The Basics of Insurance Policies

Hello All,

Most people are unaware most insurance policies are different. An auto insurance policy is different from a life insurance policy and a life insurance policy will be different from a long-term care or disability policy. While this can be confusing for someone interested in purchasing multiple insurance policies, the good news is that all of them share a few common items. Once you understand what they are you should be able to comprehend your insurance policy, no matter what type of insurance it is.

Always keep in mind to prevent a lost life insurance policy, keep it in a safe place where your loved ones and family members can locate it. Registering on a central life insurance database is something everyone with insurance should consider.

The first thing to understand is that an insurance policy is a written contract, an agreement, between the insured (you) and the insurance agency. Every policy has an insuring clause which is, basically, a generalized statement of what coverage the insurance company is responsible for. If you pay the premiums and make sure you keep to the conditions within the policy wording, the insurance company agrees to make payment to you (and/or beneficiaries) in the instance of a loss. Essentially it means any financial risk is deflected from you and transferred to the insurance company.

Every policy is also sectioned off, with each section defining the policy terms, types of coverage, the rights and responsibilities of both parties, any exclusions or limitations and any other types of optional coverage you have selected. The first page usually begins with a summary of the agreement between the insurance company and you (the insured). This Declarations Page gives the information about who is covered, what’s covered, the applicable dates for coverage and the amount of any premiums. It will also have the policy number listed, your name and address, and the name and address of the insurance agent. It can also have other important information such as coverage limits.

There should also be several provisions in your policy. These describe the policy features and types of benefits you would expect in the event of a loss. The policy will also explain any necessary requirements and the rights and responsibilities for each party. Other provisions in the contract may be required by law, either state or federal. These provisions are required and designed to protect you. There will also be a section, or sections, for any exclusions denying or precluding coverage depending on the circumstances.

If you had the option of choosing any other options when you applied for the insurance policy, there will also be a section for these, explaining what they are and any related information. This can be information about dividend options (if you have a cash value life insurance policy) or any optional auto coverage for an auto plan (such as additional bodily injury coverage).

If you are paying additional premium for any riders, there will be sections regarding the additional rider coverage – any coverage considered above and beyond the basic contract. If there are any endorsements or amendments added to the standard contract, the insurance company may add that information as well, be it at time of issue or thereafter.

Remember, your insurance policy is a legal contract. If you don’t understand any portion of the wording or provisions, it is best to get help from your insurance agent first. Make sure they explain  everything to your satisfaction and understanding before signing.
 
Until next time,

Michael Hartmann
 
 
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Knowing Your Permanent Life Insurance

Hello All,

Permanent life insurance is life insurance that is available for your use until your death – no matter when that is. Unlike term insurance, there is no ending period or termination date for your policy. Many times, permanent life insurance is also called ‘cash value’ life insurance because the premiums you pay are for ‘pure’ coverage and any associated expenses, with the remainder of your balance in a cash value account managed by the insurance company. The cash value of your policy grows depending on the type of policy you buy (universal life, whole life, or variable life). Any interest and earnings are tax-deferred until withdrawn or become part of the death benefit amount when you die. Permanent life insurance usually has a higher premium than term life insurance.

As with any insurance, it is very important to keep paperwork and/or company name available to your beneficiaries when the time arises. It is as simple as registering on a life insurance database to guarantee this information will never get lost.

Many people use permanent life insurance to cover long-term needs since the coverage you pay premiums on is good for the rest of your life. There is no annual renewal, no need to provide proof you are insurable (i.e. medical exams) and the policy locks your premiums so you don’t need to fret over increasing premium costs as you age or if your health declines. Cash value policies are similar to annuities in that all the interest and earnings grow income tax free unless you surrender the policy or begin to withdraw from the account. You can actually grow quite a bit of equity in your policy over the years and may actually end up with a benefit greater than the initial amount of the policy.

You are allowed loans and withdrawals from the cash value account of your policy, with a fixed or variable rate interest assigned to loans. However, if you withdraw a loan against your account it will reduce the overall amount of death benefit available to your beneficiaries by the amount of the loan. It will certainly reduce the available cash value and could conceivably cause the policy to lapse. If you surrender the policy with an outstanding loan you could also face heavy tax penalties. Withdrawals from the policy are tax free up to the amount you’ve paid in premiums but this may not be the case if your policy is considered a Modified Endowment. Withdrawals and loans from a Modified Endowment  policy are taken first from earnings, making them fair game for income tax laws.

Unfortunately, the advantages to a cash value, permanent life insurance policy are weighed with a few disadvantages. First, premiums for permanent life insurance are usually higher than for a comparable term policy, at least during the early years. Initially, you are paying more than is needed to pay for the insurance so you build the cash value account, or fund, in order to offset the higher cost of insurance when you are older. It is also possible to purchase a variable life insurance policy. Variable life insurance policies use investment opportunities to grow your cash value account, leaving them exposed to financial gain or loss depending on how the investments perform. Losses directly cut into the value of your cash account and could affect the total amount of the policy on your death; a minimum death benefit is almost always guaranteed, however.
 
Until next time,

Michael Hartmann
Facebook: http://www.facebook.com/FindYourPolicy
Tweeter: @FindurPolicy

Always remember our Mission Statement
“TO BE THE BEST IN SERVING OUR MEMBERS BY PROVIDING PEACE OF MIND THAT THEIR BENEFICIARIES RECEIVE THEIR INHERITANCE”

 

You Have Options When Shopping for Insurance

Hello All,

The true difficult part of shopping for insurance comes in recognizing you’ll be buying something you can’t see and, hopefully, will never use. It’s an odd situation, to be sure, but unless you’re financially prepared for everything (and few of us truly are) then you do have quite a few options when it comes to hunting for the right insurance for you.

Guarantee that you will be able to locate it when the time comes. Consider registering the company name with a database where your loved ones can always go to find it.

If you like your life simple, straightforward and uncluttered you can buy a low-maintenance insurance policy directly from a insurance company, agent or website – term life insurance and auto insurance are two that come to mind right away. Convenient and with a wide variety of products to choose from, these types of policies can have somewhat lower premiums due to reduced transaction fees. Purchasing insurance online has its own benefits, not the least of which is that it’s easy to compare insurance prices and quotes and do it at your own leisure, without any hassling sales pressure. If you have more complex needs or are seeking advice, an independent or exclusive insurance agent or broker can guide you through the steps. An independent agent typically represents more than one company while exclusive brokers do business through only one company.

As convenient as it is, it’s just as important for you to choose the right insurance company. Lower premiums and convenience don’t mean much if your insurance provider goes out of business. A number of consumer advocate companies, such as Standard & Poor’s and Moody’s, rate insurers with both a letter grade and with full financial ‘health’ reports. Insurance companies can also provide their own ratings. It isn’t necessary that the company you choose have the highest rating for your needs, but you should avoid the ones with the lowest ratings, those on ‘credit watch’, and ones with a high proportion of negative comments or feedback. Don’t discount word-of-mouth as you find the companies with the best customer service records, but it may be impossible or impractical to expect to get a clear idea of a company just from asking other people. Check company websites and talk to customer service reps, asking about the services they offer. You can also check up on a company by talking with your state department of insurance to find if any complaints have been filed against the provider. Obviously, fewer or no complaints should foretell a quality insurance company.

No matter the type of insurance you’re after, the actual purchasing process is basically the same. You’ll get a tentative quote by talking to the provider, or one of their agents, via phone or the internet. You’ll fill out an application and possibly answer a battery of questions. If you’re buying health or life insurance you’ll also take a medical exam to find out how much the premiums will be for the coverage you need. Once you’ve submitted your application, the underwriting process starts, with an insurance underwriter verifying the information you’ve supplied and possibly getting more helpful information from other sources such as the Department of Motor Vehicles, hospital and doctor records, credit agencies and the Medical Information Bureau. The underwriter then uses this information to decide whether or not to approve your application, issue your policy with an extra premium or decline you coverage.
 
Until next time,

Michael Hartmann
Facebook: http://www.facebook.com/FindYourPolicy
Tweeter: @FindurPolicy
 

Always remember our Mission Statement
“TO BE THE BEST IN SERVING OUR MEMBERS BY PROVIDING PEACE OF MIND THAT THEIR BENEFICIARIES RECEIVE THEIR INHERITANCE”

Keep This In Mind When Naming a Beneficiary

Hello All,

You might think after you’ve determined how much insurance coverage you need and the type of life insurance policy that’s right for you picking a beneficiary is a snap. It is, in fact, possibly the most difficult decision you may make regarding your life insurance policy. A beneficiary is the person (or persons) you name (within the limited of your life insurance policy) who will receive any death benefits from the policy. There are many options you have and a few limitations regarding who you may be able to pick.

Some states require you to choose a beneficiary with some stake in your passing, be it a dependent child, spouse or other relative. Other state laws have no such rule. But you can also name your estate as the beneficiary of your policy, at which time any death benefit is split among your other assets as you’ve stated in your will. One problem, however, with naming your estate as beneficiary is the proceeds may not be exempt from any creditors, who can then lay claim to their portion of the sum; a named beneficiary is exempt from creditors’ claims in most cases.

There are also different types of beneficiaries. Revocable beneficiaries can be changed whenever you wish; irrevocable beneficiaries can’t be changed without their consent. Changing beneficiaries is as simple as requesting a beneficiary designation form from your insurance provider, listing the names of the changes you want, signing and dating the form. You may also name as many beneficiaries as you wish, depending on the terms and formatting of the policy, making them a primary beneficiary or a contingent, or secondary, who is only entitled to the policy proceeds if they survive you and the designated primary. There is no legal limit to the number of beneficiaries you name but you must state exactly how the proceeds are to be divided among them when you die. Percentages are probably the best way to do this, particularly if you have any interest or dividend adjustments on the policy which would alter the face value and, subsequently, the final benefit amount. While the value of the policy changes, the values you’ve designated in percentages allow for distribution of the funds as you wish.

It’s important you name both beneficiaries, primary and contingent, so any death benefit doesn’t pass to your estate and then into probate. Any named beneficiary receives the death benefit almost immediately, avoiding costly probate fees. Naming a child a beneficiary of your policy is fine but you must also appoint a guardian, or use a trust, to prevent the probate court from appointing a guardian for you. Any changes you make in beneficiaries can be limited by divorce or settlement agreements, depending on the circumstances and terms.

Choosing someone as the designated beneficiary for your life insurance policy is as important, if not more so, as determining the exact amount of coverage you need. Always be sure and review your beneficiaries annually, or at major life events (marriage, divorce, childbirth) to keep your policy up to date with your needs and circumstances.
 
Until next time,

Michael Hartmann
Facebook: http://www.facebook.com/FindYourPolicy
Tweeter: @FindurPolicy

Always remember our Mission Statement
“TO BE THE BEST IN SERVING OUR MEMBERS BY PROVIDING PEACE OF MIND THAT THEIR BENEFICIARIES RECEIVE THEIR INHERITANCE”

 
 

Life Insurance When Terminally Ill

Hello All,

Your life insurance policy, and the welfare of your beneficiaries, may weigh heavily on your mind if you are suffering from a terminal illness. As it happens, it could be used as a value resource and not just as income for your survivors’ to meet their short and long-term needs. You may be able to get a portion of the death benefit proceeds from your policy before you die, using them to fulfill a lifelong dream or even pay expenses if you wish.

While you are terminally ill, you probably won’t be able to purchase any additional insurance coverage: you are an insurable risk to any insurance provider. But if you purchased a guaranteed insurability rider at the time you purchased your life insurance policy, it’s quite possible you can purchase more life insurance without the hassle of supplying proof you are medically insurable. This isn’t possible in every situation, though, as the rider is optional for the life insurance policy. Your insurance policy may even have an accelerated death benefit rider, making you eligible to receive a portion of the face value of the policy before you pass on. Typically the payments can be in one large sum or spread out in several installments. The up side of this is you can use the proceeds however you want and it’s tax-free if your life expectancy is less than 2 years. You can also choose not to take the full amount available, leaving some of the benefit payable to your beneficiaries.

If you have a cash value, or permanent, life insurance policy which pays you an annual dividend, you may also be in luck. If you are able to use the dividends to lower your premiums as they gather value then it’s often possible (depending on the individual policy) to switch to an option which uses the dividends to buy fully paid life insurance. In this situation you wouldn’t need to provide proof of insurability, either. A cash value option on your policy is also beneficial since many insurance companies make an option to loan against the value of the policy. The insurance company uses the policy as collateral in the loan, and taking a loan against it will reduce any cash value it had and the death benefit proceeds. But it is an option if finances are already tight.

If your illness has let you remain employed, it’s even possible to purchase credit life insurance. Credit life insurance can be used to pay off the remainder of a big-ticket loan, such as for a house or car, after you die. Check with your employer’s life insurance program, also, since you may be able to purchase additional insurance through them. Unfortunately, the open enrollment for their program may only be annually or during a certain period within the year.

Always remember that the more life insurance you purchase the better off financially your beneficiaries will be. It may seem something of a financial burden now, and your premiums will definitely go up, but always purchase the maximum amount you can afford and is available.
 
Until next time,

Michael Hartmann
Facebook: http://www.facebook.com/FindYourPolicy
Tweeter: @FindurPolicy

Always remember our Mission Statement
“TO BE THE BEST IN SERVING OUR MEMBERS BY PROVIDING PEACE OF MIND THAT THEIR BENEFICIARIES RECEIVE THEIR INHERITANCE”

 

Disability Insurance Can Also Be a Lost Policy

Hello All,

While you may have purchased a life insurance policy and become comfortable with the choices you’ve made regarding your policy and its terms, you probably haven’t thought about what could happen if, instead of death, you suffer a debilitating injury. A disabling injury can leave you and your loved ones without a source of income, large medical bills, and the cost of both rehabilitative services and long-term care. Many insurance providers give the option of purchasing add-on riders to your existing policy, offering more specific coverage depending on your needs. It is very possible you can purchase a disability income insurance rider and it may benefit you to do so.

Keep in mind when purchasing a Disability Insurance Plan that you also make sure that it is easily found when the time comes. Often when it is needed, the person it is provided for is not coherent enough to tell you with which company it is with. Register it on a database to prevent it from becoming a lost policy.

The definition of a disability often changes depending on the existing circumstances surrounding the situation. Total disability typically covers you being able to perform your own job, with residual disability covering the loss of earnings or loss of earnings and ability to do work. Some disabilities will automatically classify you as being totally disabled (called presumptive disabilities) and includes: the loss of two limbs, the loss of speech and hearing, and permanent blindness.

The benefit period for disability insurance differs from total or term life insurance in that the length of time you get the benefit once you are disabled is dependent on the benefit period you’ve chosen when you purchased the policy. This could be anywhere from two to five years or even be contingent on an age designation. Some policies have lifetime benefits but most are categorized as short term or long term. Short term policies typically pay benefits anywhere from as little as 13 weeks up to a 2 year period. Any longer period of benefit coverage is considered long term. As a general rule, the longer period you pick means a higher premium you pay out.

There is also a waiting period before you are able to begin receiving your disability benefits from the policy. Known as the elimination period, this waiting period often affects the premiums you pay as well. Acting in the opposite of the benefits coverage period, the longer a waiting period the less you pay in premiums and the shorter the period the higher. Most people choose the length of waiting period based on cost and on how long they might be able to life off of savings or ancillary income before they begin receiving their disability benefits.

The main purpose of disability insurance is to cover your loss of income while recuperating from injury. To that end, and to ensure you have some incentive to return to work, the insurance typically pays only a fraction of your normal income. The amount of disability you receive is typically 50 to 70 percent of your income, subject to a designated monthly maximum. This amount is determined when you apply for the policy and takes into account earned and unearned income and other disability coverage you may be eligible for (Social Security, group policy benefits, etc.).

Certain types of accidents or illnesses may not be covered by the disability policy, including war, suicide attempts, and normal pregnancies. And if you have a pre-existing condition, the policy may exclude your condition from the coverage, either permanently or for a specific time period.
 
Until next time,

Michael Hartmann http://www.findyourpolicy.com/
Facebook: http://www.facebook.com/FindYourPolicy
Tweeter: @FindurPolicy

Always remember our Mission Statement
“TO BE THE BEST IN SERVING OUR MEMBERS BY PROVIDING PEACE OF MIND THAT THEIR BENEFICIARIES RECEIVE THEIR INHERITANCE”