Life Insurance Lowdown

Many of us worry ourselves silly about the type of insurance that will be best suited to our needs. And the growing number of options isn’t making things any easier. So, while we are trying to get the best bargain for ourselves, it is a good idea to arm ourselves with certain insurance terms that a consumer must know.

Agent: An agent is an authorized representative of an insurance company. This person sells and services your insurance contracts.

Accelerated Benefits Rider: Sometimes life insurance policies have various types of riders one of which is the accelerated benefits rider. This rider allows you to make an early payment of some portion of the policy’s face amount in case you suffer from a terminal illness or injury.

Another type of rider is the accidental death benefit rider: this rider provides for the payment of an additional cash benefit related to the face amount of the base policy in case death occurs by accidental means.

Annually Renewable Term: Is a form of renewable term insurance that provides coverage for one year and allows the policy owner to renew his or her coverage each year, without evidence of insurability.

‘Attained Age’ is what the insurance companies call your current age. Your attained age is one of the factors life insurance companies use to determine your premiums.

Backdating: Don’t worry, there is nothing illegal about this strategy. Here, a procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age of the consumer at issue lower than it actually was. This was done to get lower premium.

Of course, there are many more and I shall enumerate some more very soon

If you are purchasing life insurance for the first time, you are probably worried about your medical reason. Don’t worry; it’s just a routine examination, which allows the life insurance company to judge how much premium to charge a potential policyholder. If the company determines you are likely to die at an early age, they will want to collect more premiums early in your life. But if they feel you will live longer they would not need to collect as much from you in the early part of your life because you will be around longer to continue to make premium payments.

Life insurance companies use two factors to judge how long a potential policyholder will live:

• Longevity Charts — These are just statistics on the mortality rates of people. These charts give the insurance company a general idea of the ages at which men, women and children die. These figures help the insurance company assess its risk when taking you on as a policyholder.
• Your Medical exam and History is the second factor. Usually your medical exam is done in the privacy of your home or office.

You probably know that annuities are a good insurance means. But usually, most people don’t know much else about this form of investment. So let us examine the common types of annuities on offer in the market. One of the most common types of annuities is the fixed annuity. With a fixed annuity, you will pay a fixed amount each month. Quite a few people treat a fixed annuity as a personal pension plan.

The other type is the variable annuity where the amount you collect each month depends on the performance of the stocks, bonds, or other investments in the underlying portfolio. This amount is variable. Then there are annuities indexed to stock market performance. They are known as equity-indexed annuities. They are supposed to shield the investor from stock market losses by going up when share prices rise but not dropping when they fall.

If you are purchasing life insurance for the first time, you are probably worried about your medical reason. Don’t worry; it’s just a routine examination, which allows the life insurance company to judge how much premium to charge a potential policyholder. Personalinsure.about.com reports:

If the company determines you are likely to die at an early age, they will want to collect more premiums early in your life, but if they feel you will live longer they would not need to collect as much from you in the early part of your life because you will be around longer to continue to make premium payments. Life insurance companies try to accurately judge how long a potential policyholder will live with two factors: Longevity Charts and Medical Exams and History.

Read more: What to Expect: Your Life Insurance Medical Exam

I think I have been writing pretty regularly about different types of life insurance policies and how you MUST take a policy. But what happens when your spouse or someone else who has taken a policy, passes away? When a loved one dies, the last thing on your mind is filing a life insurance claim. But you must, because the insurance was taken to benefit you. This is an act of love and must be understood and accepted as such. While filing the life insurance policy claim can be confusing and difficult, don’t forget, it can relieve great financial burdens for your living family. Luckily, the process is quite simple. Here is a checklist of steps to follow in case you need to file a life insurance policy claim:

Firstly, if you know that your loved one has taken a policy, ensure that it has been kept in a safe place. It is important that you have the actual life insurance policy with you in order to file. However, if for some reason you cannot locate the policy, contact the life insurance agent or life insurance company that your loved one may have used. If that doesn’t work, try contacting the state insurance department in the current state or any other state your loved one may have lived in.

Once you have the policy, call up the insurance agent or firm, which will hand over certain life insurance claim forms that you need to fill out. These forms are usually quite simple, but if you do find yourself confused, don’t worry. The life insurance company or life insurance agent can help you complete them. Once you’ve done that, you must send a certified copy of your loved one’s death certificate with the life insurance claim forms to the life insurance company. Now it will take anything from a few days to a couple of weeks, for your settlement to be issued.

It is nice to know something about the history of life insurance and how it works to know the type of insurance that is best suited to your needs. For example, ever wondered why the cost of insuring your life is so low? Sherlock Holmes would’ve said ‘Elementary’, but I’d like to use another word: LLN. The Law of Large Numbers or LLN allows insurers to spread risks over large numbers of insureds. This ensures that any one individual’s cost to cover a risk is considerably lowered.

However, the older we get the probability of our dying increases. So, life insurers are forced to charge you more money every year as you age. This cost of mortality, which goes up annually within every type of life insurance policy, is one of four cost components that determine the premium that you pay. The other components are overhead, commissions and profit. Elpasotimes.com reports:

An alternative to annual renewable term is decreasing term insurance. It has an annually decreasing death benefit for a level annual premium and is appropriate for paying off debts.

Read more: Find which life insurance works for you

This is a simple way of looking at insurance — think of it as a compulsory saving. Something that you need to set aside regularly so that if some unforeseen disaster occurs, you and your family are prepared. After all, it is by saving that you can keep something aside for a rainy day.

I know this sounds more like some gramma’s advice, but believe me, when I say that life insurance is the best form of savings especially for people belonging to the lower-income groups. Some people actually believe that life insurance is one of the greatest financial innovations the world has known. Life insurance has become one of the greatest mobilizers for savings and for very good reasons. It is a comforting assurance in the face of so many risks and unknowns. Jamaica-gleaner.com reports:

Notwithstanding the huge preference and key advantage which life policies would hold in the expenditure of the consumer dollar, armies of sales teams, or underwriters, become experts in pressing home the value of purchasing life insurance cover.

Read more: Saving is where it all begins

It’s one thing to say that you can get competitive rates for term life insurance policies and another to actually find a firm that offers the most competitive rates It is imperative that you shop around, since companies structure rates and guidelines for term life insurance uniquely. Here are a few tips, which if you follow, will help you find the best term life insurance quote:

• The Internet is your best bet when it comes to searching for and collating together a list of insurance firms that offer term life insurance.
• Secondly, whittle down this list to the handful that offer competitive rates.
• If you want a tentative idea of how much you’ll need to shell out, check InsWeb.com. The website offers quotes from a remarkable database of insurers and can give you a more or less accurate picture of the premium you’ll need to pay.
• Now you can compare the rates again and cull your insurer’s list further depending on their individual quotes. Once you’ve checked the financial ratings of these insurers, it is time to call them up and know more about the policy on offer.
• If you feel that the insurers on your list are not offering competitive term life insurance quotes, then try calling an independent insurance agent before you call up the insurance firms. Find out if the agent can beat the quotes on offer from the firms. Don’t worry; the premiums will not cost you more because you approached an agent, and they may even be able to offer you more competitive quotes than the companies.
• If you feel that you need personal contact, then don’t hesitate to find yourself a good agent rather than approach the companies yourself. However, it is important that you find yourself a good agent. A good idea would be to look for agents who have the designation CLU (Chartered Life Underwriter).

You may think that what I’m going to say is unpleasant. Have you thought of taking a life insurance policy in your child’s name? Let me be plain here: I’m not talking about the chance of your child dying. This is not something parents want to think or talk about.

Many people believe that life insurance is necessarily all about death. That’s not the case here. Child life insurance is about preparing for the future; taking steps today can help create a better tomorrow. And as parents or grandparents, it is our duty to make the future better for our children. Compuquotes.com reports:

Such child life insurance is perfect for planning for the future because of the cash value the plan would accumulate. As an adult, they could borrow against this value…or stop the policy and withdraw the money (to pay for college or any number of things).

Read more: Child Life Insurance

The Internet has become a constant in our lives and today; it has even revolutionized the way we shop. We buy everything from pet food to expensive furniture and gifts on the Internet and you can even shop for loans and insurance while sitting at home. However, you cannot get into an agreement on the Internet with your eyes closed. Here are some tips to help you shop for life insurance online:

• Shop around: Yes, you need to shop around even for life insurance. Different companies offer different rates and you can get the best deal possible when you shop around. Another benefit is that you will be able to determine which insurance coverage best fits your needs.
• Double check: Find out if the insurer you have zeroed in on is licensed and can do business in your state. For this, you must cross check with your state insurance department. You could also approach the department for a list of companies and agents that are licensed in your state.
• Update your browser: What’s that got to do with buying insurance? Everything! When purchasing insurance via Internet, you need to know that your personal information is protected. Newer browsers are equipped with current security measures. One way to know if the site is secure is by checking the address. If the firm’s site address begins https:// instead of http:// then it is a secure site. If you cannot confirm the security, it’s best to resort to good old paperwork. Just contact the firm or agent and submit the required papers.
• Keep the paperwork: This is very important. You need actual proof of everything from the time you begin scouting around for an insurance policy. And most important: You MUST receive a copy of your new insurance policy within 30 to 60 days of purchase. If you don’t get a copy, then immediately contact the firm or insurance agent.