WHOLE LIFE INSURANCE
This type of insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. These policies are designed and priced for you to keep over a long period of time. If you don’t intend to keep the policy for the long term, this may be the wrong type of insurance for you.
Whole Life policies are known by a variety of names: permanent, whole, ordinary, universal, adjustable, and variable life. Most have a feature known as cash value or cash-surrender value. This feature, not found in most term insurance policies, provides you with some options:
You can cancel or surrender the policy in total or in part and receive the cash value as a lump sum. If you surrender your policy in the early years, there may be little or no cash value.
If you need to stop paying premiums, you can use the cash value to continue your current insurance protection for a specified time or to provide a lesser amount of protection covering you for your lifetime.
You usually can borrow from the insurance company, using the cash value in your life insurance as collateral. Unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit.
With all types of permanent policies, the cash value of a policy is different from the policy’s face amount. The face amount is the money that will be paid at death or policy maturity. Cash value is the amount available if you surrender a policy before its maturity or your death. Moreover, the cash value may be affected by your insurance company’s financial results or experience, which can be influenced by mortality rates, expenses, and investment earnings.
There are several types of Whole Life insurance:
- Whole life: is the most common type of permanent insurance. The premiums generally remain constant over the life of the policy and must be paid periodically in the amount indicated in the policy.
- Adjustable life: Premiums are recalculated at set time periods, typically every five, or even ten, years, to reflect current interest rates. While five years is the most common readjustment period, some policies may be based on three or even ten years.
- Universal life: Offers flexible payment options after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. You also can reduce or increase the death benefit more easily than under a traditional whole life policy. (To increase your death benefit, the insurance company usually requires you to furnish satisfactory evidence of your continued good health.)
- Variable life: Provides death benefits and cash values that vary with the performance of a portfolio of investments. You can allocate your premiums among a variety of investments offering different degrees of risk and reward: stocks, bonds, combinations of both, or accounts that guarantee interest and principal. You will receive a prospectus in conjunction with the sale of this product.
The cash value of a variable life policy is not guaranteed and the policyholder bears that risk. However, by choosing among the available fund options, you can allocate assets to meet your objectives and risk tolerance. Good investment performance will lead to higher cash values and death benefits. If the specified investments perform poorly, cash values and death benefits will drop.
Some policies guarantee that death benefits cannot fall below a minimum level. There are both universal-life and whole-life versions of variable life.
- As long as premiums are paid, protection is guaranteed for life.
- Premium costs can be fixed or flexible to meet personal financial needs
- The policy accumulates a cash value against which you can borrow. (Loans must be paid back with interest or your beneficiaries will receive a reduced death benefit.) You can borrow against the policy’s cash value to pay premiums or use the cash value to provide paid-up insurance.
- The policy’s cash value can be surrendered, in total or in part, for cash or converted into an annuity. (An annuity is an insurance product that provides an income for a person’s lifetime or a specific period.)
- A provision or rider can be added to a policy that gives you the option to purchase additional insurance without taking a medical exam or having to furnish evidence of insurability.
- Required premium levels make it hard to buy enough protection.
- Whole Life may be more costly than term insurance if you don’t keep it long enough.
TERM LIFE INSURANCE
Term insurance provides protection for a specific period of time. It pays a benefit only if you die during the term. Some term insurance policies can be renewed when you reach the end of the term, which can be from 1 to 30 years. Many policies require that you present evidence of insurability at renewal to qualify for the lowest rates.
- Premiums are generally lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age when the need for protection often is greatest.
- It’s good for covering needs that will disappear in time, such as mortgages or car loans.
- Premiums increase at the end of the desired term chosen.
- Coverage may terminate at the end of the term and become too expensive to continue.
- The policy generally doesn’t offer cash value or paid-up insurance.
Life Insurance Exam Preparation Tips
Tips for best results with your life insurance medical exam:
- The initial application and medical questions provide basic information to the company you have selected for your life or disability insurance. Depending on the application or the exam results, the insurance underwriter may also contact your physician(s) for more information. If this is the case and the physician’s office hasn’t responded to requests within a reasonable time, we may ask you to make a call to your doctor’s office to keep things moving forward.
About the exam:
- Blood and urine tests are almost always part of the process today. These tests are administered by licensed paramedics or physicians. The examiner will schedule with you directly. Allow at least forty-five minutes (full physician exams take an hour or longer).
Blood Tests, Urinalysis, and Blood Pressure Readings:
- If your tests do include blood work (most do), you will be tested for the HIV antibody / antigen. Read the AIDS testing authorization and disclosure statement carefully for specifics on that test. A positive test does not necessarily mean you have AIDS, but it will result in declination of insurance coverage. Please read the disclosure statement carefully. The insurance industry is regulated by stringent privacy laws, so a positive test will remain confidential.
- These tests run best if you have fasted for twelve hours beforehand. Therefore, whenever possible, schedule your test for the morning, and skip breakfast. Avoid coffee or tea the morning of the exam as caffeine can elevate your blood pressure, which will be measured. Also avoid soda and sports drinks which can elevate your sugar, cholesterol and other readings. Do drink a moderate amount of water a few hours prior to the exam to hydrate your veins and to allow for moderate urination. If you must be tested in the evening, avoid rich foods especially the day of the exam. In general, avoid excessive salt, alcohol, high-fat foods and candy for several days prior to your exam.
- Blood tests screen for cholesterol levels and other biochemical ratios, and provide information on kidney and liver functions, diabetes and immune disorders, and drug use. Eating well balanced, light meals several days beforehand will keep these tests from being skewed and will produce a more favorable blood pressure reading as well. Avoid dinner rolls with poppy seeds for several days; they may show traces of opium, which is used in a variety of illegal drugs.
- If you smoke or use tobacco in any other form, admit it. Nicotine shows up for longer than you could normally refrain, unless you’ve really quit for good. If you don’t tell the truth about smoking, insurance underwriters assume you’ll have other things to hide about your health. (In addition to the exam issues, hiding tobacco use is considered a “material misrepresentation”, and in some cases can jeopardize a claim payment to your family.)
- Try to get a good night’s sleep, or find time to unwind if an exam is scheduled in the afternoon or evening.
- If your policy is issued on a standard or preferred basis, you have passed some basic screening exams that your doctor might routinely run. It is possible that your insurance is not offered at a standard rate, or worse, declined altogether. If you are borderline, paying careful attention to the above tips should help. Should you be subject to a higher rating, or declined, the reasons behind these decisions are strictly confidential. Specifics will be released only to your doctor, as they may be based on his/her records on you. Any health questions should be reviewed with your physician only.