalled he was mocked as a child for his disability, something that stopped him from going outdoors to play with friends, and confined him to the house. He said this experience became his greatest strength and he wanted to prove to the world that disabled people can live independently.  

“I want to motivate people with disabilities and their parents that we can also create great things and live independently,” said Saputra.

Last December, he collaborated with Dria Manunggal -- a rights group that focuses on disabled people -- conveyed their concerns to the regional administration on the lack of designated lanes and worship places for people with disabilities.

Currently, a mosque at Sunan Kalijaga State Islamic University is the only worship place in Yogyakarta that has a designated lane for wheelchairs.

Zola Indonesia's owner Lili Wijaya said 15 out of 20 employees at her workshop are disabled people. They handle all the production except coloring.

“They have great passion and enthusiasm to produce artwork,” said Wijaya. 

Buying Long Term Care Insurance

Buying long term care insurance is about risk management. It boils down to how you answer these four questions:

1. Would a tragic event (i.e. becoming disabled and requiring long-term care services) overwhelm and deplete everything you own?
2. Given your family history what is the probability of you needing long term care?
3. Do you have ample retirement assets and income to pay for all the costs of long term care?
4. Do you mind reducing your estate if the need for long term care occurs?

How you answer will determine whether long term care insurance is right for you. About two-thirds of those who buy LTC insurance do so either to avoid dependence on others (69%), protect their assets (67%), make long-term care services affordable (66%), or preserve their standard of living (59%)

It's been estimated that for folks 65+ about two-thirds or more are eventually going to need long term care. But what's often not mentioned is that more than half of those needing care will need it for less than 3 months, which just happens to be the time period before most long term care insurance coverage kicks in. In addition, the average stay in a long term care facility is between one year and one and a half years - longer for women, shorter for men. That should somewhat soften the risk of blowing through your entire assets. Furthermore, just because you want LTC insurance, you may not qualify. There's a chance the insurance companies might not be willing to take the risk on you, especially if there's a history of early onset dementia, coronary disease, or diabetes in your family.

Nevertheless, if preserving your estate if critical to you, and the fear of losing everything keeps you up at night, you should consider purchasing long term care insurance. The first decision you need to make is which company. While there are thousands of insurance companies currently doing business in the U.S., not all of them offer LTC insurance. So selecting the right insurance carrier and policy becomes a challenge. The selection of the company may even be more important than the policy itself since, essentially, you are purchasing a promise to pay a claim in the future.

Steps To Choosing The Right Policy

Step 1: Determine your need

Find out the average annual nursing home costs in your area, subtract fixed income sources (e.g. Social Security or pensions), and subtract streams of income derived from your assets. If a shortage remains, then long-term care insurance should be considered.

Example: Cost of nursing home care is $100,000 per year. Fixed income sources (i.e. Social Security, pensions, etc.) available are $50,000 per year. Nest egg is $500,000. Assuming a 5% return, another $25,000 per year becomes available.

Formula: $100,000 (cost) - $50,000 (fixed income) - $25,000 (investment income) = $25,000 per year shortage.

In the above example, the individuals would experience a shortfall of $25,000 per year. They would be wise to consider a long-term care policy that would cover this shortfall. Alternatively, some individuals may elect to cover the entire $100,000 per year through long-term care insurance in order insure their retirement nest egg.

Step 2: Begin the search

If you decide you want LTC insurance, select a core group of insurance companies you can choose from. If you already have an insurance agent you trust, check with him or her to make a recommendation. The most important concern at this point is that the company will be around if and when the benefit is needed. So pick companies with high financial ratings from the four main rating companies within the insurance industry: A.M. Best, Standards & Poors, Duff & Phelps, and Moodys. A safe bet would be to consider companies that are rated no lower than “A” or its equivalent.

Step 3: Narrow the search

Examine the size of the company’s assets and investigate how long a company has been in operation, especially in the business of long-term care insurance, and have a track record. Pay particularly close attention to history of rate increases. Also, call your state Superintendent of Insurance Department to see if there are any problems with the company. Finally, make sure you consider companies that offer a variety of policies: individual coverage, joint coverage, family coverage and partnership plans, where applicable.

Step 4: Customize the policy and choose the plan that’s best for you

This is the most complicated step since the number of variations available is staggering.

The three areas that will most influence the cost are:

1. How much benefit is purchased (received either as a daily or monthly benefit)
2. How long the benefit will last (usually defined by a specified number of years)
3. How soon the benefit begins (defined by a specified number of days).

Keep in mind that there is no “right” policy, just more appropriate ones for you and your partner. It’s likely that several companies will offer excellent programs for pretty much the same price.

Other Considerations

Guaranteed Renewability: Most long-term care insurance policies are guaranteed renewable, meaning the insurance company must renew your coverage as long as your premiums are paid in a timely manner. But guaranteed renewable also grants the insurance companies protection against adverse claims experience. That means that while a company cannot single you out and increase your personal premium, it can increase the cost of insurance across the board within a certain group.

Cost of Living Adjustment Rider (COLA): If you don’t submit a claim until later, you’ll want to be sure that you still have enough coverage to account for increases in the cost of care. To protect against inflation increases, you’ll want the policy to include protection against inflation both prior to and once you’ve made a claim.

Non-forfeiture Benefit: If you eventually suffer from a cognitive impairment and are either unaware of receiving the premium bill or forget to pay it, the policy coverage could lapse due to nonpayment of premium. With a non-forfeiture benefit, the policy would not be canceled.

Waiver of Premium: Waiver of premium means that if you submit a claim against the policy, the company will waive all future premiums for a specified time while you are receiving benefits. The time period for premium waiver varies from carrier to carrier: some offer a 90 day period, some a 100 day period, and others a 180 day period. Preferably, choose a policy with a waiver of premium that becomes effective after a short time period.

 Given all the considerations, here is a list of questions you should get answers to before signing onto a long term care insurance plan.

 15 Questions to Ask about Long-Term Care Insurance

1. What kind of care is covered? (Skilled nursing care, Intermediate care, Custodial care Home health care)
2. How much will be paid for each level of care?
3. Is there a waiting period before benefits are payable?
4. How long will the policy pay benefits?
5. Is there a maximum policy benefit?
6. Will benefits increase with inflation?
7. Are preexisting conditions covered? If so, what is the waiting period?
8. Does the policy impose any eligibility requirements?

•      Prior hospitalization to receive skilled nursing home benefits?
•      Need for skilled nursing care prior to payment of custodial care costs?
•      Prior coverage in a custodial-care facility or hospital to receive home health care?
•      Coverage only in a Medicare-certified facility?

9. Is Alzheimer’s disease or other dementia specifically covered?
10. Can the insurer cancel the policy?
11. Can the premium increase over the life of the policy?
12. Does the policy contain a waiver of premium?
13. Does the insurer have an A+ or A rating from Best’s Insurance Reports or other insurance rating organizations?
14. Is the insurer experienced in handling health insurance claims?
15. Is the policy guaranteed renewable?

Sun Life & Telkomsel Launched Micro-Insurance

Telco Insurance's strategic cooperation aims to reach a wider community through the financial technology services of electronic money.

PT Sun Life Financial Indonesia ("Sun Life"), an international financial services company from Canada, has launched its telco insurance service by collaborating with TCASH, Telkomsel's electronic money system, to fulfill the needs of customers.

Through this strategic partnership, Sun Life and TCASH offer insurance protection, namely Active Micro Protection, Siaga Micro Protection and DBD Micro Protection.

According to Sun Life president director Elin Waty, "Sun Life's partnership with TCASH of Telkomsel offers a way to reach a wider segment of society, in a faster, cheaper and easier way just as a sharp increase has occurred in digital-based financial transactions.”

“Sun Life realizes that transaction behavior is shifting rapidly toward digital modes; therefore we have sought the best way to achieve penetration to all Indonesian people,” she said.

She added that this step was part of Sun Life Financial Indonesia's commitment to developing new partnership distribution channels as well as its digitalization effort to provide protection access to all levels of society.

With active mobile numbers in Indonesia reaching 371.4 million, exceeding the total population of 262 million people, the move to launch telco insurance is expected to increase people’s abilities to conduct insurance transactions.

Therefore, through this service, Sun Life and TCASH are helping Indonesian people achieve financial security while increasing financial penetration and inclusion across Indonesia.

TCASH is an electronic money service offered by Telkomsel, the largest mobile operator in Indonesia with more than 196 million customers. With wide network support TCASH now has more than 20 million customers in 34 provinces, making it the leading electronic money service, reaching people in urban areas as well as rural areas that are underserviced by banking services.

TCASH CEO Danu Wicaksana said that "TCASH welcomes strategic cooperation with Sun Life to deliver insurance through mobile phones and to extend the comprehensive services TCASH provides for our customers.”

“With the support of our extensive network combination and Sun Life's long experience as a financial services provider, we believe this telco insurance service will be well-received and become a preferred product of community protection in Indonesia."

Danu added that Sun Life's insurance services could be obtained by TCASH customers with the User Menu Browser (UMB) access code, which was very easy to use and could be accessed from any type of mobile phone. "In that way, the service also opens access for customers in the unbanked segment to get quality insurance coverage safely, "said Danu.

This cooperation will utilize analysis and data processing (data analytics) methods to determine the protection that best suits the profile and needs of a customer. This insurance service can be obtained by all TCASH customers who are users of Telkomsel and are aged between 18 and 60 years, through fairly easy steps.

Customers can simply access the User Menu Browser (UMB) code by dialing * 800 * 7534 * 1 # for Micro Active Protection products; * 800 * 7534 * 2 # for Siaga Micro Protection products and * 800 * 7534 * 3 # for DBD Micro Protection products.

To ensure the security of customer data, customers only need to pay a one-time premium using a TCASH PIN as a confirmation of purchase. Furthermore, the insurance policy will be sent digitally.

Micro Active Protection insurance solutions are aimed at protecting customers who experience accidents and are hospitalized within at least 24 hours. This protection allows the customer to receive compensation of between Rp 1.500.000 to Rp 2.500.000. Siaga Micro Protection provides 100 percent coverage if a customer dies because of an accident. The amount received by customers ranges from Rp 30.000.000 up to Rp 50,000.000.

DBD Micro Protection provides cash benefits for customers who are hospitalized for at least 24 hours because of dengue hemorrhagic fever, ranging from Rp 2,000,000 up to Rp. 4.000.000. All three products protect customers for between 30 to 90 days after the registration date.

Easily accessible insurance services, provided through telco insurance cooperation, have been offered by Sun Life Financial in several markets previously. In Malaysia and the Philippines, Sun Life Financial Co. has developed several distribution lines, while in Indonesia operations only began in March, 2018. This undertaking offers support for OJK and encourages stakeholders to continue working together to increase financial penetration and inclusion in Indonesia.

The telco insurance strategic partnership also provides the comprehensive services and usability offered to TCASH customers, in line with the company's commitment to achieving the government’s financial inclusion target of 75 percent of the population by 2019.

The presence of telco insurance services provides easy access for TCASH customers in remote areas of Indonesia to get Sun Life’s quality protection anytime, anywhere and via any mobile phone.

"Solutions presented by Sun Life in collaboration with TCASH are expected to provide education for people to understand the importance of insurance. The easy, fast and cheap access can hopefully encourage people to consider insurance as a self-protection solution that is within arm’s reach,” Elin said.

Zurich Malaysia Parring Down

Zurich Insurance is mulling options for its Malaysian life insurance unit in order to comply with a local cap on foreign ownership. One option is to sell a stake through an initial public offering.

Zurich Insurance, one of Switzerland’s top insurers, is evaluating options of how to reduce its stake in the Malaysian life insurance unit, according to a report by «Bloomberg» on Thursday. The move comes after the government of Malaysia said it would start enforcing a 70 percent rule on foreign ownership.

The options include an initial public offering of a 30 percent stake in the unit that may fetch as much as $100 million, according to the report. Another way to comply with the rule would be to simply sell the stake to a local firm, such as the country’s two biggest pension funds, which already said they would bid to take such stakes.

Zurich is the latest of a string of overseas companies to mull ways to comply. Insurers Prudential and Chubb have been working with banks to find similar solutions.

Zurich didn’t comment the report, according to «Bloomberg». The Swiss company earlier opted to separate the general and life insurance businesses in the country to comply with regulatory requirements. Zurich Insurance Malaysia had net premiums of about $180 million in 2016, according to the report.