Various Type of Life Insurance Policies
Group Life Insurance
Many employers offer life insurance under a group plan and sometimes pay part or all of the premium. A medical exam is usually not required for insurance purchased this way, and the Insurance can be less expensive than coverage purchased as an individual. Under California law, group life insurance must be convertible to permanent insurance at the insured’s option when the insured’s coverage under the group policy terminates.
The converted policy will probably be much more expensive than the group insurance. Some employers will allow insurance companies to send agents or enrollers to their premises in order to offer insurance to their employees. Policies offered in this manner are different from group insurance, and you should evaluate the materials shown to you in the same way as if you were considering a purchase of an individual policy through an agent.
Types of Life Insurance Policies
| Type of Policy | Premium | Face Amount | Cash Value | Policy Loans |
|---|---|---|---|---|
| Term | Low; but increase w/age | Renewable into old age | None | No |
| Whole | Level | Level; can’t be changed | Yes; no ability to choose investments | Yes |
| Univeral | Flexible | Level; can vary | Yes; no ability to choose investment | Yes |
| Variable | Level | Level; Can’t be changed | Yes; abililty to choose investments | Yes |
| Variable Universal | Flexible | Level; can vary | Yes; ability to choose investments | Yes |
Insurance by Mail Order or Through the Internet
Some insurance companies solicit by mail or through the Internet. In most cases, the prospective buyer mails a completed application directly to the company. Both Internet and mail order marketing may not provide a complete range of choices as target marketing often involves offering only one type of policy. Before you buy by mail or through the Internet, consume insurance companies solicit by mail or through the internet.
In most cases, the prospective buyer mails a completed application directly to the company. Both internet and mail order marketing may not provide a complete range of choices as target marketing often involves offering only one type of policy. Before you buy by mail or through the internet, consult an expert who can help you determine the best policy for you.
Make sure the insurance provider is authorized to sell life insurance in California by checking their licensing. An expert who can help you determine the best policy for you. You should verify that the insurance company offering the coverage is licensed to sell life insurance in California.
Sales Illustrations
It is likely that an agent will show you one or more life insurance sales illustrations. An illustration consists of a series of numbers indicating how the policy works. The illustration usually shows the guaranteed results under the policy for each year in the future, and the results if all the non-guaranteed items continue at their present level. Actual results may be better or worse than the non-guaranteed amounts shown in the illustration (but not worse than those that are guaranteed).
Using Indexes
Use the index numbers that have been created to assist you in your search for life insurance to increase your chances of obtaining a decent deal on a policy. These index numbers are fully described in the Buyer’s Guide that each Insurer shall deliver to a Purchaser. They are good tools to help you compare the merits of similar policies.
Important Facts If You Are Considering Changes to Your Life Insurance Policy
Agents for life insurance or salespeople for life frequently approach customers. and asked to think about switching to a new life insurance policy by canceling their old one. The current life insurance policy’s cash worth is typically utilized to purchase additional insurance or a new policy. While a decision to replace an existing life insurance policy may be a good one. Sometimes this may not be in your best interest.
More than likely you purchased your policy with a long term financial plan in mind. Replacing or changing your insurance policy at this point may affect the intended results of your overall financial plan. If you are considering replacing or changing your life insurance policy. You should first assess your needs and determine what is in your own long term best interest.
It is also important to consider the interests of those you are protecting. Deciding how much insurance you need. How long it is needed, and which policy provides the best coverage is crucial to your financial security.
Your financial needs should be thoroughly evaluated before changes are made in existing policies. Any change in your personal circumstances since you first purchased life insurance may require a different strategy. A comprehensive evaluation may indicate that replacing or changing your policy is advisable. However, certain cautions are appropriate when considering replacing or changing your life insurance.
For example:
- You may have to pay “start up” costs again.
- You may be required to wait one or two years before a new policy passes through the contestable period. During the contestable period the insurer is contractually entitled to cancel the policy. Or refuse to pay a claim based on omissions, or mistaken or untrue statements in your application.
- You may pay a higher premium for new insurance over the duration of the policy because you are older than when you first purchased life insurance.
- The financial strength of a new insurer may be different from that of your present insurer.
- There may be specific tax consequences when you replace or change your current policy.
- You may find different loan provisions in a new policy. Or you may find that you cannot take tax advantaged loans in the new policy.
- If you use the cash value of one policy to pay for the premium on a new policy. The values used may not be sufficient to support the new policy in future years. And may result in the need to make additional premium payments to keep the insurance in force.
- You may not have immediate access to your money in a new policy. You may have to wait a considerable period of time, or pay a monetary penalty. To access the cash value in the policy.
Change Your Life
- Tax consequences may occur if you take cash from an annuity or mutual fund that started as a replacement policy for your original life insurance policy.
- When considering policy replacement, it is important to note that you may have the ability to amend. Convert your current policy to a newer product within the same insurance company. Without any loss of rights or accumulated cash value. It may be in your best interest to contact your current agent or company and to inform them of your intent.
- Illustrations are utilized by agents to highlight certain features of their policies. Illustrations should never be the only factor used in deciding to replace or change your policy. Illustrations that are presented for comparison purposes may not give a complete picture of the new policy’s future.
- To ensure that your insurance policy meets your financial objectives, it is recommended that you obtain a second opinion. As well as consult with your current agent. Given the complexities involved in counseling a consumer regarding insurance purchases. You may want to inquire about the professional qualifications of your current agent and new agent.
