Life Insurance

What is Life insurance?

Life insurance is a contract between an insurance policyholder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Some policies provide for an accelerated death benefit covering terminal illness, critical illness, or long-term care illness (chronic illness). The policyholder typically pays a premium, either regularly or as a lump sum. 
 
The advantage for the policy owner is "peace of mind", in knowing that the death of the insured person will not result in financial hardship for loved ones and lenders.  It is important to periodically review policies for premium rates and terms of contract to see that your current needs are met. 

The death benefit can be used to:

• Cover final expenses, such as funeral costs, taxes or debts
• Replace financial orother support that the insured person contributed
• Provide an inheritance or fund a foundation, endowment or charitable gift

 
Life-based contracts tend to fall into two major categories:
Protection policies – designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
Investment policies – where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life and variable life policies.
 

Types of Life insurance

The two major types of life insurance are term life and permanent life.

• Term life policies provide coverage for a specific period of time, provided premiums are paid.  If the policyholder dies within the period specified in the policy, the beneficiaries receive the payout of the policy.
  • More protection provided for a lower premium.
  • Premiums are level through policy term.
  • If you opt to renew at the end of term, premium normally increases and evidence of good health may be required.
  • Some companies offer ability to convert to permanent policy without a medical exam.

• Permanent life policies provide coverage throughout the policyholder's life, as long as the premiums are paid.
  • A portion of each premium paid is put into a cash value account.
    • The account is tax-deferred and its value continues to increase through the life of the policy. 
    • You can "tap into" or borrow against the cash value account if the need arises, such as extra income, college tuition or a down payment on a home.  Repayment of loan in not required.  Accessing the cash value reduces both cash value and death benefit and could create the need to pay additional premium to keep the policy active in the future.  If policy lapses with loan outstanding, the distribution may be subject to income tax.

There are many kinds of permanent life policies:

Whole life: In this type of policy, your premium will stay level throughout your life and the death benefit and cash value of the policy are guaranteed at the time of purchase.  Other features include: tax advantages, loan provisions and potential for dividends on some policies.

Universal life: Provides a guaranteed death benefit, provided premium levels are met.   The amount of coverage can be changed after the policy is in effect, the cash value of the policy will grow at an interest rate that may vary and flexible premium payments.

Rates are going up on guaranteed universal life because of a new regulation called AG38 requiring more conservative reserving.  This along with the low interest rate environment is the cause.  So if you are considering life insurance, you may want apply now rather than wait.  As always, we comparison shop for the best value for you.

Variable life: In this type of policy, your premium will stay level throughout our life.  The death benefit and cash value will change with the performance of investments that are made in sub-accounts which you choose.  This would be for investors who are comfortable with market risk.  Some policies offer flexible premium,  tax advantages

Universal variable life: In this type of policy, you can pay premiums when you wish and pay any amount as long as certain costs are met and limits are not exceeded.  The amount of coverage can be changed after the policy is in affect, and the death benefit and cash value will change with the performance of investments in sub-accounts.  

Life Changing Events that may be reason to re-evaluate if you have adequate life insurance:

• New child or grandchild                                 
• New job or promotion
• Inheritance
• Receipt of an inheritance
• Major investment gain/loss
• Health concerns
• Change in marital status
• Change in estate plan
• Sale or purchase of home
• Start/purchase a business
• Sold or acquired assets
• Death of family member
• New investments or insurance
• Retirement
• Gain/loss business partner

Why should you consider having Melissa Barnickel of Baygroup Insurance to review your life insurance?

• Can you retain your current coverage for less cost?
• Is there a policy that offers more coverage for the same cost?
• Can improved death benefit guarantees be found?
• Is the death benefit enought, too much or just right?  

Let the principals at Baygroup Insurance help you find life insurance coverage that will meet your needs and fit your budget. Learn more.

Life Insurance Policy Locator

Has a family member or close relationship passed away and you wonder if there was any life insurance or annuity contract that you don't know about?  The NAIC can assist consumers in locating life insurance policies and annuity contracts.

When a request is received, the NAIC will:

• Ask participating companies to search their records to determine whether they have a life insurance policy or annuity contract in the name of the deceased.
• Ask participating companies that have policy information to respond to the requester if the requester is the designated beneficiary or is authorized to receive information.