Should You Exchange Your Life Insurance Policy?

If you own a life insurance policy, you may have been approached to exchange it for another new policy. You need to know that even though the tax laws make the exchange income tax free and the new policy may appear better to you, you may be losing?not gaining?if you make the exchange. We are issuing this Alert because, increasingly, life insurance exchanges may involve variable products. Variable products are securities, and this Alert will provide information to help you evaluate whether the exchange is right for you, and how you can find out what you need to know to make an appropriate decision.There are various forms of life insurance products. Although features and benefits may vary, the following is a general description of typical characteristics of various types of life insurance policies.• Term Life Insurance. Term life insurance provides coverage for a specified and limited period of time (the "term"). Premiums for most term policies increase with age or at the end of each renewal period. After the policy or term ends, there is no benefit payment if the insured person survives beyond the policy period.• Whole Life Insurance. Whole life or ordinary life insurance is a form of permanent life insurance. This means it can provide coverage for the life of the insured. It also can build cash value, which is a savings feature. Premium payments typically remain level for the life of the insured.• Universal Life Insurance. Universal life insurance can also provide coverage for the life of the insured while at the same time providing flexibility in premium payments and in insurance coverage. The cost of insurance protection and, in some cases, other costs are deducted from the cash or policy account value.• Variable Life Insurance. Variable life insurance, a variation of whole life insurance, offers a fixed premium schedule and a minimum death benefit. But it differs from traditional whole life insurance in that cash values are invested in portfolios of securities in an account separate from the general assets of the insurance company. A policyholder has discretion in choosing the mix of investments the policy offers. The insurance company does not guarantee investment returns and your cash value will fluctuate.• Variable Universal Life Insurance. Variable universal life insurance combines features of universal life insurance and variable life insurance.Most variable life insurance policies and variable universal life insurance policies are securities registered with the Securities and Exchange Commission (SEC). Registration requires that investors receive important financial and other significant information concerning the securities being offered for sale. This enables investors to judge for themselves if the securities are a good investment. These regulations also provide important remedies to investors if they can prove that there was incomplete or inaccurate disclosure of important information provided to them.The Internal Revenue Service allows you to exchange an insurance policy that you own for a new life insurance policy insuring the same person without paying tax on the investment gains earned on the original contract. This can be a substantial benefit. Because this is governed by Section 1035 of the Internal Revenue Code, these are called "1035 Exchanges."But this benefit comes with some important strings.• The tax code says that the old insurance policy must be exchanged for a new policy - you cannot receive a check and apply the proceeds to the purchase of a new insurance policy.• The tax code also says that you can make a tax-free exchange from: 1) a life insurance policy to another life insurance policy or 2) a life insurance policy to an annuity. You cannot, however, exchange an annuity contract for a life insurance policy.A transaction in which a new insurance or annuity contract is to be purchased using all or a portion of the proceeds of an existing life insurance or annuity contract is referred to as a "replacement." A 1035 Exchange is a type of replacement transaction. Although the term "1035 Exchange" is often used to describe any form of replacement activity, technically not all replacements are Section 1035 Exchanges and as a consequence are not tax-free.Reasons to Exchange an Existing Policy?There are various reasons why a life insurance policyholder may want to replace an existing policy with a new life insurance policy. For example,• Improved health or mortality improvements across the general population may result in insurance coverage at a lower cost.• You may have concerns with the solvency of the insurance company that issued the original policy or with the service of the agent that sold you the policy.• A new life insurance policy may have more desirable features or benefits.Reasons Not to Exchange an Existing PolicyThere are also various reasons why replacement of an existing insurance policy may not be a good idea. For example,• Cash value built up in the original policy may be applied to the new life insurance policy's first year expenses, including commissions.• Life insurance policies (other than term policies) often include early surrender charges, which can reduce the amount of cash value available toward the new policy. The new policy will likely have its own new surrender charge schedule, which may extend beyond that of the original policy.• You may pay higher premiums if, for example, your health has declined since the purchase of the current policy.• The new policy typically will have a new contestability period - a two-year period from the issuance of the new policy during which the insurance company could challenge a death claim based upon a misstatement on the application.• There may be unfavorable tax consequences caused by surrendering an existing policy, such as a potential tax on outstanding policy loans.You should exchange your life insurance policy only when you determine, after knowing all of the facts that the exchange is better for you and not just better for the person who is trying to sell the policy to you.Both variable life insurance and variable universal life insurance are securities. Those who offer these products must follow SEC, FINRA, and state securities regulations, in addition to state insurance law. This means that a broker must tell you the important facts about the pros and cons of the exchange. Your broker or insurance agent should recommend such an exchange only if it is in your best interest and only after evaluating your personal and financial situation and needs, tolerance for risk, and the financial ability to pay for the proposed insurance policy.Your broker or insurance agent may recommend that you use insurance policy values, such as loans or withdrawals, to pay premiums for a new life insurance policy. This activity is generally called "financing" premiums. It may not be appropriate for you. For example, withdrawals from existing policies may be subject to federal income tax and may reduce the death benefit. Borrowing money from an existing policy will almost certainly reduce the death benefit. Withdrawals or loans may make it more difficult to keep the original policy in force without additional out-of-pocket premium payments. If you can't keep the original policy in force, you will lose the insurance protection and the loans themselves may give rise to tax consequences. Remember for a transaction to qualify as a 1035 exchange, the old policy must actually be exchanged for the new policy. Many states and brokerage firms require forms to reflect customer acknowledgement of a replacement transaction. These forms typically are signed by the insurance policy owner and the broker or agent. These forms may provide a comparison of the features and costs of an existing policy to a proposed policy, and point out what you need to focus on when considering an exchange. Some brokerage firms may provide brochures or educational material designed to outline the possible advantages and disadvantages of the transaction. You should review these forms and materials closely.Regardless of whether such forms are provided, you should specifically ask the person recommending that you exchange or replace your existing policy to provide you with illustrations for your existing policy and the new policy. You should also ask:• What is the total cost to me of this exchange?• What are the new features being offered? Why do I need those features?• Are these features worth the cost?• Can the existing policy be modified or supplemented to provide some or all of these same features?• Will you be paid a commission for the exchange, and if so, how much is it?You should not sign any exchange form or agree to exchange or purchase an insurance policy until you study all of the options carefully, have all of your questions answered, and are satisfied that the exchange is better than keeping your current policy.If You Have Questions or Complaints

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How to reduce your auto insurance premiums

Here’s something to stop and consider: When’s the last time you devoted mental energy to the particulars of your auto insurance policy? Did you basically set it and forget it?It’s incredibly easy to let that happen — and if it has happened in your case, it might be high time to refresh your memory on just where your policy stands. You may be able to take a bite out of your insurance bill with a minimal amount of effort.These quick tips can help you see whether you can save a little – or a lot.1. Request higher deductibles. The deductible is the amount of money you have to fork over before your insurance policy comes to the rescue. By bumping your deductible up from $200 to $500, you could lower the cost of your collision and comprehensive coverage by 15 percent to 30 percent. By increasing it to $1,000, you could decrease that cost by at least 40 percent.
Prince Harry supports Sandy efforts, wounded vets in current U.S. tour Prince Harry begins his week-long American tour with a trip to Washington, D.C. to support a charity his mother held close...Doctors solve mystery of boy's baffling strokes'Arrested Development' fans can hit Bluth's banana standHoda makes Maxim's Hot 100 list with Miley CyrusFounder of Italy's fashion house Missoni dies at 922. Forgo coverage you don’t need. Think about dropping collision and/or comprehensive coverage on older cars with a low market value. Such coverage often is not worth it because any claim you make probably won’t exceed the cost of the insurance and the deductible amount. To assess your car’s current value, visit Kelley Blue Book or Edmunds.com.3. Avoid duplicating medical coverage. If you already have good health, life and disability insurance, buy only the minimum personal injury protection required by the state where you live.4. Purchase a low-profile car. It’s more expensive to insure a vehicle that’s expensive to repair, popular with thieves or known for not having the greatest safety record. For a rundown of vehicles’ risk levels, visit the Insurance Institute for Highway Safety’s Web site.  (To check on older models, go to the bottom of the page.)5. Carpool or drive less. Many insurance companies offer “low-mileage discounts” to policyholders who carpool to work or drive a lower-than-average number of miles each year. You can call your insurer and find out whether you qualify.6. Opt for safety gear. You can qualify for a discount on many policies if you have air bags, automatic seat belts, anti-lock brakes and daytime running lights. An approved alarm system or other anti-theft device can give you additional savings.7. Seek out discounts for teens. Insure teenagers on the parents’ policy rather than a separate policy. Teens who maintain good grades and pass an approved drivers’ education course usually can qualify for reduced rates. An additional discount may come into play if your child goes to college more than 100 miles from home and doesn’t bring a car along.8. Combine policies with one carrier. You may save money if you insure all your vehicles, including trailers and recreational vehicles, on a single policy. Your car premium also may go down if you buy homeowners’ or life insurance from the same company.9. Ask about other discounts. You also might be able to pay less if you’re older than 50 or 55 and/or retired; if you’ve had no accidents or moving violations in three years; or if you’re a longtime customer. Keep an eye on the bottom line, though. Call a few other insurers to make sure you’re paying the lowest overall amount.10. Pause before paying extra for roadside assistance. It might be good to line up a roadside assistance plan elsewhere because a tow could increase your auto insurance premium and might even affect your eligibility for coverage. What’s more, you may already have an adequate roadside plan through your credit card.

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Life Insurance is a Good Safety Net, but not for E...

The first question is when do you need life insurance? You need life insurance under the following conditions (if you don't fall into one of the categories below, you probably don't need life insurance at this time, but remember to review your situation again from time to time when circumstances may change).• You have dependent children. The loss of your income will most definitely affect your spouse's ability to remain in the family home with the children or provide the level of education that you would have provided for your children if you were still alive and working.• You are married to a nonworking spouse. In this situation, your death will affect your spouse's ability to continue in the same life style, as going to work for the first time or going back to work after being out of the workplace will result in a lower paying job with a much diminished standard of living.• You have a working spouse with an income substantially less that your income. Life insurance is appropriate here as your higher income has given you a lifestyle that your spouse could not afford alone.• You have parents or special need siblings to care for and support.• You still have a large mortgage remaining on your home. Having life insurance in this circumstance will allow your spouse to use the life insurance proceeds to pay off the mortgage, easing your spouse's financial burden after your death.• You are using life insurance as an estate planning tool and wish to provide your family with the proceeds of life insurance that will restore to them the amount of your estate that was diminished by death taxes.Another question to ask is how much insurance is enough? The proper amount of life insurance would allow your beneficiaries and their dependents to invest the proceeds of life insurance and draw down the earnings thereon and some capital over time to live on to make up for the loss of earnings that the deceased spouse would have provided. There are several basic methods to determine the amount of the insurance that you may need:• The standard rule of thumb to estimate the amount of your life insurance needs is to estimate that you will need life insurance between five and ten times your annual salary net of taxes. If your net salary is $50,000 per year, you would have a minimum life insurance need of $250,000 and a maximum amount of $500,000. This method is fairly simplistic and does not take into account the specific needs you may have, such as the price of your children's education or the amount necessary for a special needs child.• The second method seeks to replace the amount of your income over a number of years. For instance, if you earned $50,000 per year and you wanted to make sure that income was available to your spouse for the next fifteen years, you would need $750,000 of life insurance. This method is fine, as long as there are no special needs to address and you have little in the way of financial assets already.• The third and most detailed method is to review the financial need. In this approach, you would take into account the various expenses that your income would otherwise pay, such as the family's annual living expenses, tuition for college and graduate education, mortgage or debt payoff and future retirement needs, as well as any special needs. This approach will require a little more thought and effort on your part to determine what expenses will be covered and what expenses are already covered by financial assets, such as college expenses that you have already taken care of through Section 529 plans and the like.Life insurance is not for everyone, but there are many times that it is a necessary part of your financial planning for your family's future.

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Life Insurance is a Good Safety Net, but not for E...

The first question is when do you need life insurance? You need life insurance under the following conditions (if you don't fall into one of the categories below, you probably don't need life insurance at this time, but remember to review your situation again from time to time when circumstances may change).• You have dependent children. The loss of your income will most definitely affect your spouse's ability to remain in the family home with the children or provide the level of education that you would have provided for your children if you were still alive and working.• You are married to a nonworking spouse. In this situation, your death will affect your spouse's ability to continue in the same life style, as going to work for the first time or going back to work after being out of the workplace will result in a lower paying job with a much diminished standard of living.• You have a working spouse with an income substantially less that your income. Life insurance is appropriate here as your higher income has given you a lifestyle that your spouse could not afford alone.• You have parents or special need siblings to care for and support.• You still have a large mortgage remaining on your home. Having life insurance in this circumstance will allow your spouse to use the life insurance proceeds to pay off the mortgage, easing your spouse's financial burden after your death.• You are using life insurance as an estate planning tool and wish to provide your family with the proceeds of life insurance that will restore to them the amount of your estate that was diminished by death taxes.Another question to ask is how much insurance is enough? The proper amount of life insurance would allow your beneficiaries and their dependents to invest the proceeds of life insurance and draw down the earnings thereon and some capital over time to live on to make up for the loss of earnings that the deceased spouse would have provided. There are several basic methods to determine the amount of the insurance that you may need:• The standard rule of thumb to estimate the amount of your life insurance needs is to estimate that you will need life insurance between five and ten times your annual salary net of taxes. If your net salary is $50,000 per year, you would have a minimum life insurance need of $250,000 and a maximum amount of $500,000. This method is fairly simplistic and does not take into account the specific needs you may have, such as the price of your children's education or the amount necessary for a special needs child.• The second method seeks to replace the amount of your income over a number of years. For instance, if you earned $50,000 per year and you wanted to make sure that income was available to your spouse for the next fifteen years, you would need $750,000 of life insurance. This method is fine, as long as there are no special needs to address and you have little in the way of financial assets already.• The third and most detailed method is to review the financial need. In this approach, you would take into account the various expenses that your income would otherwise pay, such as the family's annual living expenses, tuition for college and graduate education, mortgage or debt payoff and future retirement needs, as well as any special needs. This approach will require a little more thought and effort on your part to determine what expenses will be covered and what expenses are already covered by financial assets, such as college expenses that you have already taken care of through Section 529 plans and the like.Life insurance is not for everyone, but there are many times that it is a necessary part of your financial planning for your family's future.

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How to reduce your auto insurance premiums

Here’s something to stop and consider: When’s the last time you devoted mental energy to the particulars of your auto insurance policy? Did you basically set it and forget it?It’s incredibly easy to let that happen — and if it has happened in your case, it might be high time to refresh your memory on just where your policy stands. You may be able to take a bite out of your insurance bill with a minimal amount of effort.These quick tips can help you see whether you can save a little – or a lot.1. Request higher deductibles. The deductible is the amount of money you have to fork over before your insurance policy comes to the rescue. By bumping your deductible up from $200 to $500, you could lower the cost of your collision and comprehensive coverage by 15 percent to 30 percent. By increasing it to $1,000, you could decrease that cost by at least 40 percent.
Prince Harry supports Sandy efforts, wounded vets in current U.S. tour Prince Harry begins his week-long American tour with a trip to Washington, D.C. to support a charity his mother held close...Doctors solve mystery of boy's baffling strokes'Arrested Development' fans can hit Bluth's banana standHoda makes Maxim's Hot 100 list with Miley CyrusFounder of Italy's fashion house Missoni dies at 922. Forgo coverage you don’t need. Think about dropping collision and/or comprehensive coverage on older cars with a low market value. Such coverage often is not worth it because any claim you make probably won’t exceed the cost of the insurance and the deductible amount. To assess your car’s current value, visit Kelley Blue Book or Edmunds.com.3. Avoid duplicating medical coverage. If you already have good health, life and disability insurance, buy only the minimum personal injury protection required by the state where you live.4. Purchase a low-profile car. It’s more expensive to insure a vehicle that’s expensive to repair, popular with thieves or known for not having the greatest safety record. For a rundown of vehicles’ risk levels, visit the Insurance Institute for Highway Safety’s Web site.  (To check on older models, go to the bottom of the page.)5. Carpool or drive less. Many insurance companies offer “low-mileage discounts” to policyholders who carpool to work or drive a lower-than-average number of miles each year. You can call your insurer and find out whether you qualify.6. Opt for safety gear. You can qualify for a discount on many policies if you have air bags, automatic seat belts, anti-lock brakes and daytime running lights. An approved alarm system or other anti-theft device can give you additional savings.7. Seek out discounts for teens. Insure teenagers on the parents’ policy rather than a separate policy. Teens who maintain good grades and pass an approved drivers’ education course usually can qualify for reduced rates. An additional discount may come into play if your child goes to college more than 100 miles from home and doesn’t bring a car along.8. Combine policies with one carrier. You may save money if you insure all your vehicles, including trailers and recreational vehicles, on a single policy. Your car premium also may go down if you buy homeowners’ or life insurance from the same company.9. Ask about other discounts. You also might be able to pay less if you’re older than 50 or 55 and/or retired; if you’ve had no accidents or moving violations in three years; or if you’re a longtime customer. Keep an eye on the bottom line, though. Call a few other insurers to make sure you’re paying the lowest overall amount.10. Pause before paying extra for roadside assistance. It might be good to line up a roadside assistance plan elsewhere because a tow could increase your auto insurance premium and might even affect your eligibility for coverage. What’s more, you may already have an adequate roadside plan through your credit card.

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Should You Exchange Your Life Insurance Policy?

If you own a life insurance policy, you may have been approached to exchange it for another new policy. You need to know that even though the tax laws make the exchange income tax free and the new policy may appear better to you, you may be losing?not gaining?if you make the exchange. We are issuing this Alert because, increasingly, life insurance exchanges may involve variable products. Variable products are securities, and this Alert will provide information to help you evaluate whether the exchange is right for you, and how you can find out what you need to know to make an appropriate decision.There are various forms of life insurance products. Although features and benefits may vary, the following is a general description of typical characteristics of various types of life insurance policies.• Term Life Insurance. Term life insurance provides coverage for a specified and limited period of time (the "term"). Premiums for most term policies increase with age or at the end of each renewal period. After the policy or term ends, there is no benefit payment if the insured person survives beyond the policy period.• Whole Life Insurance. Whole life or ordinary life insurance is a form of permanent life insurance. This means it can provide coverage for the life of the insured. It also can build cash value, which is a savings feature. Premium payments typically remain level for the life of the insured.• Universal Life Insurance. Universal life insurance can also provide coverage for the life of the insured while at the same time providing flexibility in premium payments and in insurance coverage. The cost of insurance protection and, in some cases, other costs are deducted from the cash or policy account value.• Variable Life Insurance. Variable life insurance, a variation of whole life insurance, offers a fixed premium schedule and a minimum death benefit. But it differs from traditional whole life insurance in that cash values are invested in portfolios of securities in an account separate from the general assets of the insurance company. A policyholder has discretion in choosing the mix of investments the policy offers. The insurance company does not guarantee investment returns and your cash value will fluctuate.• Variable Universal Life Insurance. Variable universal life insurance combines features of universal life insurance and variable life insurance.Most variable life insurance policies and variable universal life insurance policies are securities registered with the Securities and Exchange Commission (SEC). Registration requires that investors receive important financial and other significant information concerning the securities being offered for sale. This enables investors to judge for themselves if the securities are a good investment. These regulations also provide important remedies to investors if they can prove that there was incomplete or inaccurate disclosure of important information provided to them.The Internal Revenue Service allows you to exchange an insurance policy that you own for a new life insurance policy insuring the same person without paying tax on the investment gains earned on the original contract. This can be a substantial benefit. Because this is governed by Section 1035 of the Internal Revenue Code, these are called "1035 Exchanges."But this benefit comes with some important strings.• The tax code says that the old insurance policy must be exchanged for a new policy - you cannot receive a check and apply the proceeds to the purchase of a new insurance policy.• The tax code also says that you can make a tax-free exchange from: 1) a life insurance policy to another life insurance policy or 2) a life insurance policy to an annuity. You cannot, however, exchange an annuity contract for a life insurance policy.A transaction in which a new insurance or annuity contract is to be purchased using all or a portion of the proceeds of an existing life insurance or annuity contract is referred to as a "replacement." A 1035 Exchange is a type of replacement transaction. Although the term "1035 Exchange" is often used to describe any form of replacement activity, technically not all replacements are Section 1035 Exchanges and as a consequence are not tax-free.Reasons to Exchange an Existing Policy?There are various reasons why a life insurance policyholder may want to replace an existing policy with a new life insurance policy. For example,• Improved health or mortality improvements across the general population may result in insurance coverage at a lower cost.• You may have concerns with the solvency of the insurance company that issued the original policy or with the service of the agent that sold you the policy.• A new life insurance policy may have more desirable features or benefits.Reasons Not to Exchange an Existing PolicyThere are also various reasons why replacement of an existing insurance policy may not be a good idea. For example,• Cash value built up in the original policy may be applied to the new life insurance policy's first year expenses, including commissions.• Life insurance policies (other than term policies) often include early surrender charges, which can reduce the amount of cash value available toward the new policy. The new policy will likely have its own new surrender charge schedule, which may extend beyond that of the original policy.• You may pay higher premiums if, for example, your health has declined since the purchase of the current policy.• The new policy typically will have a new contestability period - a two-year period from the issuance of the new policy during which the insurance company could challenge a death claim based upon a misstatement on the application.• There may be unfavorable tax consequences caused by surrendering an existing policy, such as a potential tax on outstanding policy loans.You should exchange your life insurance policy only when you determine, after knowing all of the facts that the exchange is better for you and not just better for the person who is trying to sell the policy to you.Both variable life insurance and variable universal life insurance are securities. Those who offer these products must follow SEC, FINRA, and state securities regulations, in addition to state insurance law. This means that a broker must tell you the important facts about the pros and cons of the exchange. Your broker or insurance agent should recommend such an exchange only if it is in your best interest and only after evaluating your personal and financial situation and needs, tolerance for risk, and the financial ability to pay for the proposed insurance policy.Your broker or insurance agent may recommend that you use insurance policy values, such as loans or withdrawals, to pay premiums for a new life insurance policy. This activity is generally called "financing" premiums. It may not be appropriate for you. For example, withdrawals from existing policies may be subject to federal income tax and may reduce the death benefit. Borrowing money from an existing policy will almost certainly reduce the death benefit. Withdrawals or loans may make it more difficult to keep the original policy in force without additional out-of-pocket premium payments. If you can't keep the original policy in force, you will lose the insurance protection and the loans themselves may give rise to tax consequences. Remember for a transaction to qualify as a 1035 exchange, the old policy must actually be exchanged for the new policy. Many states and brokerage firms require forms to reflect customer acknowledgement of a replacement transaction. These forms typically are signed by the insurance policy owner and the broker or agent. These forms may provide a comparison of the features and costs of an existing policy to a proposed policy, and point out what you need to focus on when considering an exchange. Some brokerage firms may provide brochures or educational material designed to outline the possible advantages and disadvantages of the transaction. You should review these forms and materials closely.Regardless of whether such forms are provided, you should specifically ask the person recommending that you exchange or replace your existing policy to provide you with illustrations for your existing policy and the new policy. You should also ask:• What is the total cost to me of this exchange?• What are the new features being offered? Why do I need those features?• Are these features worth the cost?• Can the existing policy be modified or supplemented to provide some or all of these same features?• Will you be paid a commission for the exchange, and if so, how much is it?You should not sign any exchange form or agree to exchange or purchase an insurance policy until you study all of the options carefully, have all of your questions answered, and are satisfied that the exchange is better than keeping your current policy.If You Have Questions or Complaints

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Should You Exchange Your Life Insurance Policy?

If you own a life insurance policy, you may have been approached to exchange it for another new policy. You need to know that even though the tax laws make the exchange income tax free and the new policy may appear better to you, you may be losing?not gaining?if you make the exchange. We are issuing this Alert because, increasingly, life insurance exchanges may involve variable products. Variable products are securities, and this Alert will provide information to help you evaluate whether the exchange is right for you, and how you can find out what you need to know to make an appropriate decision.There are various forms of life insurance products. Although features and benefits may vary, the following is a general description of typical characteristics of various types of life insurance policies.• Term Life Insurance. Term life insurance provides coverage for a specified and limited period of time (the "term"). Premiums for most term policies increase with age or at the end of each renewal period. After the policy or term ends, there is no benefit payment if the insured person survives beyond the policy period.• Whole Life Insurance. Whole life or ordinary life insurance is a form of permanent life insurance. This means it can provide coverage for the life of the insured. It also can build cash value, which is a savings feature. Premium payments typically remain level for the life of the insured.• Universal Life Insurance. Universal life insurance can also provide coverage for the life of the insured while at the same time providing flexibility in premium payments and in insurance coverage. The cost of insurance protection and, in some cases, other costs are deducted from the cash or policy account value.• Variable Life Insurance. Variable life insurance, a variation of whole life insurance, offers a fixed premium schedule and a minimum death benefit. But it differs from traditional whole life insurance in that cash values are invested in portfolios of securities in an account separate from the general assets of the insurance company. A policyholder has discretion in choosing the mix of investments the policy offers. The insurance company does not guarantee investment returns and your cash value will fluctuate.• Variable Universal Life Insurance. Variable universal life insurance combines features of universal life insurance and variable life insurance.Most variable life insurance policies and variable universal life insurance policies are securities registered with the Securities and Exchange Commission (SEC). Registration requires that investors receive important financial and other significant information concerning the securities being offered for sale. This enables investors to judge for themselves if the securities are a good investment. These regulations also provide important remedies to investors if they can prove that there was incomplete or inaccurate disclosure of important information provided to them.The Internal Revenue Service allows you to exchange an insurance policy that you own for a new life insurance policy insuring the same person without paying tax on the investment gains earned on the original contract. This can be a substantial benefit. Because this is governed by Section 1035 of the Internal Revenue Code, these are called "1035 Exchanges."But this benefit comes with some important strings.• The tax code says that the old insurance policy must be exchanged for a new policy - you cannot receive a check and apply the proceeds to the purchase of a new insurance policy.• The tax code also says that you can make a tax-free exchange from: 1) a life insurance policy to another life insurance policy or 2) a life insurance policy to an annuity. You cannot, however, exchange an annuity contract for a life insurance policy.A transaction in which a new insurance or annuity contract is to be purchased using all or a portion of the proceeds of an existing life insurance or annuity contract is referred to as a "replacement." A 1035 Exchange is a type of replacement transaction. Although the term "1035 Exchange" is often used to describe any form of replacement activity, technically not all replacements are Section 1035 Exchanges and as a consequence are not tax-free.Reasons to Exchange an Existing Policy?There are various reasons why a life insurance policyholder may want to replace an existing policy with a new life insurance policy. For example,• Improved health or mortality improvements across the general population may result in insurance coverage at a lower cost.• You may have concerns with the solvency of the insurance company that issued the original policy or with the service of the agent that sold you the policy.• A new life insurance policy may have more desirable features or benefits.Reasons Not to Exchange an Existing PolicyThere are also various reasons why replacement of an existing insurance policy may not be a good idea. For example,• Cash value built up in the original policy may be applied to the new life insurance policy's first year expenses, including commissions.• Life insurance policies (other than term policies) often include early surrender charges, which can reduce the amount of cash value available toward the new policy. The new policy will likely have its own new surrender charge schedule, which may extend beyond that of the original policy.• You may pay higher premiums if, for example, your health has declined since the purchase of the current policy.• The new policy typically will have a new contestability period - a two-year period from the issuance of the new policy during which the insurance company could challenge a death claim based upon a misstatement on the application.• There may be unfavorable tax consequences caused by surrendering an existing policy, such as a potential tax on outstanding policy loans.You should exchange your life insurance policy only when you determine, after knowing all of the facts that the exchange is better for you and not just better for the person who is trying to sell the policy to you.Both variable life insurance and variable universal life insurance are securities. Those who offer these products must follow SEC, FINRA, and state securities regulations, in addition to state insurance law. This means that a broker must tell you the important facts about the pros and cons of the exchange. Your broker or insurance agent should recommend such an exchange only if it is in your best interest and only after evaluating your personal and financial situation and needs, tolerance for risk, and the financial ability to pay for the proposed insurance policy.Your broker or insurance agent may recommend that you use insurance policy values, such as loans or withdrawals, to pay premiums for a new life insurance policy. This activity is generally called "financing" premiums. It may not be appropriate for you. For example, withdrawals from existing policies may be subject to federal income tax and may reduce the death benefit. Borrowing money from an existing policy will almost certainly reduce the death benefit. Withdrawals or loans may make it more difficult to keep the original policy in force without additional out-of-pocket premium payments. If you can't keep the original policy in force, you will lose the insurance protection and the loans themselves may give rise to tax consequences. Remember for a transaction to qualify as a 1035 exchange, the old policy must actually be exchanged for the new policy. Many states and brokerage firms require forms to reflect customer acknowledgement of a replacement transaction. These forms typically are signed by the insurance policy owner and the broker or agent. These forms may provide a comparison of the features and costs of an existing policy to a proposed policy, and point out what you need to focus on when considering an exchange. Some brokerage firms may provide brochures or educational material designed to outline the possible advantages and disadvantages of the transaction. You should review these forms and materials closely.Regardless of whether such forms are provided, you should specifically ask the person recommending that you exchange or replace your existing policy to provide you with illustrations for your existing policy and the new policy. You should also ask:• What is the total cost to me of this exchange?• What are the new features being offered? Why do I need those features?• Are these features worth the cost?• Can the existing policy be modified or supplemented to provide some or all of these same features?• Will you be paid a commission for the exchange, and if so, how much is it?You should not sign any exchange form or agree to exchange or purchase an insurance policy until you study all of the options carefully, have all of your questions answered, and are satisfied that the exchange is better than keeping your current policy.If You Have Questions or Complaints

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Life Insurance is a Good Safety Net, but not for Everyone

The first question is when do you need life insurance? You need life insurance under the following conditions (if you don't fall into one of the categories below, you probably don't need life insurance at this time, but remember to review your situation again from time to time when circumstances may change).• You have dependent children. The loss of your income will most definitely affect your spouse's ability to remain in the family home with the children or provide the level of education that you would have provided for your children if you were still alive and working.• You are married to a nonworking spouse. In this situation, your death will affect your spouse's ability to continue in the same life style, as going to work for the first time or going back to work after being out of the workplace will result in a lower paying job with a much diminished standard of living.• You have a working spouse with an income substantially less that your income. Life insurance is appropriate here as your higher income has given you a lifestyle that your spouse could not afford alone.• You have parents or special need siblings to care for and support.• You still have a large mortgage remaining on your home. Having life insurance in this circumstance will allow your spouse to use the life insurance proceeds to pay off the mortgage, easing your spouse's financial burden after your death.• You are using life insurance as an estate planning tool and wish to provide your family with the proceeds of life insurance that will restore to them the amount of your estate that was diminished by death taxes.Another question to ask is how much insurance is enough? The proper amount of life insurance would allow your beneficiaries and their dependents to invest the proceeds of life insurance and draw down the earnings thereon and some capital over time to live on to make up for the loss of earnings that the deceased spouse would have provided. There are several basic methods to determine the amount of the insurance that you may need:• The standard rule of thumb to estimate the amount of your life insurance needs is to estimate that you will need life insurance between five and ten times your annual salary net of taxes. If your net salary is $50,000 per year, you would have a minimum life insurance need of $250,000 and a maximum amount of $500,000. This method is fairly simplistic and does not take into account the specific needs you may have, such as the price of your children's education or the amount necessary for a special needs child.• The second method seeks to replace the amount of your income over a number of years. For instance, if you earned $50,000 per year and you wanted to make sure that income was available to your spouse for the next fifteen years, you would need $750,000 of life insurance. This method is fine, as long as there are no special needs to address and you have little in the way of financial assets already.• The third and most detailed method is to review the financial need. In this approach, you would take into account the various expenses that your income would otherwise pay, such as the family's annual living expenses, tuition for college and graduate education, mortgage or debt payoff and future retirement needs, as well as any special needs. This approach will require a little more thought and effort on your part to determine what expenses will be covered and what expenses are already covered by financial assets, such as college expenses that you have already taken care of through Section 529 plans and the like.Life insurance is not for everyone, but there are many times that it is a necessary part of your financial planning for your family's future.

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How to reduce your auto insurance premiums

Here’s something to stop and consider: When’s the last time you devoted mental energy to the particulars of your auto insurance policy? Did you basically set it and forget it?

It’s incredibly easy to let that happen — and if it has happened in your case, it might be high time to refresh your memory on just where your policy stands. You may be able to take a bite out of your insurance bill with a minimal amount of effort.

These quick tips can help you see whether you can save a little – or a lot.

1. Request higher deductibles. The deductible is the amount of money you have to fork over before your insurance policy comes to the rescue. By bumping your deductible up from $200 to $500, you could lower the cost of your collision and comprehensive coverage by 15 percent to 30 percent. By increasing it to $1,000, you could decrease that cost by at least 40 percent.

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2. Forgo coverage you don’t need. Think about dropping collision and/or comprehensive coverage on older cars with a low market value. Such coverage often is not worth it because any claim you make probably won’t exceed the cost of the insurance and the deductible amount. To assess your car’s current value, visit Kelley Blue Book or Edmunds.com.

3. Avoid duplicating medical coverage. If you already have good health, life and disability insurance, buy only the minimum personal injury protection required by the state where you live.

4. Purchase a low-profile car. It’s more expensive to insure a vehicle that’s expensive to repair, popular with thieves or known for not having the greatest safety record. For a rundown of vehicles’ risk levels, visit the Insurance Institute for Highway Safety’s Web site.  (To check on older models, go to the bottom of the page.)

5. Carpool or drive less. Many insurance companies offer “low-mileage discounts” to policyholders who carpool to work or drive a lower-than-average number of miles each year. You can call your insurer and find out whether you qualify.

6. Opt for safety gear. You can qualify for a discount on many policies if you have air bags, automatic seat belts, anti-lock brakes and daytime running lights. An approved alarm system or other anti-theft device can give you additional savings.

7. Seek out discounts for teens. Insure teenagers on the parents’ policy rather than a separate policy. Teens who maintain good grades and pass an approved drivers’ education course usually can qualify for reduced rates. An additional discount may come into play if your child goes to college more than 100 miles from home and doesn’t bring a car along.

8. Combine policies with one carrier. You may save money if you insure all your vehicles, including trailers and recreational vehicles, on a single policy. Your car premium also may go down if you buy homeowners’ or life insurance from the same company.

9. Ask about other discounts. You also might be able to pay less if you’re older than 50 or 55 and/or retired; if you’ve had no accidents or moving violations in three years; or if you’re a longtime customer. Keep an eye on the bottom line, though. Call a few other insurers to make sure you’re paying the lowest overall amount.

10. Pause before paying extra for roadside assistance. It might be good to line up a roadside assistance plan elsewhere because a tow could increase your auto insurance premium and might even affect your eligibility for coverage. What’s more, you may already have an adequate roadside plan through your credit card.

THE PRICE YOU pay for life insurance will 
depend on your age, your health and your habits. That is to say, forget about a really cheap policy if you smoke, have existing health problems or enjoy skydiving. Still, there's plenty you can do to save on your premium and avoid some common pitfalls. 

Here are 10 suggestions:

If you get some life insurance as a job benefit, that's fine. But that should never be all you have. You can't count on keeping it if you lose your job or become disabled and can no longer work. There's no federal law that says your old employer must allow you to keep the coverage, even if you foot the bill. So it's a good idea to use any life insurance you get from work as a supplement to what you buy on your own. If your company allows you to buy additional insurance, be sure to compare rates on coverage you can buy from your employer; more often than not, you can find a better deal on your own, although you'll have to qualify medically to get a policy on the open market.

Kevin Campbell thought he was just being honest a couple of years ago when he told a medical examiner for John Alden that he smokes a cigar about once a year. The Ohio physician, who plays racquetball once a week and jogs regularly, had no history of medical problems.

He figured the insurer would understand that cigars were simply a way to mark special occasions. No such luck. As far as John Alden was concerned, there was no difference between Campbell and a two-pack-a-day man. The company quoted him a $2,150 annual premium for a $1.3 million, 10-year term policy, $1,150 more than the nonsmoker's rate.

But Campbell wasn't having it. He wrote a letter to John Alden demanding a nonsmoker's rate. After three weeks of negotiating, the company caved in and cut his initial quote by 50%. Says adviser Michael Chasnoff, who helped Campbell set up the policy: "When I started in this business, I would have never thought to question what an insurance company told a client. Now I can't see a reason not to." (If you do smoke, 'fess up. If you die of a smoking-related illness, your insurer can choose not to pay your death benefit, opting instead to return to your beneficiaries only paid-up premiums plus interest.)

If you're going to buy $240,000 of coverage, you might as well buy $250,000. If you buy $240,000 worth, you'll pay $274.80 per year. If you buy $250,000, it will cost $260. How's that?

Sometimes more insurance costs less, especially as you approach multiples of $250,000. So, for example, a 35-year-old male nonsmoker buying $100,000 to $249,999 of renewable term insurance from USAA Life would pay $1.02 per $1,000 of coverage. For $250,000 to $499,999 of coverage, the rate drops to 92 cents per $1,000.

Forrest Luu, 37, has diabetes. When he set out to buy life insurance, he asked his insurance agent, Murray Halbfish, to shop for a diabetics-friendly company. The best deal Halbfish came up with: Manhattan Life Insurance, which quoted him an annual premium of $891 for $100,000 of whole life. Other companies wanted as much as $1,500. As Luu found out, some companies specialize in particular diseases or lifestyles. For heart disease, cancer or other "impaired risks," companies such as Connecticut National and U.S. Financial offer competitive rates. These companies employ underwriters who are trained to analyze the extent of a given problem. Instead of lumping all diabetics into one group, they rate differences between diabetics who take their medication regularly and diabetics whose disease is out of control. A person whose disease is under control could save as much as 50% on a premium.

That agent who talked you into turning in your old whole life policy for a new one (More coverage! No extra premiums!) didn't do you a favor. In fact, you've been scammed. More often than not, victims of this practice, known as "churning," receive a bill for new premiums within a year or two after the value in their old policy has been exhausted. But you can get help if you've been ripped off by your agent. Contact your state insurance commissioner to find out how to proceed. Dozens of companies have agreed to compensate victims of these and other illegal practices. Don't forget to complain to the main office of your insurance company directly. Many insurers are now fairly quick to make whole life customers who have been hoodwinked by their agents.

How much will life insurance cost me?

That depends on your age, your health and the size of the death benefit you want. No surprise that the younger and healthier you are, the lower your premium will be.

Just as a ballpark, a healthy 40-year-old man who buys a 20-year level term policy, which has a fixed annual premium, might pay $350 a year to secure a $500,000 death benefit. A healthy 50-year-old man who buys the same policy might pay $1,000 a year. If he waits until he's 60, the policy will cost about $3,000 a year.

Premiums for cash-value policies are much higher. For example, the healthy 40-year-old man who pays $350 a year for a $500,000 term policy would pay about $3,000 a year for a $500,000 universal life policy - in part because a portion of that $3,000 is going into the investment component of the policy. That's a huge difference.