Survivorship Life Insurance – What You Should Know

When it comes to life insurance, married people have two choices, individual policies or joint policies. Most couples buy separate policies for each person. But for some couples it makes more sense to get a single policy that covers both people. Choosing to buy a policy together you can buy a joint policy or a survivorship policy. A joint policy is known as a first-to-die policy. Meaning that though both people are covered the benefits are paid out when one of them passes.


Survivorship policies are called second-to-die insurance, meaning that benefits aren’t paid until both members pass away. Most couples don’t choose survivorship policies because it takes longer for the death benefit to pay out. However, survivorship policies are useful for estate planning and a source of money for children or grandchildren who may always depend on their parents. Below we’ll go into detail about how survivorship policies work so you can decide if one is right for you. 

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How Survivorship Life Insurance Works

A survivorship life insurance policy can either be a term or permanent policy. A term policy covers you for a certain number of years before you have to renew it. A permanent policy, on the other hand, covers you for the rest of your life as long as you pay the premiums. Most policies for survivorship life insurance are permanent. Most people buy survivorship coverage with permanent whole life or universal life insurance instead of term life insurance.


The reason is simple: most couples who buy a survivorship policy don’t want protection for a short time. Survivorship policies don’t pay out until both people who are covered die. So, when the first person covered by the policy dies, the second person must keep paying the premiums to keep the policy going. When both policyholders die, the death benefit is paid to whoever the policyholders named as their beneficiary. Permanent life insurance builds up cash value that can be used if necessary.

Reasons To Have A Survivorship Policy

Estate Planning

Typically couples with a high networth often buy survivorship life insurance so that their children will pay less in estate taxes once they pass away. When the first spouse dies, the other spouse will not have to pay taxes. However, if their combined assets are worth more than the federal exemption level, beneficiaries have to pay federal estate taxes once the second spouse dies. There are currently 12 states plus the District of Columbia that have even lower estate tax thresholds. And 6 states have inheritance taxes. If both spouses die at the same time, a survivorship policy can help pay estate taxes and other costs immediately. It can also help make sure that the beneficiaries get an equal share of the assets. Especially if the assets, such as a family business, are hard to sell.

Business Succession

Survivorship policies don’t necessarily have to be a married couple, it can be any two people, even business partners. When both business partners pass away, a survivorship policy can give the money needed to transfer the business to its new owner. If there is more than one new owner, the death benefit can be split amongst each of the business partners to make sure there is enough money to take over the business.

Caring For Permanent Dependents

If you have a child with special needs or another person who will always depend on you. A survivorship life insurance policy will make sure that you leave enough money for them to be taken care of for the rest of their lives. The money from the policy could be put into a special needs trust. So, that if both parents die, the child will still have some money.

Coverage With Medical Issues

When one spouse can’t afford individual life insurance because of a medical condition, but the other is in good health, a survivorship policy can be a cheaper way to get coverage.

More Affordable

Most of the time, buying a permanent life insurance policy can cost five to fifteen times as much as buying a term life insurance policy. But permanent survivorship life insurance policies can sometimes be cheaper in the long run than buying two separate policies.

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You Need Cash Value

Survivorship policies can be set up so that the cash value of the policy helps the spouse who is left behind. Even though the death benefit won’t be paid out until both of the policyholders have died. Some permanent policies can build up a cash value that can be used while one of the spouses is still alive. If the policy builds up enough cash value, the surviving spouse can take out a loan from it to pay for funeral costs or policy premiums while the policy is still in force.

Policy Costs

In general, it costs more to buy two separate $1,000,000 policies than to buy a single $1,000,000 survivorship policy. It’s easy to see why. With two separate permanent policies, insurance companies have to plan for a total payout of $2,000,000. However, when two people are covered by a single life insurance policy, the total payout is only half as much. Individual life expectancy is also longer than joint life expectancy, since one insured person usually dies after the other. This means that second-to-die policies may be cheaper than first-to-die policies. But the actual cost of a life insurance policy can vary a lot depending on many things. Such as age, health, lifestyle, type of insurance, and the insurance company. Riders are extra features that can be added to a policy to make it fit the needs of the policyholder. Here are some examples: 


  • Estate Preservation Riders – These are used for tax planning purposes when extra death benefits may be needed in the first few years of the policy. 
  • Level Term Rider – Provides extra coverage for each insured person up to age 95. The rider, which each insured person must apply for on their own, can usually be changed to a whole-life policy if it is done before a certain age. 
  • Monthly Deduction for Death and Disability Waiver – This benefit, which only applies to one of the insureds. Can help make sure the policy stays active by waiving premiums if the couple’s income drops because of death or disability.

Survivorship Pros and Cons

A survivorship life insurance policy can help you and your spouse take care of your family after you’re gone. However, this type of life insurance has some drawbacks. Before you buy a life insurance policy, you should think about the pros and cons to see if it’s the right choice for your family.


When deciding on a survivorship policy, most couples think about how much it will cost. Whether it’s first-to-die or second-to-die. The premiums on a joint policy are likely to be more affordable than the premiums on two separate policies. First-to-die policies cost more money than second-to-die policies. The ability to make your inheritance equal is another benefit of a survivorship policy. Forbes says that if you have more than one beneficiary, you can set up the policy through a trust that will divide your death benefit equally among all of your dependents.


Lastly, the process of getting a survivor policy is less strict than getting other types of life insurance. This means that if you or your spouse have health problems that might keep you from getting a traditional life insurance policy, you may still be able to get coverage through a survivorship policy.


Most couples think about how much it will cost when they choose a survivorship policy. Whether it’s first-to-die or second-to-die, the premiums on a joint policy are likely to be cheaper than the premiums on two separate policies. Policies that pay out more when the first person dies are called “first-to-die” policies. A benefit of a survivorship policy is that you can make sure that everyone gets the same amount of your inheritance. Forbes says that if you have more than one beneficiary, you can set up a trust that will divide your death benefit equally among all of your dependents.


Lastly, it’s easier to get a survivor policy than it is to get other types of life insurance. This means that even if you or your spouse have health problems that might keep you from getting a traditional life insurance policy, you may still be able to get coverage through a survivorship policy.

Life Insurance With EZ

Not sure what kind of policy you need or where to start? You have to compare plans to find the best one for your needs because there are so many different kinds of life insurance. You could use online tools or talk to an agent. Everyone has their own needs, priorities, and ways they can spend their money. At EZ.Insure, we know that you and your family want the best coverage. But we also know you have to stay within your budget.


So, we will do everything we can to find you the best policy at the best price. And we want to make it as easy as possible for you to do so! We’re here to help, and the best part is that everything we do is free. We will help you with everything, from answering all of your questions to helping you choose a policy and finish the enrollment process. We will also help you after your plan has started. To get started, just type your zip code into the bar below or give us a call at 877-670-3560.

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ILIT: Understanding Irrevocable Life Insurance Trust

ILIT: understanding irrevocable life insurance trust text overlaying image of insurance agent holding a familyAn irrevocable life insurance trust (ILIT) gives you more control over your insurance policy and how your beneficiaries will get the death benefit when you die. A life insurance policy is an investment and an asset. So, it will be part of your estate after you die. Because of this, the death benefit, or proceeds, can be subject to an estate tax if all of your assets are worth more than the federal exemption limit.

How ILITs Work

In estate planning, a trust is a separate entity that holds your assets, such as money, real estate, and personal items. So that they can be given to your heirs after you die. An ILIT is a trust that you can’t change your mind about. It holds your life insurance policy for you so that it doesn’t count toward your taxable estate. 


The trust is the policyholder, so you don’t have to worry about anything to do with ownership. The death benefit is no longer part of your estate and does not add to the value of your estate for tax purposes. It also won’t have to go through probate, which is the legal process of getting your estate in order. Your heirs can get the full amount of the death benefit. Here’s the process:


  • You set up your ILIT
  • You give your existing life insurance to the trust, or you have the trust “buy” a new policy. Then you put money into the trust so it can pay your premiums.
  • The trust is the beneficiary of your life insurance policy. So when you die, the policy pays the death benefit to the trust. The benefit is not counted toward your estate tax. 
  •  The ILIT will give your trust’s beneficiaries the death benefit based on your instructions. Which are written in the trust document. 

Setting Up An ILIT

ILITs are hard to understand and have many tax effects. When setting up a trust, it’s important to talk to an attorney to make sure it’s done right and works to your advantage. Once you’ve started putting together the trust you’ll find there are 3 designations that need to be made:


  • Grantor – You, the person who makes the trust
  • Trustee – The person you elect to manage the trust for you
  • Trust Beneficiaries – The people you have chosen to receive your assets listed in the ILIT after you have passed away

To actually set up the ILIT you have a few steps. First, you open and finance the ILIT and fund the trust to keep up with the premiums for your life insurance policy. Second, you’ll transfer or buy a new life insurance policy into the trust. Lastly, you’ll select a trustee and choose how the ILIT will distribute the benefits. Be careful as these instructions can not be changed later.

Benefits Of ILITs

Using an irrevocable life insurance trust can help you save on taxes and give you more control over how the death benefit from your life insurance is used.

Minimizing Estate Taxes

If you have a life insurance policy when you pass away, the death benefit is considered an asset. So, it is added to the total value of your estate. However, if you put the life insurance into an ILIT, the money from your death benefit would not be counted as part of the estate and will not face taxes. If you don’t include your life insurance, you may also be able to lower the total value of your estate before the federal exemption level and avoid paying taxes on it. 

Death Benefit Can Pay Estate Taxes

All of the money and things you own make up your estate. If your estate is worth more than the amount the law says is exempt, federal estate taxes will have to be paid. In 2020, the amount that won’t be taxed is $12.92 million. This means that a person can leave $12.92 million to their heirs without having to pay any estate taxes at all. Also, if the two people are married, the exemption would double to $25.84 million. If the trust is set up right, the money from your death benefit can be used to help pay taxes on your other assets.


For example, let’s say you have a $15 million estate made up of real estate, retirement accounts, and stocks. Your beneficiaries would have to pay estate taxes for that amount. Your trustee could pay that tax with the money from your death benefit. This lets you beneficiaries get the full value of all other assets outside of the ILIT.

State Estate Taxes

Even if you don’t have to pay the federal estate tax, depending on where you live, you may still have to pay the state estate tax. When compared to the federal level, the amounts that are exempt from these estate taxes are much lower. Here are the states that charge an estate tax and their asset exemption limits:

  • Connecticut – $12.92 million
  • Hawaii – $5.49 million
  • Illinois – $8 million
  • Maine – $6.41 million
  • Maryland – $5 million
  • Massachusetts – $12.92 million
  • Minnesota – $3 million
  • New York – $6.58 million
  • Oregon – $1 million
  • Rhode Island – $1,733,264
  • Vermont – $5 million

You Control The Benefits

With a trust, you, as the grantor, can give specific instructions about how the death benefit will be used. Usually, the beneficiary gets the money from a death benefit in one lump sum or several payments over a set amount of time. With an ILIT, you can give extra instructions. Like holding back money if the beneficiaries are too young. Or even setting aside portions of the money into investment accounts that can be accessed later. Having the money from a life insurance policy owned by an ILIT can help protect the benefits of a trust beneficiary who gets government help. Like Social Security disability income or Medicaid. The Trustee can keep a close eye on how the trust’s money is spent so that it doesn’t affect the beneficiary’s ability to get government benefits.

Disadvantages of ILITs

ILITs could help people reach certain tax and estate planning goals, but ILITs can also have the following problems. Before starting an ILIT, think about these things.

No Modifications 

Once you give your life insurance policy to an ILIT, you can’t give it to another trust or entity. This is because you’ve given up all rights to your coverage. Imagine you set up an ILIT and named your spouse as a beneficiary. After a few years, you get a divorce and want to take your spouse off the policy. There is no easy way out of this situation unless specific language was added before the trust was put into action.

Potential Taxes

If you die within the first 3 years of setting up your ILIT, the trust’s life insurance policy may be automatically added to your estate. If the payout from your life insurance is part of your estate, it could be taxed along with the rest of your assets.

You Don’t Own Your Life Insurance

With an irrevocable life insurance trust, the policy is owned by the trust and not by you. Most of the time, you can’t change your life insurance policy after you set up an ILIT. Your trustee is in charge of making sure that your policy is managed and paid out according to the rules of the trust.

Choosing Life Insurance

If you are setting up an ILIT and choosing a new life insurance policy at the same time, you are in a great position to choose the best policy for your needs. This could be a term policy, which lasts a specific amount of time. However, it’s more likely with an ILIT that you will choose a whole life policy. The good news is, there is no rule about what kinds of life insurance you should include in your ILIT. To make sure you get the results you’re aiming for you may want to work with a lawyer, a financial advisor, and an insurance agent. Among the three, you’ll make sure all your bases are covered when you set up your ILIT.

Who Should Get an ILIT

ILITs are best for people with a high net worth who want to avoid paying higher estate taxes if they don’t have to. Parents who want the money to go to their minor children can also use an ILIT. This makes sure that the money goes to care for their children and doesn’t get stuck in court. 


Most people won’t need to include the complexity of an ILIT in their end-of-life planning like paying for a funeral or cremation. So a strong will, a revocable trust, and an insurance policy will be enough for their estate plan. Since the trust can’t be changed once it’s set up. It’s best for people who have special needs when it comes to estate planning.

Working With EZ

Your family will still have bills to pay after you die, and they will need your help more than ever. The last thing you want them to worry about while they are grieving is money. There are many great options for low-cost life insurance that will give your family enough money for a low monthly price. Working with an agent who specializes in life insurance is the best way to find the right policy for you and your needs. At EZ.Insure, we know that you and your family want the best coverage but we also know you have to stay within your budget.


So, we will do everything we can to find you the best policy at the best price and we want to make it as easy as possible for you to do so! We’re here to help, and the best part is that everything we do is free. We will help you with everything, from answering all of your questions to helping you choose a policy and finish the enrollment process. We will also help you after your plan has started. To get started, just type your zip code into the bar below or give us a call at 877-670-3560.

What to Do with Life Insurance Money

what to do with life insurance money text overlaying image of a heart on a pile of moneyAfter the passing of a loved one, the proceeds from a life insurance policy can help remove a portion of your stress. Allowing you to focus on your emotional needs without worrying about money. However, a sudden large sum of money can also bring up some hard choices. Before deciding what to do with it, you should first look at your assets and plans thoroughly. Do an overview of your financial situation to help decide what makes sense for you.


Taking a little time to really consider everything will not only help you decide how to use the money. But also, how you should collect it. You can generally receive a death benefit payout in a lump sum. Or in regular installments, either monthly, quarterly, annually, semi-annually etc. Below we’ll take a look at some of your options for using the payout to give you an idea of what you should be considering while making your decision.

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How Life Insurance Payouts Work

For many people, receiving a death benefit for the first time can be overwhelming, especially when you don’t know how the process works. Don’t worry, everything is fairly simple. First you have to notify the life insurance company that your loved one has passed away. Then provide appropriate documentation, such as a death certificate. Once the claims process starts, you will typically receive payment within two weeks or less. Depending on how you choose to collect the payout.


The only time this would take longer is if there was an issue surrounding your loved one’s passing. Such as they committed suicide or gave the insurance company false information on their application. Both of these instances would render the payout void, which means that you won’t receive payout at all. However, let’s assume everything goes smoothly. When you receive the cash, it is tax-free which is a great benefit to you. Now, how do you use this money? There are no rules here, you are free to do whatever you want with this money. Below we’ve detailed some ideas on how you can use your payout.

Pay Off Debt

If you’re buried in debt, like many Americans are, it may make sense to take the lump-sum option and pay off any high-interest credit card debt or student loans. This not only eliminates your debt but frees up your income for monthly expenses. Even if you were to invest the money, if you have credit card debt, it’s unlikely that investment will pay off more than the interest you’re being charged on credit card or student loan debts. Having that lump-sum in your pocket may sound nice. But think about the extra money in your account each paycheck that isn’t going towards trying to pay down a debt. Overall it’s a smarter financial move that will actually save you more money than if you were to just start spending the money.

Build An Emergency Fund

A life insurance payout is a great opportunity to start or add to an emergency fund. A portion of your life insurance benefit can be placed in an interest earning account. Such as a savings or money market account. This money can later be used to pay for any future emergencies that could cost you a lot of money. Savings accounts ensure that unexpected expenses such as medical emergencies, home repairs, or temporary unemployment won’t derail your savings plan. Or worse, put your family heavily into a debt. Most financial experts recommend that you should have at least 3 to 6 months’ worth of living expenses in your savings. And if you’re self-employed or have unstable income, you should be saving twice that. 

Consider Buying An Annuity

It’s common for beneficiaries to need the life insurance payout to help cover their monthly living expenses. This is especially true for young families who are trying to replace the breadwinner’s income, or for seniors whose spouse passed away and they now no longer have a second income or social security check. In these situations, it may make sense to use your life insurance policy death benefit to buy an annuity. Which is a type of account that will pay out a set amount of money over time, like monthly or yearly, they can even be set to continue for your entire life.


Some life insurance plans will even offer an annuity as a payout option for the death benefit. There are several types of annuities all designed to help reach specific goals. Some annuities are designed to provide an immediate stable stream of guaranteed income. Others are designed to help you save for long-term plans like retirement. However, annuities are complicated, so, if this sounds like an option for you, make sure you read any and all materials that come with whichever plan you’re considering. It may also be helpful to speak to a financial expert to make sure there are no hiccups or misinformation.

Collect Installments

If the idea of receiving regular payments over time sounds appealing, but an annuity seems too complicated, there is a similar and simpler option. We mentioned earlier you have the option to receive your payout in installments from the life insurance company. Installment payments can provide a similar income guarantee without all the extra complexity. For example, the life insurance company may pay out 10% of the total death benefit every year over a 10 year period. The portion of the death benefit that is still in the account will typically continue to earn interest so it’ll also make more money over the years. However, keep in mind that while the death benefit itself may not be taxable, any interest you earn after opting for an installment payout may be taxable.


If you don’t have any pressing needs to use the money towards, like if your emergency fund is all set, bills are paid, debt is handled, it may be a good idea to take all or some of the payout and invest it. You can invest it in a combination of stocks and bonds for potential financial growth. If you’re not fully funding your 401K and IRA, for example, life insurance payouts can supplement your savings so you can pay more into your 401k. A 40-year-old who invests $100,000 in a taxable brokerage account and never invests again could accumulate $424,000 after 25 years, assuming a hypothetical annual return of 7%.

Build A College Fund

We all know, in today’s world, college is expensive with a capital E. Especially if you have more than one child. You can use a portion or all of the death benefit towards your children’s college fund with a 529 college savings account. Earnings on 529 accounts are tax-deferred, and withdrawals are tax-free as long as they are used for qualifying higher education expenses. An initial investment of $50,000 in a 539 college savings plan could potentially double within 12 years, assuming an annual growth rate of 6%. Considering death benefits can be very large. This may be a great way to make sure your kid’s education is taken care of.


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A Combination 

For some people, if the death benefit is big enough, a combined approach could be a great option. You won’t have to choose one approach and go all in. For example you could use a portion of the death benefit to buy an annuity that creates a guaranteed monthly income stream for 12-15 years. At the same time you can take another portion of the payout and invest it in the stock market to let it start making you money.


Theoretically, this strategy would allow you to cover your immediate living expenses. While allowing the invested portion enough time to generate potential returns. If your portfolio generates a reasonable amount over the next 12-15 years then it could potentially generate income for another decade. Keep in mind though, that any option with investments means you have to accept a certain level of risk. There’s no guarantee the investments will do well. 

Life Insurance Made EZ

Losing a loved one is difficult, and you may not know what to do with the money you will receive while you are in mourning. However, this money will provide you with the assurance that you can continue to provide for your family. Working with an agent who specializes in life insurance is the best way to find the right policy for you and your specific needs if you are looking for a policy for yourself and are unsure which policy is best.


Below is a list of the best life insurance companies in the country; each offers hassle-free service and the most affordable rates. Always check multiple sites to ensure that you have negotiating power and are aware of the benefits of each company. Ensure that a difficult time is not exacerbated by a financial burden by comparing life insurance rates today. You can always call us at 877-670-3560 if you have more questions or wish to speak with an agent directly.

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Ways Your Lifestyle Affects your Life Insurance

Ways Your Lifestyle Affects your Life Insurance text overlaying an image of a table with fruit, workout equipment, a prescription and a stethoscope on itThere are several factors that determine life insurance costs within a plan. The cost of a policy can be based on how long you are expected to live as well as your risk category. The three most common risk classifications are preferred, standard, and substandard. The Standard risk class is typically the starting point for underwriting life insurance. It represents a risk comparable to that of others of the same age and gender. 


Then, a life insurance underwriter looks for risk factors that may increase or decrease your likelihood of dying before your natural life expectancy. If you have a lower risk of premature death, you may qualify for preferred risk classes. If you have a higher risk, you are assigned substandard risk classes. The higher your risk, the more expensive your life insurance policy will be.  The cost of a policy can change based on your age, gender, family medical history, overall health, and your lifestyle choices. This is measured by comparing your stats to those of other people whose lifestyles are similar to yours.


If you are in a high-risk group (substandard), it means that statistically, you are more likely to die at a younger age. As a result, your policy will be more expensive because the insurance company assumes you will pass away younger. Therefore, you’ll make fewer payments than people in a low-risk group. There are some things you can’t change, like your age and your family’s health history, but there are choices you can make that will affect how long you’ll live. 

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People who smoke are more likely to have greater health problems down the road. Some of these health issues would be cancer, heart disease, strokes, lung diseases, diabetes, and asthma. This makes smokers a bigger risk for insurance companies, so your life insurance policy will cost more. Even if you only smoke a few cigarettes every now and then, you are still considered a smoker. 


When applying for life insurance, be sure to give honest answers about your life choices. Such as smoking because if it leads to an illness down the road and the company did not know about it, there is a chance your family might not get the money from your life insurance policy.  Also, there is a chance that you could also be medically checked before getting insurance. Which could show that you have nicotine in your system. 


Note that “smoking” includes more than just cigarettes. It also includes vapes and e-cigarettes, cigars, pipes, nicotine replacement therapies. As well as any other way to get nicotine into your body. 


Drinking alcohol once in a while won’t change your premium, but if you drink often, this is another thing you may need to think about when applying for life insurance. Drinking consistently has been shown to lead to illnesses such as liver disease, cancer, kidney problems, heart problems, and high blood pressure. If a health problem caused by drinking ends up being fatal, the insurance company can void the policy. Unfortunately, this means that your loved ones won’t get the money you worked so hard for. 

Risky Hobbies

Your insurance policy will be more expensive if you are considered a high-risk insurance candidate because your chosen ventures could harm you or be fatal.


These activities include scuba diving, hang gliding, race car driving, flying a plane, off-roading, parasailing, bungee jumping, and any extreme sports. Of course, this only applies if you do these things fairly often. If you go scuba diving once in a while, such as when you’re on vacation, it won’t necessarily affect your insurance premium. 


Basically, the more often you do these things and the more dangerous they are, then the more likely it will be that they will affect your life insurance premium. We know that these types of activities really keep life interesting and fun, but be sure to keep in mind the risk that comes with it.

Hazardous Job

Your job can also affect how much your life insurance plan costs. This is because your chosen occupation can be considered more dangerous depending on what it entails. For example, someone who works at a desk during regular hours is thought to be less of a risk and therefore pays less. On the other hand, someone like a construction worker would have to pay more. Because their job has more risk factors, such as being on the roof of a tall building or using power tools. 


In this case, there isn’t much you can do to reduce the risk, unless you can find a job that is safer and less risky. Most of the time, this is too much to ask, since changing your whole career is usually a very stressful thing to do. 

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Your Body Mass Index (BMI)

Based on your height, your weight affects how much you pay for life insurance. A build chart is used to figure out how your height and weight compare to each other. Then, your results are compared to the death rates for people who have a similar build. If you are more or less than the preferred ratio, you will be seen as a higher risk and have to pay more for your insurance.


This is because being overweight makes you more likely to have health problems. Such as heart disease, high blood pressure, type 2 diabetes, stroke, cancer, or a mental illness. On the other hand, being underweight can cause anemia, osteoporosis, and a weaker immune system.


Something to be aware of is that if you lose or gain weight right before you apply for insurance, it is unlikely your rate will go down. You will have to show that you can consistently keep your weight at a healthy level. You can show that you’ve been working toward a healthier lifestyle by taking up a sport, going to the gym. Or even working with a personal trainer. However, be aware that your insurance rates won’t go down if you make big changes all at once. 

Driving Record

Unsafe driving is a factor that can lead to fatality at a young age. Something like receiving multiple speeding tickets would show insurance companies that you are not interested in your own as well as others safety on the road. Also, if you drive carelessly, it may be a sign that you are also careless in other areas of your life. 


Insurance companies will be looking at the most recent part of your record. Which is usually the last 5 years when deciphering your policy rates. When they are looking at your record, small parking tickets aren’t considered a large red flag. 

Illegal Substance Use

Drugs are bad for your health and can even be lethal. Especially if you are considered an abuser of drugs or take prescription medication constantly. The price of your life insurance will change if you use illegal drugs like marijuana, cocaine, heroin, and so on. The medical test you have to take before getting life insurance will show if there are drugs in your system. Whether you said so on your form or not. If you test positive for drug use, you will need to show further proof that you don’t use such substances. Otherwise your application will be denied. Those working on sobriety will have to show that they are not still using illegal drugs in order for an insurance company to consider their application. 


The same as the other life choices, if you don’t tell your insurance company about your drug use and then perish in a drug-related accident. Your loved ones will not get the money from your life insurance, even if you’ve paid your premiums overtime.

Frequent Foreign Travel 

Traveling has its own risks, which is why if you travel a lot, your life insurance premium might be higher. The price will depend on how often, when, for how long, and where you travel. The destination is important because some countries are safer than others. For example, some countries have higher crime rates or have a higher risk of individuals getting diseases that can kill. The amount of time you spend at your destination and the number of times you travel will also affect your costs as they affect the level of risk. Flying is linked to how often you travel. Since it is a high-risk way to travel, the price of your life insurance policy will go up if you do it often. 

Medical History

Your medical history shows how often you go to the hospital or the amount of doctor visits. If you put yourself in dangerous situations often and end up needing medication, surgery, or treatment. This will, of course, affect your insurance. 

Work With EZ

At EZ.Insure, we know that you want the best coverage for you and your family. But you also have to stick to a budget. That’s why we’re committed to finding you the best policy at the best price. And we want to make it as easy as possible to do so! We’re here to help, and the best part is that everything we do is free. We will help you with everything. From answering all of your questions to helping you choose a policy and finish the enrollment process. We will also be there to assist you after your plan has started. To get started, just type your zip code into the bar below or give us a call at 877-670-3560.

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Can a Life Insurance Claim Be Denied?

Can a Life Insurance Claim Be Denied? text overlaying image of a man shaking his hand noOne of the best things you can do for your family is to protect their financial future with a life insurance policy. The last thing you want is for their death benefits to be denied after you’ve passed. It’s a rare possibility, but it can happen. If you buy your plan from a reputable life insurance company and make your payments on time, then you don’t have much to worry about. However, it’s important to understand how and why an insurer can contest or delay payment on a claim so you can avoid this problem for your family.

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Reasons A Claim Could Be Denied

Like we said, a life insurance claim denial isn’t common. In fact, it’s fairly easy to avoid. Below we’ve highlighted the reasons a claim can be denied or delayed so you understand what to do to avoid this situation.

Failure To Pay Policy Premiums

If you are not up to date on your premium payments when you pass away, your family may not be eligible for a payout. In fact, this is the most common reason for life insurance claim denials. So, it’s important that you pay your premiums on time, every time. If you don’t keep up with the payments your policy will eventually lapse. However, your insurance company typically notifies you of the late payment. Depending on your state, your insurance company may have to legally give you a grace period, typically about a month to pay the outstanding balance before they cancel the policy. This helps for those times when you need a little extra time to catch up.

Lying On Your Application

You are generally required to disclose any medical conditions and other risks such as dangerous hobbies when you apply for life insurance. The life insurance claim can be denied if you fail to give accurate information on your application. This is because your life expectancy is the base factor in determining your premiums, and whether or not you are eligible for a policy at all. Omitting important details on your application is known as “material misrepresentation”.


An incomplete or false application is another common reason for denials. Life insurance policies generally have a contestability period, which lasts about 2 years depending on the company and your state laws. During this time your insurance company can look into your policy and if they find a misrepresentation, they can decide the policy is void. If you pass away during this time, your insurer has the right to, and most likely will, investigate your family’s claim. If the company finds any misinformation, the company has two options: one, if the misinformation was small enough, they may look at how much you should have been paying on your premium and deduct that amount from the death benefit before releasing it to your beneficiaries, and two is out right denying the claim.


These options depend entirely on the insurance company, how big the misrepresentation was, and your state laws. So, the best thing you can do is just be honest on your application. Even if you have higher risks or health problems there are several life insurance policies that can and will cover you with the correct information.

Things You Should Expect To Disclose

Here are some examples of the kind of important information you have to disclose:


  • Medical history – You have to provide information on any current health conditions including your mental health. You also need to provide prescription history and family health history.
  • Dangerous hobbies – If you regularly participate in a dangerous hobby such as racing, mountain climbing, recreational piloting, and scuba diving you must tell your life insurance company.
  • Dangerous behavior – You have to disclose if you’re a smoker, have a criminal record, dangerous driving record such as a DUI conviction, or other traffic violations.
  • Dangerous jobs – Anyone with a dangerous job may have higher rates because of their daily risks at work. This includes construction workers, active military, firefighters, police, and pilots.

Contestable Circumstances

Contestable circumstances depend on how you pass away. Certain types of death can be excluded from coverage, most often linked with the contestability period we mentioned above. For example, if you say you are not a smoker and then pass away due to emphysema. Other contestable circumstances incur dying while performing an illegal act. While newer policies are starting to have less and less exclusions, older policies may exclude death during military service, acts of war, piloting a plane recreationally, scuba diving and mountain climbing. 


Another contestable circumstance is suicide. Most life insurance policies come with a suicide clause, which states that benefits will not be paid if the policyholder commits suicide within a certain period of time after buying the policy (typically 2 years). Meaning your insurer may deny your family’s claim if you pass away due to suicide within that time period. If you or someone you know is having suicidal thoughts, please contact the National Suicide Prevention Lifeline at (800)-273-8255.

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Not Providing Documentation

This one is less common, but it can happen so we’re putting it here just in case. When your family contacts the life insurance company to start the claims process, they will most likely be asked for certain documentation, at the very least they need the death certificate. If your beneficiaries don’t provide the documentation in time their claim can be denied.

Policy Term Has Expired

You could outlive the term of your term life insurance policy, which would result in no death benefits payment. If your policy is about to expire and you need coverage for longer you may be able to renew your policy (at a higher cost) at the end of your term. You may also be able to convert your term policy into a permanent life policy, but there is a window of opportunity to do so. If you’re interested in converting, make sure you know the deadline, so you don’t miss it.

No Designated Beneficiary

A life insurance claim may also be denied if the insured failed to name a beneficiary. Every policy stipulates who should receive the proceeds in the absence of a designated beneficiary. In the absence of a designated beneficiary, an insurance company will distribute the proceeds in accordance with the applicable state law or the policy terms. As insurance companies may mistakenly pay benefits to the wrong person, such claims may result in lengthy delays or denial.


What To Do If A Claim Is Denied

If you receive a claim denial letter it can be scary, especially if you relied on your loved one’s income and the money would supplement that income. If the insurance company finds that the policy holder died of suicide within their clause’s time frame or find another violation during the contestability period, the claim will not only be denied, it can also be disqualified from an appeal. However, other denials can be appealed, below are the steps you can take if you’ve received a denial letter.

Contact The Company

In the initial denial letter, the insurance company will detail the reason they’ve denied the claim. However, if the reasons are unclear or don’t have sufficient supporting information, the best thing to do is request additional information regarding their specific objections to paying out the death benefits. For example, if the denial just says “violation of terms” you can request what the violation was specifically and any documents that “prove” the violation. You should know if you are dealing with a life insurance policy that came from an employer there is typically only 60 days from the denial letter to file an appeal so don’t put off contacting them. 

Contest The Decision

All insurance companies have an appeals process. You will have to file the appeal and provide evidence that the denial was incorrect. For example, if the denial is due to a lapsed policy, you would provide them with the receipts from payment premiums to prove the policy was in fact up to date. You have the option to represent yourself during this appeal. However, while self-representation is free, it comes with added emotional stress due to going through this complex process on top of grieving. In certain cases, you can contact your state’s insurance department or attorney general for help through the appeals process. Generally, the state departments of insurance and attorney general’s office offer easy and free resources to help get your death benefit as long as the claim was valid. Having state representation carries some serious weight during the appeals process so consider contacting them for help.

Working With EZ

It is important to understand why life insurance claims can be denied in order to ensure that your family receives the benefits you want to leave for them. And if you’re in the market for a policy that will safeguard your family’s financial future, be sure to compare policies from different companies and work with a knowledgeable agent. To get started simply enter your zip code into the bar below. Or you can contact one of our licensed agents today at 877-670-3560.

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Whole Life Vs Term Life Insurance

whole life vs term life insurance text overlaying image of two different colored doorsThere are many aspects of life that are beyond our control, most of all being when it will end. Even though you have no control over that. You can take steps to ensure that your family is not put in a financially precarious situation when the time comes. It’s time to look into purchasing life insurance. And once you start searching, you will notice that there are many different kinds of policies available. The first thing you have to decide between is if you want temporary (term) or permanent life insurance (whole life). Most people have trouble deciding which one is a better fit for them. Some even end up switching from one to another. To start you need to understand the fundamentals of each, including the pros and cons. Below we’ll look at each policy and then compare them for you.

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Term Life Insurance

Term life insurance is the more affordable of the two, because unlike whole life insurance, it does not last forever. You have the ability to choose how long you want to be insured when you purchase this kind of policy. The length of time (known as the term) can typically range anywhere from 10 to 30 years. But there are companies who offer shorter or longer terms as well.


Your beneficiary will only receive the face value of the policy from your estate. And there is no cash value that can be withdrawn from the policy before you’ve passed away. This is one of the primary differences between your two options. People who want to be covered for a set amount of time, such as while they are still making payments on their mortgage or other loans, are the best candidates for this kind of insurance policy. Additionally, if needed, you can convert your term policy to a whole life policy.

Types Of Term Life Insurance

There are several types of these policies. Below we’ve highlighted a little bit of each of them to give you an idea of how term life insurance works.

Level term

This type of term life insurance policy is the most common type and is often the type people choose. The reason for its popularity is simple. Both the death benefit and the premium are set when you purchase your policy. Meaning they don’t change during the entire term. You’ll never suddenly have to pay more a month or suddenly have a smaller death benefit. Making this type straightforward and easy to manage and afford.

Annual renewable

Coverage under an annual renewable life insurance will last for 1 year. You are able to renew your policy every year however, the premium will rise each year due to your age. This type of policy is best for meeting short-term needs for life insurance coverage. This is because the policy will eventually become expensive the longer you have it. If you want a longer coverage it’s more beneficial to choose a different option.

Increasing term

With these policies your death benefit will increase at a steady predetermined rate over the length of your term. For example, your health benefit could increase by 5% every year. Meaning over the course of your term your coverage becomes more valuable. However, increasing benefits typically means increasing premiums. 

Decreasing term

This policy is the exact opposite of an increasing term policy. With these your death benefit will decrease over your term but your premiums will remain the same. But why would anyone want a smaller death benefit? Great question, this type of policy is typically meant for someone who wants to make sure a specific loan or debt is covered once they pass. For example say you have a large mortgage and you want to make sure it’s paid off for your family if you pass away. As you pay off your mortgage while you’re alive the death benefits decrease, matching the loan amount. That way when you pass the amount your family would need to finish off the loan will be available to them. This ensures they can remain in their home and not have extra stress of worrying on top of their grief. 


Return-of-premium life insurance, also referred to as ROP insurance, is a type of term life insurance that will return your payments in the event that you outlive your coverage. The premiums for ROP policies are significantly higher compared to those of other term life insurance types. On the other hand, you may find that the possibility of having your premiums returned to you is a valuable feature of this kind of insurance policy.


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Whole Life Insurance

Whole life insurance is a life insurance that will remain in effect for your whole life. Because of this, the cost of this policy is significantly higher than the cost of term life insurance. These policies come with a cash value that makes these policies an investment as well as provide protection. You can borrow money or take money out of the cash value of your policy whenever you need and a portion of your premium payment is always added to the cash value of your policy. If you pay your premiums in accordance with the guidelines set forth by the government, you will be able to withdraw tax-free the majority or all of what has accumulated in your account.

Types Of Whole Life Insurance

Just like with term life insurance, there is an array of options available to policyholders when it comes to whole life insurance. This gives you the ability to select the precise coverage you require along with the benefits you desire:


A type of permanent life insurance that includes a cash value, which earns interest based on an investment index chosen by your insurer. For the vast majority of individuals, purchasing indexed whole life insurance is not the most prudent financial decision. It is possible that your cash value will grow faster than it would under a traditional whole life policy. However, this rate will be lower than what you would receive from a savings or checking account. The minimum rate of return on your cash value is determined by your provider and the majority will also determine your earnings’ maximum rate of return. In addition, these policies may not be the best option because cash value accounts incur fees, whereas traditional savings accounts do not.


The initial payments for a modified whole life policy, also known as a modified premium whole life policy, are affordable. After the initial payment period (2 to 5 years) finishes, the premium will increase once and then remain constant for the remainder of the policy’s term. Rather than waiting until you’re older to purchase coverage, you can obtain a higher death benefit sooner by purchasing a modified premium policy. Even if you cannot currently afford the higher premiums but are confident that you will be able to in a few years. During your initial payment period, it may not be possible to add to the cash value.

Simplified issue

Simplified issue whole life insurance is a permanent form of life insurance. Therefore, you are covered for the duration of your life. However, its coverage is less extensive and it is restricted to those aged 45 and older. If you apply for this type of policy, you will not need to undergo a medical exam. Instead, you will be asked a few health-related questions. Insurers will charge you a higher premium for a lesser coverage amount with this policy because the health evaluation is not as thorough. The expedited application process will result in almost immediate coverage. However, you should be aware that even with simplified issue policies, there are still conditions that can prevent you from acquiring coverage.

Guaranteed issue

Guaranteed issue life insurance does not require any type of medical underwriting. In other words, neither a medical exam nor questions about your medical history will be required. There is a catch -this type of life insurance requires you to pay a higher premium in exchange for a smaller death benefit. In addition, after purchasing this type of policy, you will be subject to a waiting period. During which death benefits will not be paid out.


In addition, you will not be covered if you die from certain causes (such as suicide) in the first few years after purchasing the policy. This doesn’t mean that guaranteed issue policies have no value. Due to the guaranteed issue nature of these policies, they can be a lifeline if you are over a certain age or have health issues that make traditional insurance policies unaffordable. In most cases, however, the maximum coverage amount for these policies is $25,000.

The Differences

Both term and permanent life insurance require a monthly premium payment. In exchange, your beneficiaries will receive a predetermined amount of money (your death benefit) upon your passing. The length of the policy is the primary distinction between these types of insurance. 


When purchasing term life insurance, you will be required to choose the duration of your coverage, typically between ten and thirty years. Your policy will terminate at the end of that period. If you outlive your policy, your beneficiaries will not receive any death benefits. You will then be required to decide whether to purchase a new policy or extend your current one. In both scenarios, your premiums will likely increase because you will be older and may have developed health problems. 


A major disadvantage of term life insurance is the possibility that your policy will expire and you will have to extend or repurchase it. However, with whole life insurance, you may pay higher premiums, but the policy covers you for the remainder of your life. In addition, many whole life policies have a cash value – similar to a savings account – that accumulates money over time.

Which Is Best For You?

When selecting the life insurance policy that best meets your requirements, you must consider your assets, loans, budget, and desired duration of coverage. Do you want to ensure that expenses such as mortgage payments and college tuition for your children are covered? Then a term plan is an excellent and inexpensive option. Do you want to accumulate a cash value that you can borrow against and that your family can use when you die? Then your whole life will function better for you.


The premiums for both whole life insurance and term life insurance are fixed for the duration of the policy. But whole life insurance is more expensive because it remains in effect until death. Whereas term life insurance expires after a set period of time. If you are on a tight budget, you should purchase term life insurance, but if you want to build cash value or have long-term dependents, you should purchase whole life insurance. 


We recommend consulting with a licensed agent before selecting a life insurance policy. They will be able to discuss your options and determine the best plan for your requirements. Don’t wait until you need life insurance to compare rates from the listed, highly-regarded insurance providers. Always check multiple sites to ensure that you have negotiating power and that you are aware of the unique benefits of each company. Ensure that a difficult time for your loved ones will not be exacerbated by a financial burden by comparing life insurance rates today. Start comparing today by entering your zip code in the box below or giving us a call at 877-670-3560.

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