The first question you should ask yourself about life insurance is whether or not you really need it. The purpose of life insurance is to provide a source of income, in case of your death, for your spouse, children, dependents, or other beneficiaries. It can also serve other estate planning purposes, such as giving money to charity when you die, paying for estate taxes, paying for funeral and burial costs, or providing for a buy-out of a business interest.
Do I Need Life Insurance?
Whether or not you need to buy life insurance depends on whether anyone is relying on your income. If you have a spouse, child, parent, or some other individual who depends on your income, you probably need life insurance. (You might also need life insurance for estate planning or if you need to make arrangements for your business after you are gone.) Typically, however, if you are single with no dependents, and you don’t own your own business, you probably don’t need life insurance.
Types of Life Insurance
If you determine that you do need life insurance, how do you know what kind of policy is right for you? See our article on Life Insurance: What Types are Available for a discussion on the different kinds of policies one can buy. In general, there are two categories of life insurance:
Term, whereby you pay for coverage for a specified amount of time, and if you die during that time the insurer pays your survivors the death benefit specified;
Cash value — whole life or universal life (or variable life, or universal variable life) —, which, in addition to paying a death benefit, also provides you with some other redeemable value during your lifetime.
Using a Broker
If you know little about buying life insurance, it’s best to use a broker who deals with several companies and who can educate you about the different options available, how the cash values accumulate, and what the policy will cost you over different periods of time. The premium is based on your current age, but may increase over time.
You may also wish to consider purchasing different policies from different companies, particularly if the protection you want exceeds $500,000. Each state has a life insurance guaranty corporation, required by state law, whose purpose is to protect insureds in the event an insurer is unable to pay a claim. There are, however, limits to this protection. These limits are typically $300,000 to $500,000 per insured individual. Policies that exceed that amount are not covered.
Here are some questions to ask of your broker or agent:
How do cash values accumulate? (An early, rapid build-up is generally preferable.)
How has the policy’s cash value performed in the past? You can get this information from a publication called Best Review, Life and Health. Determine how the policy performed in comparison with the company’s projection and with other insurers.
If there are any special features in the policy, do they add value for you, or are they just bells and whistles that you’re paying for but don’t need?
What is the company’s rating with Best, Standard & Poor’s, and Moody’s? You can find these publications in public libraries or online. The rankings should be in the top three to ensure that a company has financial stability.
Note that everyone’s situation is different and your needs will not be the same as your neighbor’s even if you have similar lifestyles and family units. To choose the right policy, it is important to give your broker some important pieces of your financial information to help her understand your financial status and your current and future family needs.
Sunday, May 25, 2008
What kind of exclusions and limitations might be in my health plan?
There are a variety of exclusions and limitations with respect to health insurance. Common exclusions include pre-existing conditions (subject to portability of insurance as discussed below), substance abuse, attempted suicide, mental illness, reimbursement through a Workers’ Compensation insurance program, cosmetic or elective surgery and procedures, optical and dental coverage, prescription medicine, and procedures determined to be preventive care.
Many individual health insurance policies exclude coverage for medical conditions that exist prior to the inception of the coverage. This is commonly referred to as a "pre-existing condition" exclusion. Common pre-existing condition periods are six months and 1 year prior to the inception of the insurance coverage. Other common exclusions include: psychiatric care, alcohol and drug related problems, prescription medicines, and elective or cosmetic surgery and services.
Other common limitations of coverage are listed below under Health Insurance Purchase Considerations.
Many individual health insurance policies exclude coverage for medical conditions that exist prior to the inception of the coverage. This is commonly referred to as a "pre-existing condition" exclusion. Common pre-existing condition periods are six months and 1 year prior to the inception of the insurance coverage. Other common exclusions include: psychiatric care, alcohol and drug related problems, prescription medicines, and elective or cosmetic surgery and services.
Other common limitations of coverage are listed below under Health Insurance Purchase Considerations.
Monday, January 22, 2007
I in glossary insurance
IDENTITY THEFT INSURANCE
Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney's fees to defend against lawsuits and remove criminal or civil judgments.
IMMEDIATE ANNUITY
A product purchased with a lump sum, usually at the time retirement begins or afterwards. Payments begin within about a year. Immediate annuities can be either fixed or variable.
INCURRED BUT NOT REPORTED LOSSES / IBNR
Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.
INCURRED LOSSES
Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
INDEMNIFY
Provide financial compensation for losses.
INDEPENDENT AGENT
Agent who is self-employed, is paid on commission, and represents several insurance companies.
INDIVIDUAL RETIREMENT ACCOUNT/IRA
A tax-deductible savings plan for those who are self-employed, or those whose earnings are below a certain level or whose employers do not offer retirement plans. Others may make limited contributions on a tax-deferred basis. The Roth IRA, a special kind of retirement account created in 1997, may offer greater tax benefits to certain individuals.
INFLATION GUARD CLAUSE
A provision added to a homeowners insurance policy that automatically adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction costs.
INLAND MARINE INSURANCE
This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. Floaters that cover expensive personal items such as fine art and jewelry are included in this category.
INSOLVENCY
Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree – regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure.
INSTITUTIONAL INVESTOR
An organization such as a bank or insurance company that buys and sells large quantities of securities.
INSURABLE RISK
Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.
INSURANCE
A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.
INSURANCE POOL
A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated by the state to cover risks that can’t obtain coverage in the voluntary market such as coastal properties subject to hurricanes.
INSURANCE REGULATORY INFORMATION SYSTEM / IRIS
Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.
INSURANCE SCORE
Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race.
Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.
INSURANCE-TO-VALUE
Insurance written in an amount approximating the value of the insured property.
INTEGRATED BENEFITS
Coverage where the distinction between job-related and non-occupational illnesses or injuries is eliminated and workers compensation and general health coverage are combined. Legal obstacles exist, however, because the two coverages are administered separately. Previously called twenty-four hour coverage.
INTERMEDIATION
The process of bringing savers, investors and borrowers together so that savers and investors can obtain a return on their money and borrowers can use the money to finance their purchases or projects through loans.
INTERNET INSURER
An insurer that sells exclusively via the Internet.
INTERNET LIABILITY INSURANCE
Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet, including copyright infringement, defamation, and violation of privacy.
INVESTMENT INCOME
Income generated by the investment of assets. Insurers have two sources of income, underwriting (premiums less claims and expenses) and investment income. The latter can offset underwriting operations, which are frequently unprofitable.
Saturday, January 20, 2007
Maintain Your Family's Standard of Living
| Maintain Your Family's Standard of Living |
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Your spouse or family may find it hard to live the way they do now if something were to happen to you. The death benefit from a life insurance policy can help them maintain their standard of living by supplying funds they’ll need for:
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Life Insurance Policy Backdating
Life Insurance Policy Backdating
Life insurance policies are issued at the Insurance age of the insured. With age being one key factor in determining the premium rate of a policy, it is important to keep the age at policy issue as low as possible. In the absence of a viable time-traveling machine, there is little we can do to reverse the aging process. However, policy backdating is sometimes an option that could keep the Insurance Age of the insured down by one year. And one year often makes a big difference in premium rates. For the most part, life insurance premiums increase as you get older. So having an insurance age change during underwriting is most likely going to result in a higher final premium when the policy is issued. To prevent this change in premium, a policy may be backdated to save the previous age of the applicant. Here's how it works: Original Quote = $300.00 annually Action Date Age July 1 30 July 15 31 July 30 31 July 31 31 August 15 Final Premium = $325.00 annually The final premium is now $25.00 higher annually due to the age change. Over the course of a 20-year term policy, this would result in an additional cost of $500.00 to the policy owner. Original Quote = $300.00 annually Action Date Age July 1 30 July 16 31 July 30 31 July 31 30 August 15 This policy was backdated with a policy date of Backdating this policy would result in a savings of $500.00 over the course of the next 20 years. However, in doing so, the policy owner must pay for coverage for a period of time in which there was no coverage in place (July 15 to August 15). This is the opportunity cost of backdating and in this case the amount is equal to approximately $25.00. There is obviously a positive tradeoff for the policy owner in this case. Backdating the policy to age 30 would result in a net savings of $475.00 over the term of the policy. Depending on the circumstances, it may not always be best to backdate a policy. QuickQuote's Account Managers and Case Managers work closely together to identify backdating opportunities and present the associated advantages and disadvantages to applicants. Our objective is to help customers decide the best course of action to take for saving money on their life insurance policies. Example 1 - Without Backdating Application signed and dated Applicant's age changes Application approved as applied Policy issued Premium submitted/policy in force Application signed and dated Applicant's age changes Application approved as applied Policy backdated and issued Premium submitted/policy in force
insurance age
What is Your Insurance Age?
Life insurance companies use several factors when determining the premium for a policy. These include, but are not limited to, health status, health history, tobacco/nicotine use, gender and age. The last one seems fairly simple to determine. After all, your age is what the calendar says it is. Unfortunately, many life insurance companies see it a different way. Life insurance companies generally use one of two methods for determining an applicant's insurance age for the purpose of issuing a life insurance policy. 1. Actual Age The first method of age calculation is called Actual Age (sometimes referred to as Age Last Birthday). This method calculates your insurance age based on your last birthday. Let's look at a couple of examples: Your Date of Birth May 1, 1950 Today's Date April 30, 2006 Your Insurance Age Today 55
- Example 2
| Your Date of Birth | May 1, 1950 |
| Today's Date | May 2, 2006 |
| Your Insurance Age Today | 56 |
The Actual Age calculation method is very straightforward as it is simply a measure of an applicant's calendar age on any given date.
2. Age Nearest Birthday
The second method of age calculation is called Age Nearest Birthday. This method calculates your insurance age based on your nearest birthday, which could be either your last birthday or your next. Here's how it works:
- Example 1
| Your Date of Birth | May 1, 1950 |
| Today's Date | May 2, 2006 |
| Your Insurance Age Today | 56 |
- Example 2
| Your Date of Birth | May 1, 1950 |
| Today's Date | November 2, 2006 |
| Your Insurance Age Today | 57 |
Example 2 shows us the significance of the Age Nearest Birthday calculation method. Your insurance age in Example 2 is 57 because on November 2nd, you are actually closer to your next birthday (your 57th) than you are to your last birthday (your 56th). So even though you have not yet turned 57 by the calendar, this method of calculation determines your insurance age to be 57. This will happen every year on the day you move to within six months of your next birthday.
Most life insurance companies use the Age Nearest Birthday method for age determination. QuickQuote's quoting system is designed to provide an accurate quote based on your date of birth, taking into account each individual company's quoting method.
However, by the time your policy is issued, your insurance age may be different than it was when you received your original quote. This will depend on whether you had a birthday or moved to within six months of your next birthday during the underwriting process. In either case, it may be possible to have your policy backdated to keep your Insurance Age down.
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