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INDIVIDUAL LIFE
INSURANCE
Life insurance is an
integral part in financial planning. It can
provide instant financial security for a family
after the premature death of a loved one. Life
insurance cannot ease the emotional trauma for
the family members, but can lessen the
compounding anxiety from financial matters.
A qualified insurance agent
can help determine the amount of life insurance
by a “needs analysis”. When the insurance amount is
calculated, different types of insurance plans are presented. After this comprehensive process is
completed, the estimated premium rate class will
be determined to present a premium amount. The
final step is the application for insurance.
All life insurance policies
contain a 2 year contestability clause. The
insurance company has the right to investigate
any fraudulent misrepresentations on the
application and deny a claim if death occurs
during this period. For this reason, most
insurance companies exercise due diligence in
the underwriting process by having the proposed
insured take a paramedical exam, blood test,
urinalysis, and obtaining medical records. By
exercising the due diligence process, life
insurance claim denials have become very
minimal.
Another important
feature to understand about life insurance is
the unilateral nature. Life insurance is a
contract between an individual and an insurance
company. The insurance company cannot
change the rates as long as all the scheduled
premiums have been paid. However, if
the insured lapses the policy and wants to
reinstate coverage, he or she can be denied for
health reasons. If the policy is
reinstated after a medical review, the 2 year
contestability period is reactivated.
TERM
LIFE INSURANCE
Term insurance is the most
common form of life insurance sold today. Term
insurance is the least expensive of all
insurance plans which makes it affordable to
provide the proper amount of protection for
every family’s need. Premiums typically have a
term length which range from 10 to 30 years.
Premiums for the term length chosen are
guaranteed not to increase with a quality
term
plan.
Term life insurance is
designed for a premature death. Term insurance
can provide a very large amount of protection
for a family during the time they need it most.
In most instances, the insured will outlive the
term length and no benefit will be paid. When
purchasing term insurance,
it may be prudent to
choose the longest term available to allow for a
larger margin of changes in financial needs.
Term insurance is also
commonly used in business planning. A business
owner can insure a key employee or fund a buy
and sell agreement with a business partner. In
these cases, the timeframes on the need can be
determined making term insurance suitable.
The newest form of term
life insurance is the “Return of Premium”
policy. This type of term insurance is modestly
more expensive than straight term. ROP term
offers some additional options which could be
beneficial in later years.
ROP term offers a 100%
return of all premiums paid on a base policy at
the end of the chosen term period. Although
modestly more expensive, the guaranteed tax-free
rate of return on the additional premium can be
attractive. There are cash values prior to the
end of the term period which are less than
premiums paid.
ROP term also offers a
“reduced paid up” option at the end of any year
where there is some cash value. The amount of
paid up insurance is substantially less than the
original amount chosen, but offers an option of
some permanent insurance.
The ROP term option is
becoming very popular in today’s life insurance
market. Most consumers want some value in their
insurance program, but do not want to pay the
higher premiums of permanent insurance. The ROP
term plans offer some of the features of
permanent insurance without the higher cost.
UNIVERSAL LIFE
INSURANCE
Universal Life Insurance
has been commonly referred to as “cash value”
life insurance. In most cases, universal life
insurance is used for permanent protection.
There is no guesswork involved as to the length
of a term. There are more options with
permanent life insurance which also come with a
higher premium cost.
Universal Life Insurance is
much more complex than term insurance. There
are cash values, permitted loans on the cash
values, different types of death benefits, and
many riders which can be added to the policy.
Universal life insurance can help supplement
long term savings, but it should be noted that a universal life insurance policy is not an investment.
The long term need of life
insurance is the best situation to implement a
universal life insurance policy. These needs
can be as simple as a basic burial policy to a
very complex estate preservation plan. It is
always recommended to work with a quality
insurance agent to discuss all the details of a
universal life policy to make sure it is
suitable for your specific situation.
INDIVIDUAL
DISABILITY INSURANCE
Disability
insurance (income protection) is one of the most
important, yet overlooked insurance. Most
individuals buy some life insurance, but very
few people have sufficient long term income
protection. The odds of being disabled for
longer than 90 days is more probable than dying
before age 65.
Individual long
term disability policies are not tax deductible
to the insured, but benefits payable are
tax-free. Many factors are considered when the
premium and benefits are being calculated. Here
are some of the factors in designing a
personalized plan.
Occupation:
The insured’s
occupation is the most important factor to
determine which rate class. The type of
occupation may limit the length of benefits and
riders available.
Age & Gender:
Typically the younger the insured, the lesser
the premium. Also, females are generally more
expensive than male applicants. Tobacco usage
will also increase the base premium.
Other Disability
Insurance:
Unlike life insurance, Disability insurance
companies are very conservative in both medical
and financial underwriting. The underwriters
are very careful to make sure an individual does
not have too much disability insurance. Being
over insured could present a financial incentive
to be “better off” not working due to
disability. Typically, most insurance companies
will cover up to 75% of current income.
Long term
disability insurance benefits are very
comprehensive and complex. Many of the
definitions in the policy need to be fully
explained by a qualified licensed insurance
agent. Our agency is very qualified to set up a
comprehensive income protection plan to fit your
needs and budget.
INDIVIDUAL MEDICAL
INSURANCE
Most Americans are
covered for medical insurance through their
employers. However, there are an increasing
number of individuals who are self employed or
work for a small company which does not offer a
medical plan. These individuals comprise the
largest market share for individual medical
insurance.
Individual medical
benefits are not as comprehensive and premiums
are typically higher than group insurance. One
advantage to individual medical insurance is the
flexibility of choice. When purchasing an
individual plan, a proposed insured can choose
their own level of benefits to help save on the
premiums.
Individual medical
insurance is different from group insurance in
many ways. Individual plans in Illinois can
have exclusion riders. Exclusion riders could
permanently exclude certain medical conditions
or exclude them for a specified period of time.
Individual medical
plans usually have more limitations or
exclusions. Some examples of exclusions
are:
preventative services, chiropractic visits,
mental illness, and pre-existing conditions.
These conditions may be limited but are usually
not excluded on group plans.
Individual medical
plans are not guaranteed approval. Group
insurance is mandated by federal law to
guarantee employees and families coverage if
they are a timely enrollee. When you apply for
individual insurance, you can be charged an
additional premium or denied coverage due to
your current health status.
With all individual
medical insurance policies, there is a 2 year
contestability clause. It is very important to
disclose ALL medical history required on the
application. The larger claims incurred during
the contestability period will probably be
reviewed to make sure pertinent information was
fully disclosed on the application. If it is
determined that all the information was not
disclosed, the insurance company can rescind the
policy by returning all premiums received less
claims paid. In addition, the current claims
will be denied.
Individual medical
insurance should not be purchased without the
help of a qualified insurance agent. Please
feel free to e-mail or call us anytime for additional information. |
