1. What is life insurance?
Life insurance policies come in a wide variety, but they all share this feature: For consideration of a premium someone will receive money when someone else dies. (That someone may be a trust or a corporation as well as one or more individuals.
2. What types of life insurance are there?
The two basic types of life insurance are Ordinary Life and Term Life.
3. What is Ordinary Life Insurance?
Ordinary Life Insurance is based on a mortality assessment to age 100. Premiums are higher in the early years to fund mortality in the later years. Consequently, it builds cash value which you will be able to borrow against or take at surrender. This makes it an asset. You may keep your life insurance to age 100 (or later, depending on the contract) as long as internal values support the policy. The following are types of Ordinary Life: Whole life, Universal Life, Variable Life, etc. There are many other variations.
Back to the top • Close window
4. What is Term Life Insurance?
Term Life Insurance is purchased for a specific period, after which it terminates. Premiums are cheaper because mortality risk is limited. Term Life is good for bulking up your life insurance while children are young. It also is used to satisfy conditions of loans or partnership agreements, or for any need that has a fixed duration. Term insurance comes in variations such as Annual Renewable Term (ART), Decreasing Term and Flat Term.
5. What is Decreasing Life Term?
Decreasing Life Term or Mortgage Decreasing Life Term is Term Insurance that is tied to the decreasing value of your mortgage. The premium remains flat while the benefit decreases. It usually is not a good value these days. Flat Term is generally cheaper and the benefit does not decrease.
6. What is Annual Renewable Term (ART) or Yearly Renewable Term (YRT)?
ART and YRT refer to a Term Insurance policy wherein the premium increases each year according to your attained age.
Back to the top • Close window
7. What is Flat Term?
Flat Term refers to a recent innovation in Term Life wherein the death benefit and the premium are guaranteed to remain the same for a period of time. Guarantees lasting the duration of the life of the policy are strongly advised. Be sure to ask before purchasing.
8. What is a collateral assignment?
Banks, lending institutions, the Small Business Administration and other interested parties sometimes ask for a collateral assignment on your life insurance policy. The collateral assignment gives the interested party an interest in your policy to the extent of your remaining obligation. For example, if a bank loans you money for a business it will require you to have life insurance for as much as or more than the amount of the loan. The bank will have an assignment (become first in line) in the case of your death for the amount still owing on your loan, but no more. The balance of your policy death benefit will be paid to your beneficiaries per your instructions.
9. What is a beneficiary?
A beneficiary is a person or entity (corporation or trust) designated by the owner of a life insurance policy to receive death benefits at the death of the insured. Beneficiaries can be primary or contingent. Primary beneficiaries are first in line for proceeds. There may be more than one primary beneficiary and the percentage he or she will receive is determined by the owner of the policy. Percentages must total 100.
Back to the top • Close window
10. What is a contingent beneficiary?
A contingent beneficiary is a party designated to receive funds should the primary beneficiary pre-decease them. For example, it is common for a man to name his wife as primary beneficiary. It is appropriate to name their children as contingent beneficiaries should husband and wife die together in an accident.
11. Who can be a beneficiary?
A corporation, a trust, a partnership or any individual may be a beneficiary. It is common for businesses to insure their key employees, their owners or principals or officers or anyone at the death of whom the business would suffer. It is most common for parents to carry life insurance in favor of each other and their children. Even estates are named beneficiaries for the purposes of liquidity and taxes.
12. What is an insured?
The insured is the party who will be insured.
Back to the top • Close window
13. What is an owner?
An owner is the party who has control of the policy. Only the owner may change beneficiaries or execute assignments, etc. Most often, for family use, the owner, insured and premium payer are the same person.
14. Who can be an owner?
Individuals, corporations, trusts, partners or any party with an insurable interest may be an owner.
15. Will I need a medical examination?
Medical exams by physicians including chest X-rays and EKGs are usually required only for large face amounts (death benefits). It is usual, however, for an insurance company to require a Paramedical Exam which will involve a lot of medical questions, a urine sample and a blood test.
Back to the top • Close window
16. What is a paramed?
A paramed is an individual who is a licensed phlebotomist (licensed to draw blood) who will visit you at your location of choice at a time of your convenience.
17. Who pays for the medical exams or the paramed exams?
The insurance company almost always pays for exams it requires.
18. How are premiums paid?
Premiums may be paid by an automatic withdrawal from your checking account or with a mailed check by the month, quarter, semi-annually or annually. It is important to note that there is an additional charge for paying life insurance premiums other than annually. The charge increases as the frequency of payment during the year increases.
Back to the top • Close window
19. Are tobacco users charged more?
Yes! And there may be a substantial difference in charges between insurance companies. You should consult a broker you trust to get the best rates.
20. How hard is it to apply for life insurance?
It is not hard at all. There are some applications that can be begun by telephone or over the Internet. We can help you with that.
Back to the top • Close window
|
