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How Life Insurance Works in Maryland
Types of Life Insurance Available in Maryland
Term Life Insurance
Permanent Life Insurance
Maryland Life Insurance Laws
The Cost
Maryland Life Insurance Resources
FAQs
EZ Can Help!
How Life Insurance Works in Maryland
A life insurance policy is essentially a contract between you and your chosen insurance company. You agree to make premium payments to the company. In return if you die while the policy is still active, your chosen beneficiaries will be entitled to a lump-sum death benefit from the insurance company. They will be free to use this payout however they choose. Like paying off a mortgage or other debts, saving for retirement or college, or simply replacing your income. And one of the best things is that they will receive this money tax-free. Unlike the money they might get from your estate.
Types of Life Insurance Available in Maryland
Because there are so many options when it comes to policies, almost anyone can find a life insurance policy that is right for them. EZ can certainly find the right policy for you, but you should first be aware of what’s on offer. The first thing you’ll need to think about is which of the two main types of life insurance is right for you:
- Term life insurance
- Permanent life insurance
Two of the most important factors to consider when deciding between term and permanent life insurance are how long you want the policy to cover you for, and how much you are willing to pay for your policy.
Term Life Insurance
Term life insurance tends to be more popular than permanent life, most likely because of its more affordable premiums. This type of policy tends to be cheaper, because its policies do not cover you indefinitely. Instead, when you buy term insurance, you choose how long the policy will cover you for. A typical term is 15, 20, 25, or 30 years. With term life, your premium payments are, in most cases, guaranteed to remain the same for your whole term. If you die while the policy is still in effect, your beneficiaries will receive a tax-free death benefit.
There are several types of term life insurance policies available, including:
Level Term Life Insurance
The death benefit and premiums for level term life insurance are fixed for the duration of the policy. This is the most popular type of term life insurance because it is simple and straightforward.
Annual Renewable Term Life Insurance
Annual renewable life insurance is a one-year term life insurance policy. You can renew your policy on an annual basis, but your premiums will most likely rise each time you renew.
Increasing Term Life Insurance
The death benefit of an increasing term life insurance policy will grow over the course of the policy’s term. For example, the death benefit could increase by 5% each year. Unlike with other types of term life, your premiums for increasing term life insurance may increase or decrease over the policy’s term.
Decreasing Term Life Insurance
On the other hand, the death benefit associated with this type of policy gradually decreases over the course of the policy, while the premium remains the same. This policy is typically purchased for coverage while repaying mortgage or loan. The death benefit decreases as the loan is repaid.
Return-of-Premium Life Insurance
With return-of-premium (ROP) insurance, your premium payments will be refunded if you don’t die before the policy’s expiration date. While many people find the return of premiums feature appealing, it’s important to note the cost of ROP policies is significantly higher than that of other types of term life.
Permanent Life Insurance
Permanent life insurance differs from term life in a few significant ways. First, with permanent life insurance, your policy will remain in effect for the rest of your life if you continue to pay your premiums on time. Next, permanent life policies usually include a type of savings account, known as cash value. This accrues interest and that you can borrow against or even use to help pay your premiums. Finally, these policies are usually more expensive than term life policies because of the above features.
There are numerous types of permanent life insurance policies available, including:
Whole Life Insurance
Whole life insurance includes a guaranteed death benefit and set premiums. A whole life insurance policy can accumulate cash value that accrues interest at a predetermined, tax-free rate, in addition to providing a death benefit.
Universal Life Insurance
With universal life (UL), you can change the death benefit associated with your policy as well as your premium payments. Since these policies include a cash value, you can eventually use the money that accrues in your account to lower your premium payments. You can also choose to lower your death benefit to lower your premium payments.
Indexed Universal Life Insurance
Indexed universal life, or IUL, insurance is another type of permanent life insurance that includes a cash value. But unlike with a policy like whole life, the cash value of an IUL policy can be invested in a stock index, meaning you could earn more interest than you would with a set interest rate. IUL premiums, like universal life policy premiums, can be changed; they can increase and decrease in proportion to the cash value of the policy. Eventually, the cash value may be sufficient to cover everything, and you will no longer be required to pay premiums.
Variable Universal Life Insurance
Like the cash value of other types of permanent life insurance policies, the cash value of a variable universal life (VUL) policy can be used to make investments, but with VUL you can invest your money in subaccounts, which are similar to mutual funds. Premium changes are possible, just like with traditional universal life insurance.
Final Expense Life Insurance
A final expense insurance policy is a type of whole life insurance that pays out a small death benefit, typically $2,000 to $35,000. This death benefit is intended to pay for final expenses such as a burial, cremation, or funeral services, but your beneficiary will have complete control over how the death benefit funds are spent.
These policies have advantages and disadvantages. They can be a good option if you are older or in poor health, because you won’t need to undergo a medical exam to get immediate coverage. But these policies can be more expensive than for other, bigger policies that do require a medical exam.
Maryland Life Insurance Laws
In the case of life insurance policies, the federal government has largely delegated the responsibility of regulating the insurance industries and protecting consumers to the states. That means Maryland has life insurance laws in place to protect consumers. The primary regulating force behind the insurance industry in the state of Maryland is Title 31 of the Code of Maryland Regulations (COMAR), but other legal provisions are also in place as consumer protection laws. The Maryland Insurance Administration regulates the state’s insurance industry.
If you purchase life insurance in Maryland, you’ll have the following rights:
Free Look Period
In the state of Maryland, you’ll have the option to cancel your life insurance policy and receive a full refund of any premiums paid within the first 10 days of purchase. That means you have up to 10 days to carefully review the policy before making a decision, and can cancel it and receive a complete refund if you do not like what you see, or if you find a better deal elsewhere.
Grace Period
In the event that you fall behind on your life insurance premium payments, you will have a grace period to make up the payment, meaning your policy will not be immediately canceled. Insurance companies in Maryland are required to give you a grace period of 30 days to “make good” on your late payment, so you can avoid having to reapply for a policy and go through the underwriting process again.
Benefit Guarantee
In the event that your life insurance provider goes out of business before paying your claim, you will be covered by the Maryland Life and Health Insurance Guaranty Association. This organization backs all life insurance policies sold in the state. Guaranteeing death benefits of up to $300,000 in the event of a policyholder’s passing.
To be eligible for this benefit, your previous insurer must have held a legal license issued by the state of Maryland, and you must be current on all of your payments for your insurance policy.
The Cost
The cost of your premiums will be affected by factors such as your age, health, and even your gender. Get in touch with one of our EZ agents for the quickest and most precise information on pricing that’s tailored to you. But to give you an idea of prices, a healthy 31-year-old man who does not smoke could pay anywhere from $21 to $56 per month for a 20-year $926,000 policy in Maryland.
Maryland Life Insurance Resources
In Maryland, there are several resources in place to help you if you have any problems with your insurer or policy. These resources include:
- Maryland Insurance Administration – The Maryland Insurance Administration is in charge of regulating insurance companies operating within the state, and maintains a wealth of information that can be of assistance to policyholders.
- Maryland Life & Health Insurance Guaranty Association – Maryland law mandates membership in the Maryland Life & Health Insurance Guaranty Association for any insurance company conducting business in the state. In the event that a guaranty association member company goes out of business, policyholders will be protected by the association’s coverage.
FAQs
Does Maryland require life insurance?
No, you will never be forced to get life insurance. It is always your choice.
What are the best life insurance companies in Maryland?
In Maryland, there are a lot of good ways to get life insurance. MassMutual, Nationwide, Mutual of Omaha, AAA, and State Farm are at the top of the list.
How much does life insurance cost in Maryland?
There are many things that can change how much life insurance costs, but here’s an example. A healthy 31-year-old woman in Maryland will pay an average of $35.19 a month for a 20-year term policy that costs $926,000. On the other hand, a healthy 31-year-old man will pay about $36.51 for the same policy.
EZ Can Help!
We at EZ understand that you want to find the best policy for you, so you can provide financial security to your family without emptying your savings account. But we also get that looking for this policy can take a lot of time and effort. So, we do everything we can to simplify the process for you. And not only that, but every one of our services is completely free. You will not be charged any additional fees for assistance with anything. From answering basic questions to navigating policy selection to the enrollment process and beyond. Simply enter your zip code in the space provided below or call us at 877-670-3560 to get started.
