Life, Health, Casualty

The insurance business is loaded with high-pressure salesmen (sometimes poorly trained), hundreds of competing companies that sell a confusing array of policies that seem to shoot off in all directions at once - and hokum in a public press that's too frequently afraid to rock the boat. But nevertheless you need insurance! You must buy it! Here are some tips.

Take a look at your life insurance

First look at your life insurance policies. A review may be in order. You might improve your present coverage by taking advantage of new features available (maybe at little or no extra cost). You can also make certain that your basic strategy is up to date, and that new family requirements haven't outdated any old provisions. You might even find out that you are overinsured - especially if you're a high-income businessman past 50.

As for family requirements changing: A new child or grandchild, or a death, obviously could require a beneficiary change. For example, a new secondary beneficiary may be needed.

In any case, if you've piled up several life policies over the years, a clear inventory of them all (including such items as projection of cash values to age 65) is the first step toward a coherent insurance plan. Your family solicitor or another key advisor should have a copy of this inventory if you make one, since insurance should be considered as part of your overall estate plan. Especially, it must be coordinated with your will.

Buying life insurance isn't, of course, just a matter of how much. Sometimes you hear advice to sell your straight life policies with sizable cash values, invest the money profitably (maybe in a favourite stock) - then buy term-life coverage to give your family death-benefit protection.

This sounds fine and may, indeed, work well for you. But keep in mind that if you're middle-aged, you may find yourself virtually priced out of any form of life insurance. Term coverage at age 50 costs nearly double what it does at 40. At 55, it costs three times as much. Remember, too, that the cash value of a straight life policy may represent 5% compounded - after taxes. Note the "after taxes." Any alternate investment of premium money would have to better this level of return, hardly an achievement today!

Limited-term payment is another idea that looks attractive. Typically, you are told that a contract requiring you to pay for just 20 years, during your highest-earning period, would suit you fine. It may - and it may not. A point to remember is that straight life gives your family greater protection - per insurance pound - than does a limited-payment contract.

As a rule of thumb, straight life - which means, of course, that you pay premiums until death - will give you over 50% more coverage during the first 20 years than will a 20-payment policy costing the same premium.

In any case, if you want it, you can get a straight life policy that has a built-in partial decrease in premium starting at age 65, when your income normally becomes limited. Many straight life contracts provide that at retirement age you can elect to use the cash value for an annuity. This gives you an income for the rest of your life - without the red tape and commissions that would ordinarily accompany a new contract. Often the retirement income can be paid to you and your wife for as long as either of you lives. Cash value of straight life at age 65 averages about £500 for each £1,000 of coverage. Note: Often you get a larger annuity return on this type of policy written today than if you wait to buy an annuity when you retire.

Remember, in your review, that there are many possibilities for special payment of insurance benefits. For instance, at no extra cost you can arrange for your family to get a fixed income until the children are through school, with the balance then payable in a lump sum or in reduced income.

But what if you're overinsured? Suppose your children are grown, and your investment portfolio has expanded. You may decide you want to part with some life coverage. An obvious way, of course, is simply to cash in a policy (with current cash value less net cost taxable), then reinvest the cash. Or you might get a paid-up policy with a smaller face value.

But there are other ways. One is to borrow as much as you can on a policy, then assign it to your children and let them pay both the premiums and interest on the loan. If you give them full ownership - with no strings attached - the policy payoff will be outside your taxable estate.

It's wise to make sure that you have common disaster, double indemnity, emergency premium payment, home mortgage, and guaranteed insurability clauses. These are useful, often overlooked, and quite cheap.

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Reading Up - and Down - on Investments

Everybody and his cousin is telling you how to manage your money and tuck it away safely so that it will grow from modest size into a bonanza.

But it took the stock market fever of the 2000s and 2000s to turn a steady stream of investment sites into a flood of printed pages.

Today, get-rich websites commands broad reams of Google's index, and the flood of new articles goes on unabated.

All too seldom, the advice comes from successful pros, and is worth the price of thesubscription.

Gerald M.

Loeb's The Battle for Investment Survival was one of the earliest and still better of these.

Too often, however,... see: Reading Up - and Down - on Investments