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How Life Insurance Works in Minnesota
Types of Life Insurance Available in Minnesota
Term Life Insurance
Permanent Life Insurance
Minnesota Life Insurance Laws
The Cost
Minnesota Life Insurance Resources
FAQs
EZ Can Help!
How Life Insurance Works in Minnesota
A life insurance policy is a contract between you and your chosen insurance company. You acknowledge that it is your responsibility to pay your premiums in a timely manner. And if you pass away while the policy is still active, your insurance company will be obligated to pay a lump-sum death benefit to your chosen beneficiary. They will be able to use the death benefit payout however they choose. Including making mortgage payments to saving for retirement or college to simply replacing your income. In the end, the policy you choose should give you peace of mind knowing that your family will be able to live comfortably after your passing.
Types of Life Insurance Available in Minnesota
When it comes to life insurance policies, there are so many options available that it’s possible for almost anybody to purchase a life insurance policy that is uniquely suited to meet their needs. But that means making a lot of decisions about what’s right for you and your family. The first decision you’ll need to make is between the two main types of life insurance: term life insurance and permanent life insurance.
When choosing between term and permanent life insurance, one of the most important things to consider is how long you want your policy to cover you for. For example, do you want to set and forget your policy? Or do you want it to cover you only while you repay your mortgage, for example? You will also need to think about how much you are willing to spend. And what extra features you might want from your policy.
Term Life Insurance
Term life insurance is very popular, mostly because of its lower premiums when compared to permanent life. It’s usually cheaper because term life policies do not provide indefinite coverage. Instead, when you purchase term life insurance, you specify how long you want to be covered for (your “term”). The typical term of an insurance policy is 15, 20, 25, or 30 years.
These policies are also popular because they are fairly straightforward. For example, in most cases , your monthly term life premiums will remain the same for your entire term. And, if you pass away while the policy is in effect, a tax-free, lump-sum death benefit will be paid to your beneficiaries.
There are several types of term life policies available, including:
Level Term Life Insurance
With level term life insurance, the death benefit and premiums are fixed for the policy’s entire term. Most people who choose term life insurance purchase a level term policy.
Annual Renewable Term Life Insurance
Annual renewable life insurance is a one-year term life insurance policy. You will be able to renew your policy on an annual basis, but your premiums will most likely increase every year.
Increasing Term Life Insurance
The death benefit of an increasing term life insurance policy will gradually increase over the policy’s term . For example, your total death benefit might increase by 5% each year. Unlike with other types of term life, premiums for increasing term life insurance can fluctuate over the course of the policy.
Decreasing Term Life Insurance
In contrast to increasing term life, the death benefit of this type of policy gradually decreases over the policy’s term, while the premiums stay the same. This type of policy is typically purchased for coverage while repaying a mortgage or loan. The amount of the death benefit decreases as the loan is repaid.
Return-of-Premium Life Insurance
With Return-of-premium (ROP) term life 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 of this policy appealing. It’s important to note that the cost of ROP policies is significantly higher than that of other types of term life policies.
Permanent Life Insurance
Permanent life insurance differs from term life insurance in a few significant ways. First, permanent life insurance policies remain in effect for the rest of your life. As long as you continue to pay your premiums. Next, permanent life policies usually include a type of savings account, known as cash value. The cash value can accrue interest in different ways. This cash value can be an attractive feature, since you will be able to borrow against it. You can even use it to pay your premiums. Finally, because of these features, premiums are usually higher for permanent life policies than for term policies.
There are numerous types of permanent life insurance policies to choose from, including:
Whole Life Insurance
Whole life insurance includes a guaranteed death benefit as well as fixed premiums. A whole life insurance policy can accumulate cash value and earn interest at a predetermined, tax-free rate, in addition to providing a death benefit.
Universal Life Insurance
This type of policy offers a lot of options and flexibility. With universal life (UL) policies, you can choose to change the amount of the death benefit – for example, you can lower the death benefit in order to lower your premium payments. You will also be able to lower your premiums after your policy has accumulated enough cash value.
Indexed Universal Life Insurance
Indexed universal life insurance, or IUL, is another type of permanent life insurance that includes a cash value, but instead of accruing interest at a set rate, IUL’s cash value earns interest based on investment in a stock index. The premiums for an IUL policy, like universal life policy premiums, can increase or decrease in proportion to the policy’s cash value. Eventually, the cash value might be sufficient to cover everything, and you won’t have to pay your 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 you can invest your cash value 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 life 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. The funds could, for example, be used to pay the beneficiary’s taxes or to take a vacation.
These plans have advantages and disadvantages. They’re great if you need coverage quickly, and are worried that you will not pass a medical exam to get a traditional life insurance policy. But you should know that they can be more expensive than comparable policies with small death benefits.
Minnesota 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 state. That means that Minnesota has its own life insurance laws in place to protect consumers. The primary regulatory force governing the insurance industry in Minnesota is Chapters 59A through 79A of the Minnesota Statutes, but other legal provisions have also been adopted as consumer protection laws. The Minnesota Department of Commerce regulates the state’s insurance industry.
All of this means that you will have the following protections when you purchase life insurance in Minnesota:
Free Look Period
“Free look periods” are short periods of time given to new policyholders (typically a week or two) during which they may cancel their policy without penalty, and receive a full refund on any premiums paid. Many states require that insurers give new customers this free look period, but life insurance companies in Minnesota are not required by law to offer customers a free look period. Nonetheless, offering short free look periods remains standard practice for insurance providers in the state of Minnesota.
Grace Period
Minnesota, like the majority of states, requires that insurance companies give policyholders a 30-day grace period if they miss a payment. Insurance companies will not be able to cancel your policy during these 30 days, and if you die during your grace period, your death benefit must be paid in full as long as the claim is otherwise valid. And as long as you make your missed payment during the grace period, your policy will be reinstated. There is no limit to the number of grace periods you can be granted.
Benefit Guarantee
All life insurance policies sold in Minnesota are guaranteed by the Minnesota Life and Health Insurance Guaranty Association. This means you will be protected even if your insurance company goes out of business. This organization will cover your benefits as long as your premiums are paid in full and your previous insurer was authorized to do business in the state. Death benefits of up to $300,000 will be covered, as will cash value of up to $100,000.
The Cost
Factors such as your age, health, and even gender can all affect the cost of your premiums. Contact one of our EZ agents for the quickest and most accurate information, and no-obligation quotes on policies that are right for you. But to give you an example of what you might expect to pay, a healthy 30-year-old man who does not smoke could pay anywhere from $20 to $56 per month for a 20-year $763,000 policy in Minnesota.
Minnesota Life Insurance Resources
In Minnesota, there are several resources in place to help you if you have any problems with your insurer or policy. These resources include:
- Minnesota Attorney General – The Minnesota Attorney General receives and investigates complaints about Minnesota life insurance companies. If an insurer fails to properly handle your claim, the Office of the Attorney General can assist you in resolving the matter.
- Minnesota Life & Health Insurance Guaranty Association – Any company offering life insurance or annuities in Minnesota must be a member of the Minnesota Life & Health Insurance Guaranty Association. The policyholders of a guaranty association member company will be safeguarded in the event their insurance company goes out of business.
FAQs
Does Minnesota 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 Minnesota?
In Minnesota, there are many good ways to get life insurance. Progressive Life, Prudential, State Farm, AAA, and Transamerica are at the top of the list.
How much does life insurance cost in Minnesota?
There are many things that can affect how much life insurance costs, but here’s an example. A healthy 30-year-old woman in Minnesota will pay an average of $29.66 a month for a 20-year term policy that costs $763,000 and lasts for 20 years. A healthy 30-year-old man, on the other hand, will pay about $32.32 for the same policy.
EZ Can Help!
At EZ, we get that everyone has unique requirements, priorities, and financial constraints. And we understand that you want the best for your family without depleting your savings account. But we also know that finding what you need can take a lot of time and effort. So we make every effort to simplify the process of purchasing life insurance for you. We also offer all of our services for free. You will not be charged any additional fees for assistance with anything. Including 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.
