FREQUENTLY ASKED LIFE QUESTIONS
FREQUENTLY ASKED LIFE QUESTIONS
2. WHAT IS A TERM LIFE POLICY?
3. WHAT IS A UNIVERSAL LIFE POLICY?
4. WHAT IS A WHOLE LIFE INSURANCE POLICY?
5. HOW MUCH LIFE INSURANCE DO I NEED?
6. WHAT ARE SOME ADDITIONAL FEATURES OF A LIFE INSURANCE POLICY?
7. WHAT FACTORS DETERMINE THE PREMIUM COST OF LIFE
INSURANCE?
8. IF ONE INSURANCE COMPANY DENIED MY INSURANCE APPLICATION, CAN
I STILL FIND SOMEONE TO INSURE ME?
9. WHAT ARE ANNUITIES?
10. WHAT DETERMINES THE AMOUNT OF PERIODIC INCOME RECEIVED BY
THE ANNUITANT?
1. WHY DO I NEED LIFE INSURANCE
YOU NEED LIFE INSURANCE IF OTHERS ARE DEPENDENT UPON YOU.
WITHOUT YOUR WEEKLY INCOME COMING IN TO THE HOUSEHOLD, YOU
COULD LEAVE YOUR LOVED ONES IN A HARD SITUATION. THE PRIMARY
PURPOSE OF PERSONAL LIFE INSURANCE IS TO PROVIDE AN IMMEDIATE
ESTATE TO FUND THE NEEDS OF DEPENDENTS.
2. WHAT IS A TERM LIFE POLICY?
A TERM LIFE POLICY IS A LIFE INSURANCE POLICY DESIGNED TO KEEP YOU
COVERED TO A SPECIFIC POINT IN TIME. IT MAY BE UNTIL THE MORTGAGE IS
PAID OFF, THE CHILDREN ARE OUT OF COLLEGE, OR UNTIL YOU ARE
COLLECTING RETIREMENT. TERM POLICIES OFFER THE LOWEST PREMIUMS.
A TERM LIFE POLICY IS A LOW COST, PURE PROTECTION POLICY.
ADVANTAGES
1. IDEAL FOR YOUNG COUPLES WITH MAJOR FAMILY OBLIGATIONS AND
LIMITED INCOMES.
2. A METHOD TO INSURE OUTSTANDING DEBT OBLIGATIONS SUCH AS A
MORTGAGE.
DISADVANTAGES
1. COVERAGE MAY EXPIRE OR DECREASE WHEN PROTECTION IS STILL
NEEDED.
2. ACCUMULATES NO CASH VALUE OR RELATED NONFORFEITURE
VALUES.
3. WHAT IS A UNIVERSAL LIFE POLICY?
THIS POLICY OFFERS FLEXIBLE LIFE INSURANCE COMBINED WITH A SAVINGS
VEHICLE (CASH VALUE). THE INSURED HAS THE OPTION TO ADJUST THE
PREMIUM AMOUNTS AND THE DEATH BENEFIT OF THE POLICY.
4. WHAT IS A WHOLE LIFE INSURANCE POLICY?
A WHOLE LIFE INSURANCE POLICY IS A PERMANENT CASH VALUE INSURANCE
POLICY, WHICH REQUIRES A LEVEL PREMIUM PAYMENT UNTIL THE AGE OF
100. THIS POLICY OFFERS PROTECTION FOR THE LIFE OF THE INSURED, OR
UNTIL THE AGE OF 100. THERE IS ALSO A SAVINGS ELEMENT, THE CASH VALUE
MAY BE BORROWED OR SURRENDERED.
ADVANTAGES
1. A FIXED PREMIUM THAT WILL NOT INCREASE WITH AGE.
2. PROVIDES PERMANENT PROTECTION FOR THE INSURED.
3. PROVIDES A SAVINGS ELEMENT THAT MAY BE BORROWED AGAINST.
4. FLEXIBLE THROUGH THE USE OF NONFORFEITURE VALUES.
DISADVANTAGES
1. PAYMENT PERIOD MAY EXTEND INTO THE RETIREMENT YEARS
2. LOWER CASH VALUES AND RELATED NONFORFEITURE VALUES THAN
LIMITED PAYMENT WHOLE LIFE.
5. HOW MUCH LIFE INSURANCE DO I NEED?
THE NEEDS APPROACH ATTEMPTS TO DETERMINE THE AMOUNT OF LIFE
INSURANCE A FAMILY NEEDS BASED ON FINANCIAL OBJECTIVES.
COSTS ASSOCIATED WITH DEATH + FUTURE FINANCIAL OBJECTIVES
=TOTAL CAPITAL NEEDS - AVAILABLE LIQUID ASSETS = LIFE INSURANCE
REQUIRED.
6. WHAT ARE SOME FEATURES OF A LIFE INSURANCE POLICY?
PREMIUMS ARE NONDEDUCTIBLE
DEATH BENEFIT IS TAXED FREE
CASH VALUE IS TAX DEFERRED
SURVIVOR PROTECTION - DEATH BENEFIT PAYS INCOME TO SPOUSE AND
CHILDREN.
ESTATE CREATION - DEATH BENEFIT CREATES AN IMMEDIATE ESTATE.
LIQUIDITY - DEATH BENEFIT IS USED TO PAY IMMEDIATE EXPENSES
ASSOCIATED WITH DEATH.
VIATICAL SETTLEMENT - TO ACCESS A PORTION OF THE DEATH BENEFIT
BEFORE DEATH, A COMPANY BUYS THE POLICY AND PAYS PREMIUMS.
7. WHAT FACTORS DETERMINE THE PREMIUM COST OF LIFE INSURANCE?
THREE FACTORS DETERMINE PREMIUM COSTS.
1. MORTALITY COST - A MORTALITY TABLE IS USED BY INSURANCE
COMPANIES TO ILLUSTRATE THE DEATH RATE AT VARIOUS AGES.
2. INTEREST - THE INSURANCE COMPANIES EXPECTED RATE OF RETURN.
3. EXPENSE COST - THE COMMISSIONS AND RELATED UNDERWRITING
EXPENSES INCURRED TO WRITE THE POLICY.
8. IF ONE INSURANCE COMPANY DENIED MY INSURANCE APPLICATION, CAN
I STILL FIND SOMEONE TO INSURE ME?
APPLICATIONS CAN BE TURNED DOWN BY A NUMBER OF REASONS, MOST OF
TIME AN APPLICANT IS TURNED DOWN IT IS BECAUSE THEIR CURRENT
HEALTH OR MEDICAL HISTORY IS AT A HIGH RISK. IF YOU ARE DENIED
INSURANCE, ASK WHY YOU WERE DENIED COVERAGE. IF YOU THINK THERE
MAY BE AN ERROR, OR YOU JUST WANT TO VIEW YOUR PERSONAL MEDICAL
HISTORY - REQUEST A COPY OF YOUR MEDICAL HISTORY FROM:
MEDICAL INFORMATION BUREAU
P.O. BOX 105, ESSEX STATION
BOSTON, MA 02112
9. WHAT ARE ANNUITIES?
ANNUITIES PROVIDE A GUARANTEED PERIODIC INCOME FOR A DESIGNATED
PERIOD OF TIME, OR FOR THE REMAINDER OF THE LIFE OF THE ANNUITANT.
PREMIUMS DEPOSITED INTO AN ANNUITY ACCUMULATE ON A TAX DEFERRED
BASIS. THE ACCUMULATIONS ARE TAX DEFERRED UNTIL DISTRIBUTED.
10. WHAT DETERMINES THE AMOUNT OF PERIODIC INCOME RECEIVED BY
THE ANNUITANT?
 | THE CONTRIBUTIONS PAID AND/OR ACCUMULATED |
|
THE AGE AND SEX OF THE ANNUITANT. |
|
THE TYPE OF ANNUITY. |