Life Insurance: Coverage for you and your family

by zhl203 » Tue Dec 08, 2009 04:26 am
Posts: 10
Joined: 08 Dec 2009

When you have family members depending on your income, saving for the future of your loved ones is a good idea. Investing in life insurance will give you enough financial support to take care of the future of your loved ones when you are no longer around. A life insurance plan also makes provision for a cash value where a part of your premium is put into a savings account. Hence, while you invest for a secured future, you can make savings too.

What is life insurance?

Life Insurance means insuring your life to save for the future of your family. If you have family members depending on your income you may invest in life insurance. This is a contract between you and your insurance company where your insurer agrees to pay a certain amount of money to your beneficiary in the event of your death.

What are the types of life insurance?

  • Term Life Insurance:

    For those who are running on a budget, you can opt for a simple life insurance. Term life insurance allows the beneficiary death benefits for a specific period or 'term'. This term may be 1 or more years and the benefits are paid only in the event of death of the policy holder within the term of the policy.

    There are certain term life insurance that can be renewed for more than one additional term. However, if you do so, your premiums may go higher. You may even sometimes be allowed to trade your term life insurance for a whole life insurance policy.

    Term Insurances are of 5 types:

    1. Annual renewal term insurance: Allows you to renew your term insurance every year till you reach a specific age which often freezes at 65.
    2. Renewable term insurance: With expiry of the term of the policy (generally 5-20 years), you can automatically renew the policy even if your health condition has worsened. It is similar to the annual renewable policy but this one is for a longer period of time.
    3. Level premium term insurance: Ensures that your premiums will not go higher for the term (between 5 and 20 years) of your policy.
    4. Decreasing term insurance: Allows your premiums to stay level throughout while decreasing your cash benefits each year. Such policies are usually used to cover items whose costs decrease with time.
    5. Convertible term insurance: With this policy you may convert your term insurance into any other type of life insurance policy that the company offers.

  • Whole Life Insurance:

    A whole life insurance covers a policy holder for his entire life. There is no date of expiry like in a term life insurance and the death benefits will be received by the beneficiary mentioned in the policy only in the event of the death of the policy holder. If you buy a whole life insurance you will have to pay a higher premium as compared to a term life insurance. The reason for this is that a certain portion of the premium paid for whole life insurance is put away into a savings program.

    When you compare the total premiums paid for whole life insurance and the total premiums paid for term life insurance it is seen that whole life insurance is less expensive. Even if you pay higher premiums for whole life insurance, the fact is that the premiums remain the same throughout the tenure of the insurance. But in the case of term life insurance, you may be paying lesser premiums in the beginning, but as you renew your term policy, premiums will increase. Hence, the total value accrued in term policy is bigger than a whole life insurance.

    Certain clauses in a whole life insurance allow you to pay premiums for a lesser period of time. The greatest advantage in this policy is that the premiums develop cash values that may be claimed or used for purchasing rider policies for more protection. Few of the whole life insurance benefits are:

    • Guaranteed death benefits
    • Guaranteed cash values
    • Fixed annual premiums

    A whole life insurance also known as "straight life" or "ordinary life" insurance, is not just an investment for your future alone, but also for the future of your family.

    To understand the basic difference between term life insurance and whole life insurance click here.

  • Universal Life Insurance:

    Universal life insurance is a flexible policy that provides security for you and your family. To know more please click here.


How to save money on life insurance policy?

When you shop for life insurance coverage, there are certain ways by which you can save money on your policy. You must look for a policy that meets your needs and the right kind of benefits received. If you think that buying a policy with a low premium will save your money think again. If you buy inadequate insurance, it will be a sheer waste of money. However, you can maximize your life insurance dollars using some of the tips provided here.
  1. Seek financially sound companies: Look for companies that are financially strong so that when your beneficiary(s) make a claim, he may receive the benefits of life insurance without hassle.

  2. Shop around: Get life insurance quotes from more than one insurance provider. You may even ask an insurance agent or an insurance broker to get you few insurance quotes from different carriers. You may then compare the quotations and find a policy that suits your needs as well as pocket.

  3. Seek group insurance: Employer provided group life insurance is often given at subsidized rates so you may find a less expensive policy here. Even if you have to pay premiums out of your own pocket this might be a good idea for the subsidized rate they provide. However, premiums paid by you will probably be through payroll deduction which is convenient. But a comparison of group and individual rates depending on your age, health must be done to assess which is the best policy for you.

  4. Change in lifestyle: Maintain a healthy lifestyle. Smoking may rate you as a risk option and you may have to pay higher premiums. Exercise regularly and consider making more lifestyle changes if necessary.

How to decide on the type of life insurance to choose from?

You may go for term life insurance if:
  • You need to make a short term investment and not a permanent one. With term life insurance benefits you can ensure the education of your children if you can invest in time. If there is a debt that you have to pay off, you may invest in term life insurance. Term life insurance covers you for a term of 5 to 20 years.

  • You need a big amount of life insurance with a premium that suits your pocket. A term insurance usually pays only in the event of death of the policyholder. However, if you are alive at the time the policy ends, term life insurance coverage will stop until you renew it. But here, you will not build a savings like in a whole life insurance.
You may opt for whole life insurance if:
  • You need life insurance stretching for the tenure of your life. A whole life insurance would pay the beneficiary the death benefit no matter when the policyholder dies.

  • You feel the need to accumulate a savings on a tax-deferred basis. A whole life insurance has its own savings program that puts aside a certain portion of the amount you pay as premiums into the savings program.
Click here to know more.

Can you pay your mortgage with life insurance?

Yes. With mortgage life insurance your mortgage loan can be paid for in the event of your death in a time when the loan is not paid off fully. This insurance is available for 15 and 30 years where for the first 5 years, the amount of insurance is level and then decreases on an annual basis. The premiums for mortgage life insurance can be paid annually, semi-annually, quarterly or monthly.

How should you choose a life insurance company?

When choosing a life insurance company, take the following into consideration:
  • Identity of companies - Make sure to know the full name, office location and affiliation of the insurance company that you plan to buy from.

  • Product sold - Check out what products the company is selling. Most often the companies provide a wide range of policies. Check for what you need and if they have it you may consider buying from them.

  • Financial Security - Select a company that is strong financially and has been in business for long. Your life insurance is an investment to secure your lifetime. Be sure that your insurance company will make life easy for you and not otherwise.

  • Ethics - Check if your company abides by the codes of conducts and principles of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical conduct in life insurance marketing.

  • Agent - An agent is supposed to help you out with your insurance needs on behalf of the company. You must consider taking help from a reliable person only. If there is any discomfort in dealing with the agent, move to another one.

  • Cost of insurance - Based on your age, type of policy and features, and the amount of insurance to be purchased, compare one insurance company with the others. Find out one which offers a better coverage.

  • Claims - A national claims database will give you the complaints (if any) against an insurance company. You may want to check to find if the company you are considering buying from is listed for consumer complaint.

How does a life insurance company choose you?

Your application for a life insurance policy has to go through the insurance underwriting process before it's approved. The underwriters evaluate the risks associated with your application and forward it to the insurance processing department of the company.

Factors that influence underwriting procedure for Life Insurance
  1. Age of the individual to be insured.
  2. Gender of the person
  3. Pre-existing medical conditions
  4. Medical records of the family
  5. Smoker or non-smoker
  6. Mental health of the person
  7. Occupation
  8. Hobbies or lifestyle habits (activities like race car driving, mountain climbing or bungee jumping might be marked as risky)
  9. Driving records
  10. Credit history
  11. Selection of coverage limits, benefits etc.
  12. Medical reports after thorough health check-up including tests like :
    • > Blood pressure level
      > Blood sugar level
      > Cholesterol level
      > Weight of the individual
      > Urine tests
      > Blood tests
      > EKG/ECG
      > X-Rays
      > Stress tests etc.

Click here to know how the above mentioned factors affect the rates of a life insurance policy.

Your life insurance policy might not come to your assistance in your lifetime. However it'll help securing the future of your loved ones when you won't be there to take care of them. A small amount spent at regular intervals will thus be able to give you the sense of security, as you hand over the risks to your insurer. Top

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My parent bought whole life insurance that pays dividends many years ago. The sales representative told my parent that she can stop paying premium in approximately 12 years because the it policy would be able to pay for itself at that time. And at the same time the policy will make annual distributions to my parent. What does that mean? Is there such thing?

The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.

I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?

Thanks in advance for your help.

Total Comments: 282

Posted: Mon May 28, 2012 11:29 pm Post Subject:

I agree that in most cases an ILIT is preferable. My post was just about making sure that correct information is given.

Posted: Tue May 29, 2012 10:57 am Post Subject:

Actually the thing is clear. If at the time of insurer's death, the estate is not under his/her name, then anyhow the beneficiaries are not going to have any type of advantages from the insurance companies.

Posted: Tue May 29, 2012 12:32 pm Post Subject:

ronekenn, can we assume that English is not your native language? Nothing that you wrote makes sense.

Posted: Tue May 29, 2012 02:35 pm Post Subject:

ronekenn, can we assume that English is not your native language? Nothing that you wrote makes sense.

LOL But it did generate $.00112.

Posted: Tue May 29, 2012 10:53 pm Post Subject: LIFE INSURANCE BENEFITS

I have been the beneficiary on my deceased common law husband of 40 yrs life ins policy for about 15 -20 yrs. His biological no good moneyhungry despot of a daughter who was never involved in his life now after his death has contested his policy claim. SHE BASED IT ON THAT HE WAS NOT ABLE TO READ OR WRITE not true - he worked for yrs, handled his own financial affairs, did his taxes,wentto hisdrs on his own, but yet we are facing court due to her allegations. Can I be removed and the benefits paid to her?

Posted: Thu May 31, 2012 12:17 am Post Subject:

Can I be removed and the benefits paid to her?

Not at the insurance company level. Probate court is a different situation.

When a death claim like this is challenged, the insurance company typically files an "interpleader" with the Probate Court, and pays the death benefit to the court, ending the insurance company's obligation under the contract.

The Probate Court holds a hearing to determine the validity of competing claims to the insurance proceeds. The "interpleader" will state that the insurance company's records indicate that "X" is the beneficiary, and has been since "19xx". "Y" may contest, but in the absence of compelling evidence of coercion or duress that caused the owner to (re)designate a particular beneficiary, the court is highly unlikely to overturn the beneficiary as identified by the insurance company.

Posted: Thu May 31, 2012 12:59 am Post Subject:

reading through this thread shed a new light in understanding life insurance.

Posted: Mon Jun 25, 2012 08:02 pm Post Subject: NY LIfe whole life insurance policy

my son at age 27 purchased a whole life policy for valued
at 250,000 he was told in 2007 that the policy would pay for itself in 22 yrs in 2010 he was told differently he was told it would pay for itself in 30yrs in other words he would no longer have to pay premiums he was recently told now it will be even longer since the market is not doing well? he pays 1,920 annually he tried contacting his agent who simply said the increase is due to economy and the agent is hard to reach to get further explanation as he makes himself unavailable and assigns his secretary the responsibility of responding to my son and sending out new illustrations which are similar to mortage amortization tables and illustrations is this reasonable sounds like he will be paying the policy forever as I just read in another explanation that you gave to another inquiry so why does the agent continually promise that it wil pay for itself what is a reasonable amount of total premiums that an age 27 male in excellent health should have paid and will continue to pay for 250,000 of whole life insurance and for how long will he be paying I know we have to read the policy as you stated to the other inquirer cause the policy may say payable until age 100 and I assume that is a reasonable and legal practice or should we be contacting the NYS insurance board any help would be appreciated thank you

Posted: Tue Jun 26, 2012 06:48 am Post Subject:

Are you positive it's a Whole Life policy? By my calculations, the policy was sold in or about 1988 - close enough to see the very top of the Vanishing Premium mountain. Whole Life policies were generally not sold that way. Usually it was the Universal or Flexible Premium Life policies. Can you tell me which company your son purchased his policy from?

Does your son have any notes or illustrations (which may have been hi-lighted) to show that premiums can be discontinued at some point?

I seriously doubt NY's Dept of Insurance will do anything to help. Feel free to send me a message if you'd like me to look into this further.


Posted: Wed Jul 04, 2012 05:06 pm Post Subject:

i just wanted to ask that which policy is good fixed or floating policies or flexible for family.

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