Category Archives: Insurance

Life Insurance Terms You Should Know

Life Insurance Terms You Should Know

 

Just like with lawyers, members of the insurance industry use unfamiliar terms when they discuss the various products they represent. Not because they’re smarter than anyone else, it’s just the nature of the industry. Certainly, anytime you’re speaking with an agent, you can interrupt and ask what they’re talking about; but when you’re reading about insurance, there is typically no glossary at the bottom of the article or web page that explains the unusual life insurance terms. For this reason, we’ve listed the most common terms and their meaning in layman terms.

When You’re Shopping for Life Insurancelife insurance terms

Term Insurance

Term life insurance refers to insurance that is purchased for a period of years (the term) which are typically 5, 10, 20, and 30 years. There is also annually renewable term which is a one-year policy. Since the premium remains the same throughout the policy term, the rates for a longer term are higher than rates for a shorter term because of the higher risk

When term policies expire, most companies will offer a renewal for a one or five year term, but the pricing will be based on your new age. Many insurers will also have a conversion privilege that allows the policyholder to convert the term policy to a permanent policy such as Universal Life or Whole Life without you having to prove you are still healthy. You will, however, pay the rate based on the new type of policy based on your new age.

Term insurance quotes can easily be done online as most independent agents have a “quote engine” on their website. It’s important to note that an online quote must be confirmed with an agent because there are underwriting questions that must be asked and answered before the application can be submitted.

Whole Life Insurance

Whole life is permanent insurance that provides coverage throughout your lifetime. These policies accumulate cash value because the periodic premium you pay is actually more than the cost of insurance during the early years and less than the cost of insurance in the latter years. The insurance company also pays a small amount of interest on the cash value account each month.

Whole life insurance is most attractive because the death benefit is guaranteed for your lifetime as long as you pay your periodic premium, the premium does not change, and you can borrow the cash that accumulates in the policy.

Universal Life Insurance (UL)

Universal life is a type of flexible permanent life insurance that offers lower cost insurance protection (like term) combined with a savings element (like whole life). The money in the savings account is invested by the insurer and credited to the account to allow for building the cash value of the policy.

The primary difference between UL and term or whole life insurance is its flexibility. With a UL policy, the premiums and face amount can be changed to accommodate life changes of the policyholder. Also with a UL policy, there is a minimum interest rate established by the insurer, but if the insurance company’s portfolio outperforms the minimum interest rate for the policy, the insurer will apply the excess earnings to the cash value of the policy. UL also allows access to the cash value through loans and partial surrender.

Death Benefit

The death benefit is the amount the insurer agrees to pay your beneficiary in the event of your death.

life insurance termsWhen You Apply for an Insurance Policy

Periodic Premium

This is the amount you pay to the insurer in return for the insurance policy. Typical premium periods are monthly, quarterly, semi-annually, or annually. Your premium will be based on many factors such as your age, your health, the amount of coverage, and your weight and height.

Underwriting

This is a process your insurer will require to determine the rate class you will be assigned. The process typically includes an application containing questions about your health, a medical exam, a blood and urine analysis, and reports from your doctors and any medical facilities you listed on the application.

Table Rating

A table rating is like a rate surcharge used by the insurer when the applicant does not qualify for standard insurance rates.

MIB (Medical Information Bureau)

Most insurers check the MIB database while going through the underwriting process. This database does not contain your medical records, it does, however, provide member insurance companies with information regarding health conditions and lifestyle information.

ScriptCheck

ScriptCheck is a for-profit organization that maintains a database of individual’s prescription records that only a life or health insurer can access.

life insurance termsWhen You’ve Been Approved for Coverage

Beneficiary

Your beneficiary is the person(s) or organization(s) that you assign to receive the death benefit in your policy when you die.

Contingent Beneficiary

Your contingent beneficiary (alternate) receives the death benefit when your beneficiary does not survive your death. For example, you might name your spouse as beneficiary and then your children as contingent beneficiaries.

Cash Value

A savings account found in Whole Life and Universal Life policies that earn interest and is available to the policyholder through policy loans or surrender.

Riders

Riders are options that are available to purchase and add to your life insurance. Since they are an extension of coverage, most all riders require additional premium.

Policy Loan

A policy loan is when a policyholder borrows from their insurer and uses the cash value in their policy as collateral. Policy loans may or may not have to be repaid, but in all cases, the unpaid balance of the loan will be deducted from the death benefit if you die with an unpaid balance.

Surrender

When a policyholder surrenders a life insurance policy, they are exchanging all their rights under the policy for the accumulated cash value, minus any surrender charges. Only a whole life or universal life policy can be surrendered.

Life Settlement

A life settlement occurs when an insured sells their life insurance policy to an individual or company for cash. The new owner keeps the policy in force and continues to pay the premiums. The purchaser receives a return on investment when the insured dies. Almost all types of policies are eligible for a life settlement. Typically, to qualify for a life settlement, you must be at least 65 years old with a life expectancy of 15 years or less, and the death benefit must be at least $100,000.

Article source: http://www.lifeinsure.com/life-insurance-terms/

Life Insurance Myths Debunked

As a general rule, every type of insurance can be confusing, especially when a layperson listens to life insurance myths and attempts to read the content of an actual policy. Not because they don’t understand the concept of insurance, because most people do; but because policy information is typically written by lawyers who use a lot of legal terms, in fact, the insurance policy typically has a glossary to help the policyholder understand the meaning of “insurance terms.”

What may be even more confusing is the misinformation about life insurance and the myths that evolve as a result of consumers and people in the industry attempting to simplify something that is not simple. Not because it’s difficult to understand, but because insurance applies to different people differently. The following is a list of myths regarding life insurance and how they are debunked.

Single People Don’t Need to Buy Life Insurance

Regretfully, you cannot bury your cousin Sid in the backyard like you buried your Collie. When someone dies, there is a cost to burying or cremating their body. If you decide not to purchase life insurance, in many cases your friends or relatives will have to pool their resources to pay for your disposal. Not because it’s the law, but because it’s the right thing to do. Also, if a friend or relative has co-signed or otherwise guaranteed a debt for you, when you die they become liable. By having insurance in place, your final expenses and funeral or cremation costs can be paid by your life insurance, rather than a friend or relative.

I Have Plenty of Life Insurance through My Employer

For most employees, an employer-sponsored life insurance policy is only good while you are employed with the company. In most cases, if you choose to leave or retire, or you are let go, your life insurance will be cancelled, and then you will be forced to purchase coverage on your own. If you are not healthy or have gotten older, your cost of insurance will be substantially higher if you can get a policy at all. Typically, employer-sponsored life insurance is a multiple of your compensation, and that is generally not enough to take care of a family after you’re gone.

cashI Have Enough Cash on Hand to Leave to My Family

This is doubtful. Yes, you may have enough cash to pay for a funeral or cremation, but what about income replacement, mortgage payments, college tuition, and debts? Most people who have a mortgage and a family to support earn about $100,000 a year and still live paycheck to paycheck. It’s likely your family will need about $750,000 to pay off the mortgage and other debt, send the kids to a state college, and replace your income for even a few years. And even if you have a lot of cash now, what makes you think you won’t have to spend all or some of it in the future? Sometimes, bad things happen to good people, so it’s better not to take the chance.

life insurance mythsAlways Buy Term and Invest the Rest

This may not be the best advice, and you are not likely to hear this from a licensed insurance agent or financial planner. Typically, over the long run, term insurance can end up costing more than permanent insurance, especially if you live to be 90 or older. Permanent insurance is permanent, and term insurance is temporary. Believe it or not, people do lose investment value when the market takes a turn for the worse. Also, permanent insurance can be paid up, which is never the case for term. Term insurance is great for young adults who’ve accumulated a lot of debt, but for many people, permanent insurance will be the better option when they are seniors.

You Only Need to Insure the Breadwinners in a Household

No one wants to think about it, but sometimes children die. When they do, and you are grieving, the last thing you want to be concerned with is how you are going to pay for a funeral. Adding the children to a breadwinner’s life insurance policy is inexpensive and very easy to do. Most life insurers will allow you to purchase a CTR (child term rider) that covers all the children in the household and any that may be added by adoption or birth in the future.

My Church will take Care of My Burialchurch life insurance myths

In some cases, this may be true. Many congregations are certainly willing to band together and take care of funeral expenses for a long-time member but why would you want to leave the burden on the church when you can easily and affordably take care of it beforehand? It’s naïve to believe you can join a church and then expect the members to take care of a $10,000 funeral a year later. Actually, it’s quite selfish.

I’ve got a Chronic Illness and Won’t Get Approved

Unfortunately, this myth prevents many people from attempting to buy life insurance. They don’t want to complete an application, pay the down payment, undergo a medical exam, and then find out that they are uninsurable because of a chronic illness. However, there are many insurance companies that offer “guaranteed issue” insurance policies. These are policies where the application does not have medical questions, and the insurer doesn’t require a medical exam. There are a few drawbacks and rightly so since the insurance company is accepting an unknown risk.

The cost of insurance is higher than a standard life insurance policy.

The company usually puts a lower cap on coverage, usually about $25,000.

There is a two or three year waiting period before the company will pay the death benefit if you die of natural causes. They will pay the full benefit from day one if you die from accidental causes.

On the upside, guaranteed issue policies are whole life insurance and guaranteed to pay as long as the periodic premium is paid (only for accidental death during the waiting period), the premium will remain the same throughout the life of the policy, and the insurer cannot cancel as long as the periodic premium is paid. Since they are whole life policies, they could build cash value over time that the policyholder can access it through a policy loan (for any reason).

 

Article source: http://www.lifeinsure.com/life-insurance-myths-debunked/

Like to Drive Fast? It Could Be Costing You in More Ways Than You Think

The amount of money that you pay every month for your life insurance policy is based on a number of different factors. You might be surprised to know that your driving record is one of them. Insurance companies are always assessing the risks involved in taking on a new policyholder. They need to make sure that they receive a decent return on their investment. This means combing through a policyholder’s medical history, lifestyle and their driving record in order to assess the risk. If you think that you’re paying too much for life insurance, your history on the road might have something to do with it. Learn more about how your driving record can affect life insurance premiums.

Assessing the Overall Risk

Insurance companies are accustomed to doing research on their customers prior to issuing a policy. This is their way of calculating how much money people should pay for life insurance. If a young, healthy person purchases life insurance, they will pay less than someone with a serious heart condition who’s in their late 50s. This is because the insurance company can expect to receive premiums from the healthy customer for a much longer period of time.

The same is true of a person’s driving record. If someone has a history of automobile accidents, driving without a seatbelt, speeding, or driving under the influence of drugs or alcohol, the insurance company is taking on more risk by issuing a policy to that person. In the company’s eyes, this person might not be around for very long to pay their life insurance premiums. On the other hand, a customer with a clean driving record represents less of a risk, and therefore, will pay less for life insurance.

It Pays to Slow Down and Buckle Up

If you’re considering purchasing life insurance, you can lower your premiums by leading a healthy lifestyle and by staying safe on the road. In addition to lowering your premiums for life insurance, being a responsible driver will also help you save on your automobile insurance premiums. A minor traffic violation or a high-speed cruise can lead to some unnecessary costs down the road. Paying more for life insurance is just another reason to play it safe behind the wheel.

Curious how much a life insurance policy will cost you? Compare rates from top-rated life insurance companies using our life insurance quote tool now.

Article source: http://www.lifeinsure.com/driving-record-life-insurance-rates/

Bunk Beds