Variable Life Insurance: When you Need Flexibility

Variable Life Insurance: When you Need Flexibility text overlaying image of a family covered by an umbrellaLooking for the ideal life insurance policy? While you’re researching all of these options, you might want to consider one that’s often overlooked: variable life insurance. This is a type of whole life insurance policy with a cash value determined by the amount of premiums paid, the policy’s fees, and the success of your investments. If you are interested in this kind of life insurance policy. You need to first understand how the cash value works, how the death benefit is paid out, and how flexible these policies are. 

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What is Variable Life Insurance?

Variable life insurance is a whole life policy that protects you for the rest of your life. As long as you keep your premium payments up to date. Every variable life insurance policy is made up of 3 components: the death benefits, the premium, and the cash value. The premiums are your monthly payments you make to keep your policy active. The premium goes toward the cost of insurance and fees then the rest goes toward your policy’s cash value. The cash value is a tax-deferred savings account where you can invest in different mutual funds. You have the freedom to keep an eye on your money and decide what gets invested where. 

 

If your cash value investments do well, you can use it to increase your death benefit. Or cash some of it out as you need it. It’s important to know that with investments there also comes the possibility that the investment won’t do well and you can lose money. When you die, the death benefit is the amount of money your beneficiaries get. 

Cash Value

The cash value of a variable life insurance policy works differently than the cash value of a whole or indexed universal life policy. Each variable life insurance policy comes with a proposal that tells you all the ways you can invest the money. Cash value investment choices work just like mutual funds. In that the money would be put into a certain set of investments. Like a money market account, bonds, or an index fund. With variable life insurance policies the insurance company may also offer a fixed interest investment alternative. This option is less risky but it also means your potential rewards are lower as well.

 

Variable life insurance gives you more ways to make money than other cash value life insurance plans, like whole life insurance, because you can choose how to invest your money. With that being said, variable life insurance plans rarely have a promised return rate. Because the performance of your investment market directly affects your cash value. Meaning in a good year your account will earn a healthy return on investment. But in a bad year you’re risking losing money. Additionally, most insurance companies will put a limit on how much your investment can earn, so you can’t make as much as you would with an independent savings investment.

Death Benefit

Most of the time, variable life insurance death benefits are paid out in one of two ways:

 

  • Level death benefit – This means the death benefit will be equal to the face value when you buy the plan.
  • Face amount plus cash value – This structure costs more, but your beneficiaries will get the face value of your death benefit as well as whatever is in your cash value account.

Some policies do offer other types of benefit structures like paying out the face value plus all of the premiums paid. But the two listed are the most popular. The death benefit is basically a goal based on an assumption about how well the cash value will do, like a 4% annual rate of return. If this rate of return holds, the insurer assumes the cash value will equal the face value of the insurance you pass away. However, if the cash value doesn’t go well, it can actually reduce your benefit based on the terms of your policy. No matter how your death benefit is set up, you should always check the policy terms to make sure the death benefit is guaranteed. If it is, make sure the expected value and the guaranteed value. 

Variable Universal Life Insurance

Variable universal life insurance works just like a regular variable life insurance policy. However it comes with extra flexibility. With variable universal policies you get the option to put your cash value towards your premium. Meaning if your investments do well and you have enough in your cash value account the policy will essentially pay for itself. When you pay your premium you can choose to pay more or less than the normal premium out of pocket. Giving these policies the nickname “flexible premium policies”. Even though most variable universal life insurance plans do have a minimum and maximum premium limit, you can pay any amount between the limits. So, you can:

 

  • Pay a portion – If your monthly payment is $500, you can choose to pay $250 out of pocket and use your cash value to pay the other half. Keep in mind that you can only do this if you have a certain amount saved in your cash value amount. 
  • Pay nothing – When your cash value has enough money in it, you can put it entirely towards your premium payment. 
  • Pay more – If you want to get to the pay nothing section quicker then early on you can put more than the premium amount in so the cash value and investments build up quickly. This is often the best choice if you have a large income and want to be able to stop paying fees in the future like when you retire.

Single Premium Variable Universal Life Insurance

We know the policy names are getting long, stick with us, we’ll explain. These plans let you buy coverage and add to the cash value of your policy in one payment. You buy coverage and make all of the minimum cash value contributions at the same time. It’s a hefty chunk of change. But in that single payment you’re fully funding your policy and automatically guaranteeing a large death benefit. Single-premium life insurance plans are also helpful because they let you pay for long-term care with policy loans or by adding a rider. Some single-premium life insurance policies let the policyholder withdraw money from the death benefit tax free to pay for living expenses.

 

Single-premium whole life and single-premium variable life are two of the most in-demand single-premium policies. How each program builds up a cash value is different. The first one has a set interest rate with no risk. The second option invests the cash value in carefully managed portfolios. Which comes with the risks and possible rewards of active investing.

Variable Life Insurance VS. Whole Life

Both variable and whole life insurance covers you for your whole life. But whole life insurance is less risky and pays out less. Whole life insurance has the following:

 

  • Fixed premiums – You pay the same premium every month.
  • Level death benefit – The death benefit will not lose value, it is guaranteed and remains the same.
  • Guaranteed returns – Your cash value will keep going up. And when the insurance matures, it will usually be guaranteed to be equal to the death benefit.
  • Fixed growth potential – There is no room for your investment returns to be higher. 

Variable life insurance plans can make the cash value grow much faster. And in some cases, the cash value can even be used to pay the premiums. These plans have more flexible premiums than whole life insurance policies.

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Variable Life Insurance VS. Term Life

If you have monetary obligations that aren’t likely to go away in the next 20 to 30 years. Term life insurance is likely a better choice than variable life insurance because it costs a lot less. For example, if you want to make sure your family can stay in your home if you die and you have a 15-year debt, term life insurance would be a better choice. In the same way, if you think you can save enough money over the next 20 years to take care of any future financial responsibilities, you should just buy term insurance as a backup. You would have to pay more for variable life insurance if you wanted a death payment for the rest of your life. 

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Even though this type of policy has some risks. It is the best way to invest in life insurance for the long run. Variable life insurance is a good choice for people who want a permanent life insurance policy that lets them build up cash value. Or people who want control over their investment options and the freedom to choose where to put their money. However, it is only for people who have enough money to pay the premiums for the rest of their lives. Even though there are more risks with this type of insurance, it could be worth it if you can afford it.

 

However, if you want cheaper coverage with more of a guarantee. You might be better off with a term life insurance policy because the premiums are cheaper. And you can convert it into a permanent life insurance policy. Working with an agent who specializes in life insurance is the best way to find the right policy for you and your needs. Everyone has their own needs, goals, and ways they can spend their money. At EZ.Insure, we know that you and your family want the best security. But we also know you have to stay within your means.

 

So, we will do everything we can to find you the best policy at the best price. We want to make it as easy as possible for you to do so and the best part is that everything we do is free! EZ will help you with everything. From answering all of your questions to helping you choose a policy and finish the registration process. We will also help you after your plan has been implemented. 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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Should You Have Life Insurance For Your Child?

Should You Have Life Insurance For Your Child? text overlaying image of an adults hands holding a child's hands with a heartWe know it’s hard to think about your child’s death; after all, every parent hopes their children will have a long, healthy life. So, it’s understandable if buying life insurance for your kids doesn’t seem like a priority. However, as a parent you have to constantly prepare for the unexpected. Buying life insurance is typically a smart financial move, but is it necessary for a child? 

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What is Child Life Insurance

Child life insurance can be bought by a parent, guardian, or grandparent to protect the child’s or guardian’s financial security. Child life insurance works the same as adult life insurance. You pay a premium and when the covered person passes their beneficiaries receive a payout. However, coverage options for kids are much more limited than they are for adults. Adults can choose from a variety of plans including term, whole, universal etc. Child life insurance policies only come as a whole life policy. Meaning as long as you keep up on the premiums the policy will last for the child’s entire life. Having a whole life policy also means the premiums are fixed so they will never go up.

 

There is also the added benefit of a cash value with a whole life policy. This is the savings component of a life insurance policy where a portion of the premium is set aside and earns interest over time. However, for child life insurance the coverage amount is typically under $50,000. Once your child is a certain age, typically between 18-21, they can take over the policy for themselves. And decide if they want to keep it, increase their coverage, or drop it completely. So essentially you’re giving your child a head start on protecting their own families when they eventually pass.

Child Rider Vs. Child Life Insurance

Child life insurance and child riders are often confused, but they are not the same. With child life insurance it’s a separate contract that covers the risk of death of a child. When the child passes the family receives a death benefit. Child riders are add-ons that you can choose to add to your own life insurance. They are tied to a parent’s policy rather than being a standalone policy. If a child on a child-rider dies, you get a small payout. If all you’re looking for is peace of mind in case the worst happens, a child rider may be a better choice than a child life insurance policy on its own. Child riders offer:

 

  • Straightforward protection – A child rider gives security for your child without the complicated investing part of a child policy.
  • Conversion options – If your child needs coverage for the rest of his or her life, you can change a child rider into a permanent insurance in the future.
  • Affordability –  A child rider costs significantly less than a full life insurance policy for a child. Every $1,000 of coverage typically costs about $5 per year. So, a $10,000 child rider might cost you $50 more per year.

Benefits of Child Life Insurance

If you’re debating whether or not to buy a policy for your child and aren’t sure what to look for, here are some of the benefits of a policy.


  • Future insurability – Most child life insurance policies come with or offer a guaranteed purchase option. That means the child can buy additional coverage once they are an adult without having to take a medical exam. This can be especially helpful if your child gets a long-term illness like diabetes or decides to have a dangerous career. Most people with health problems or hazardous jobs have to pay a lot more for life insurance than the average person.
  • Savings – You can take money out of the cash value account or take out a loan from it. Then your child turns 18, they have the option to drop the policy and receive the full cash value. The money can help for things like college tuition, a car, or down payments on their first home. The account is also tax-deferred if you don’t have to pay taxes on the interest until the money is taken out.
  • Worst case scenario coverage – Losing a child is very painful, and leads you to having unexpected costs in your worst moment. As long as the premiums are paid the policy will pay out a lump sum if it happens. The money can be used to cover things like a funeral or grief counseling. It can also help cover your bills so you can take off work while you’re grieving. 

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Disadvantages of Child Life Insurance

Generally, they are not a smart financial investment. While in the benefits list we mentioned insurance companies sell life insurance for kids as a way to save for your child’s future with the cash value, these types of policies can have higher fees and less growth than a separate investing account. We also noted that since rates go up as you get older, getting a policy when your child is young can give them coverage when they are older. Even though life insurance rates do go up between 4.5% and 9% every year, it’s rare that a child won’t be able to get a cheap policy as a young adult. The only time this isn’t true is if your child has a disability or illness that will last their whole life and make it hard for them to get cheap term life insurance when they’re older. 

 

Another benefit is that a full policy for a child is a great investment, but this is sometimes not the case. Even though the cash value of a whole policy makes interest at a rate set by your insurance company, often with a guaranteed minimum, it is too expensive for the average person to buy a whole policy. This is because whole life insurance costs a lot more than term insurance. Over the course of your child’s life, you may not be able to keep paying those fees. Whether or not you should get child life insurance entirely depends on your family’s specific situation. Where one child may benefit because they have a chronic illness, another might not actually get too much from it because they’re healthy and able to get a completely affordable plan as a young adult. 

Do I Need Child Life Insurance?

Before you buy coverage for your kids, you should look at your budget and think about your own life insurance needs. In general, your own life insurance is more important than your child’s because it can help pay for your family’s living costs or other costs if you die. Here are times when getting a policy for your child might be a good idea:

 

  • Your child makes a lot of money as an actor, model, or social media star.
  • Your teenager is working part-time to help pay for things around the house.
  • Your child takes care of their younger siblings and gives you the kind of help you would have to hire someone else to do otherwise.

Beyond that, you don’t need to protect your child’s ability to get insurance unless you have a family background of serious health problems that start young or a child with a disability. When it comes to locking in premiums, most adults in their 20s and 30s don’t have any trouble getting reasonable coverage. If you need to protect your child’s life, it’s easier and less expensive to add a child rider to your term policy. Riders are add-ons that can give your policy extra coverage. You could also choose this choice if you want to pay for a funeral in case the worst happens.

Alternatives

Don’t worry if you’re not sure about child life insurance or if you decide it’s not for you. There is still a way to protect your child’s financial future and help them get off to a good start when they become adults. Savings plans are a more straightforward option for saving money for your kids. You can put the money you would have spent on the life insurance into traditional savings accounts, such as:

 

  • 529 savings plan – These plans are tax-advantaged accounts offered by the government. There are two kinds of 529 accounts: prepaid tuition plans and educational savings plans. Both can only be used to pay for higher education costs, and qualifying withdrawals are tax-free.
  • Custodial accounts – Parents can save and invest in a custodial account kept in the name of their child, such as a UTMA (Uniform Transfers to Minors Act) or UGMA (Universal Gifts to Minors Act) account, to build up savings for their child. Parents or guardians take care of custodial accounts and give them to the child when they turn 18 or 21.
  • IRA – If your child works and makes money, you can set up an IRA savings account for them and match their earnings to get them started for retirement savings.

Let EZ Help

Since child life insurance is so dependent on your circumstances your best bet is to speak with an agent. Everyone has their own needs, goals, and ways they can spend their money. At EZ.Insure, we know that you and your family want the best protection, but we also know you have to stay within your means. So, we will do everything we can to help you decide as well as find you the best policy at the best price.

 

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 registration process. We will also help you after your plan has begun. 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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How Mental Illness Affects Your Life Insurance

How Mental Illness Affects Your Life Insurance text overlaying an image of a woman sitting on a chair with her head in her handsWhen choosing whether or not they should accept your life insurance application, insurance companies look at a number of things. Some of these things are your age, your job, your habits, your general health, and your mental state. Mental health affects many of us, with about 57.8 million American adults having a depression, anxiety, or PTSD diagnosis. As we learn more about how mental health affects people, insurance companies change their screening process. Your mental health can affect whether you can get a life insurance policy and how much you’ll pay for it. So, it’s important to know what life insurance agents are looking at on your application if you struggle with mental health. So, you know what to expect and which policy would be worth the higher premium. 

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Depression

Depression is a common mental illness that is often treatable. However, if you have depression and want to get life insurance, insurance companies will consider you being a higher risk applicant. The main thing that worries life insurance companies about a depression diagnosis is that, according to the National Institute of Health, depression often leads to other serious health issues. For example, the chance of coronary artery disease is 64% higher for people who have a depressive disorder or even signs of depression. Other health conditions linked to depression are weakened immune system, and cardiovascular disease.

 

Aside from the health concerns, some life insurance companies also worry that people suffering from depression may have trouble paying their premiums. Statistically speaking, people with depression are more likely to quit or lose their job. This is because they tend to feel like they can’t do the job, struggle to show up or are not able to be productive.

 

Some insurers even treat postpartum depression as clinical depression even though it’s a temporary form of depression. Postpartum usually happens within the first 3 months of having a baby. It does eventually fade away especially if you seek help for it. But because life insurers treat it as clinical depression you face higher rates. Which is difficult because many parents buy life insurance when they start a family. 

Depression Categories

Most people experience sadness at various points in their life. However, being sad is not the same as having a depressive disorder. Because of this, life insurance companies only consider you to have depression if you have a diagnosis from a doctor prior to applying for a policy. Depression can be defined in a number of ways, just like many other health problems. These include seasonal affective disorder, persistent depressive disorder, and major depression. Companies that sell life insurance divide people into 3 groups. How they decide your rate depends on which group you’re in.

 

 

  • Mild – You’ve had no more than one type of medication for depression and have never been hospitalized for depression.
  • Moderate – You take multiple depression medications and see a psychiatrist.
  • Severe – If you’ve ever had suicidal ideations or a history of an attempted suicide.

Anxiety

If you have an anxiety disorder diagnosis life insurance companies will take that into account when deciding your eligibility and premiums. When a person with anxiety applies for life insurance, drugs and alcohol abuse is one of the main things that life insurance underwriters worry about. Life insurance companies will be very hesitant if you use drugs or alcohol to treat yourself. Or if you have a history of abusing them. Each case is carefully examined to decide if you can buy the policy. Having an anxiety disorder can make it harder to get life insurance, but it doesn’t mean you can’t get it at all. Many people who have been diagnosed with anxiety are still able to buy life insurance. The good news is not all life insurance companies cover health concerns the same way. So one company may charge you more than another because of the anxiety.

Anxiety Ratings

Different people have very different anxiety conditions. When working with underwriters, many people with these disorders may find it uncomfortable to be put in the “mental illness” category, especially since some of the questions are intrusive. But insurance companies usually depend on experts, especially the criteria for these conditions set by the Centers for Disease Control and Prevention (CDC), to figure out how extensive the disorder is.

 

If you’re not sure about the classification, you should first ask for more details. It is always better to treat a condition properly than to do nothing. In fact, many people with much worse mental illnesses than, say, occasional panic attacks can get life insurance as long as their situation is under control. As we mentioned, some of the questions may seem like they are prying. Some common questions you might get are:

  • What is the diagnosis?
  • When did you get diagnosed?
  • How severe is the condition?
  • Have you received treatment?
  • What are your symptoms?
  • How long have you had the symptoms?
  • Have you missed work due to your condition?
  • How has your situation changed your life?
  • Has a reason been found for your condition?
  • Have you ever been hospitalized for the condition?

Possible Outcomes

Depending on your answers and medical records (you’ll be asked for the names and addresses of the doctors and hospitals you’ve been to), you can expect the following “ratings”:

 

  • Preferred rating – This means that your mental health is under control or not too bad. Either you are taking one medication that works well. Or a mental health professional has told you that you don’t need any medicine at all. In short, you can expect to get the best benefits and prices if your diagnosis doesn’t affect your health as a whole.
  • Standard rating – This means that your mental health problem isn’t too bad, but it does affect your health in some way. This group includes people who have been hospitalized, need daily therapy, or have more than one prescription.
  • Table rating – This grade means that your mental health problem is very bad or that you aren’t doing anything to deal with it. This grade could lead to either high premiums or being turned down for coverage.

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PTSD

Even though many traditional term or whole life insurance applications from people with Post-Traumatic Stress Disorder (PTSD) are automatically turned down. There are a few companies that will at least look at a person with PTSD as a possible candidate for traditional coverage. Before you even think about asking for coverage, make sure the life insurance company you’re working with is more willing to work with people who have PTSD. If you don’t, you’re likely wasting your time and effort.

 

Insurance companies will want to know more about your diagnosis of PTSD. They may also want to know about your habits and how you live. The insurance company will use this information to figure out how much of a risk you are. And how much your premiums will be. The questions you’ll be asked are very similar to the ones asked for anxiety. You can expect:

 

  • What traumatic event started your PTSD?
  • What are your symptoms?
  • How long have you had PTSD?
  • What treatment did you receive?
  • What is your current mental health state?
  • What medications are you taking for PTSD?

PTSD Rating

As we’ve already said, if you’ve been diagnosed with PTSD, most standard term or whole life insurance companies will automatically turn you down. They do this because they think that insuring people with PTSD is too much of a financial risk for them. Which is fine, since not all life insurance companies will have such strict rules about who they will accept.

However, you can bet that even companies who aren’t that strict will be hesitant to insure someone who has been diagnosed with PTSD. Because of this, most people who are able to get coverage do so at a “sub-standard” rate. Which means their insurance will cost more than if they hadn’t been labeled with PTSD.

Other Life Insurance Options For PTSD

If your PTSD or other health problems make it hard for you to get a traditional term or whole life insurance policy, you may have other choices. You could also think about getting a “guaranteed issue” life insurance policy. People who can’t get traditional life insurance because of their health or other reasons can get guaranteed-issue life insurance. These policies don’t require a medical exam or ask the applicant about his or her health background. So, they are often more expensive than standard life insurance policies and may have lower coverage limits.

 

These plans will also have a “graded death benefit,” which limits when your policy will start covering natural causes of death (usually, the policy needs to be in place for two to three years before natural causes of death are covered). An accidental death policy is another thing to think about. A policy for accidental death is a type of life insurance that pays out if the insured dies in an accident. Accidental death policies usually pay the policyholder’s beneficiary a reward if the policyholder dies in an accident. Accidental death plans will never cover deaths caused by illness or natural disasters, no matter how long you own the policy.

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As we’ve seen, those suffering from depression, anxiety, or PTSD face a difficult scenario. But it doesn’t have to be disastrous. The milder your symptoms are and the better you manage your condition, the more likely it is that you will be able to obtain coverage at a cheaper rate. This also applies to your overall health. People with chronic diseases or poor habits, such as diabetes and alcoholism, will be scored similarly to those with depression or anxiety.

 

It is critical to weigh ALL alternatives here. This is where EZ comes in. EZ is dedicated to getting the best coverage at the greatest price for you and we want to make it as simple as possible for you to do so! We are here to help you. And the best part is that all of our services are completely free of charge. We will help you with everything from answering all of your inquiries to selecting a policy, completing the application procedure, and providing support after your plan has been implemented. To begin, enter your zip code into the bar below or phone us at 877-670-3560. If you or someone you know is suffering from depression, anxiety, or suicidal ideation, please call 1-800-273-8255.

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What To Do When Your Term Life Insurance Policy Expires

What To Do When Your Term Life Insurance Policy Expires text overlaying a calendar with a red pin in itA term life insurance policy is great for you and your family if you need life insurance, but only want it for a certain amount of time, like while you are paying off your mortgage. You buy this kind of coverage to protect you for a certain amount of time that you choose. You can also choose from different kinds of term life insurance. For example, you can choose a level term policy, which may cost a little less than other policies because you have to pass a medical exam to apply for it.

 

If you are worried about your health, you can look into a term life insurance policy that doesn’t require a medical test. You can also add extra coverage to your insurance by getting “riders.” However, what happens once the term ends? What should you do if you have new debt and your policy is ending? No matter what, when your term life insurance policy ends, you have a few choices. 

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Examine Your Needs

If your term life policy is coming to an end, the first thing you need to do is decide if you need more life insurance. Your debts may be gone or at least smaller, but you should think about whether you have any new duties, such as helping your children pay for college or taking out more loans. Think about whether you want to leave your family a little extra money when you die, or if you want to leave your spouse a retirement fund. Also, ask yourself if your family will be okay if you die suddenly and they lose your source of income. Will they be able to pay for your funeral, which can cost around $10,000 on average?

Your Options

Renew Your Policy

Your insurance doesn’t have to end at the end of your term because you can renew it. However, you should know that doing so will probably mean paying more in premiums because your premiums will be based on your current age and the results of a new medical exam. This choice is probably best for people who only need a couple-year extension.

Drop Your Policy

If you’ve paid off your debts and have enough money saved for retirement and costs related to your death, you probably don’t need life insurance longer. You can choose not to pay the renewing fee and let your insurance company know that you’re happy to let the policy end. 

Convert Your Policy

If your health isn’t great and you don’t want to get a term life insurance policy that requires a medical test, you can change your current policy to permanent life insurance. If you convert it, you’ll pay more than you were paying for your current term life policy, but you can control the cost by buying a smaller policy. This choice will work for you if you don’t need as much coverage, such as if you’ve paid off most of your debts.

 

Many term life insurance plans include a term conversion rider that lets you change your policy to a permanent policy before the term ends. Permanent life insurance, on the other hand, is generally much more expensive than term life insurance. Think about switching to a permanent policy only if your health has gotten so bad that you can no longer get standard coverage and you only want a permanent policy, like final expense insurance. This kind of coverage doesn’t require a medical test and pays out a small amount to pay for things like a funeral or medical bills at the end of life. If you decide to use the term “conversion rider,” you’ll need to make this change while your policy is still in effect. Start the process no later than the last year of your term.

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Buy a Brand New Policy

If you want to still have life insurance but don’t necessarily want to renew your current policy you can choose a new term life insurance policy with a different company. This is best if you’re still in good health because you will have to start the process over with a medical exam. Keep in mind your rates will be higher now that you’re older, and any new health problems that have come up since you first bought your original policy will also affect how much your premium will be.

 

When you buy a new term life insurance, you can choose a coverage amount and term length that fit your current needs. For example, if you have nine years left on your mortgage, a 10-year policy might make sense. And you don’t have to buy a new term policy; you can choose from a number of other types of life insurance. If you want to go this route, the best way to find a policy with the benefits you want at a price you can afford is to compare all life insurance policies from different companies in your area.

FAQ

  • Can I get benefits from a term policy if I’m still alive?

Term life insurance isn’t structured with a cash value, so it’s not meant to give you a return on your money. Instead, it gives you peace of mind about your money. One of the reasons term life insurance is so cheap is that it only pays out money if you pass away. Most term policies work the same way as other types of insurance such as health or car insurance. For example, even if you were a great driver, your car insurance wouldn’t give you any money back. There are, however, two situations where you can get money from your term policy while you’re living.

 

A Return of premium life insurance is a term life insurance policy that will give you back some of the money you paid in premiums if you outlive your policy. These policies can be two or three times more expensive than a regular term life insurance policy though. Most people would be better off putting the difference in payments away or investing it. The other option is a living-benefits rider. This is a rider you can add to your term life insurance policy when you originally sign up. Your premiums will again be higher but if you have a critical or terminal illness you can withdraw from your death benefit to pay your medical bills. This choice is typically used for end-of-life care, but keep in mind it will lower the death benefit your beneficiaries will receive after you pass away.

  • Can I Just Cancel My Policy?

When you cancel a term life insurance, most of the time your coverage ends, and you don’t get any of your premiums or benefits back. There are no termination fees for term life insurance. You don’t have to pay anything extra if you decide to stop your service. The only other way to get a refund when you cancel traditional term life insurance is to do it during the “free look” time, which is usually 10 to 30 days after your coverage started. Your policy papers will tell you how long you have to look at the policy for free.

  • How Long Should My Term Policy Last?

Think about how long you will have your current financial obligations and use that as a guide to figure out how long your life insurance policy should be in effect. You should choose a term length that is long enough to cover all of your big financial obligations, but not so long that you end up paying for safety you don’t need. 

 

For example, if you have a 20-year debt such as a mortgage, you have to pay it back over that time. To cover your mortgage payments, you should look for an insurance with a term of at least 20 years. If you have kids, you should think about how many years it will take for them to be able to support themselves financially, as well as how much money you will need to pay for their needs.

Need Help?

While all of this information is helpful, it can be a little overwhelming to sort through when you’re trying to choose what to do. Everyone has different wants, priorities, and limits on how much money they can spend. We at EZ know that you want the best security for you and your family without having to spend a lot of money. We work hard to make it as easy as possible for you to buy insurance. Our staff is always ready to help you and all of the things we offer are free. We can help you with anything, from answering the most basic questions to helping you choose insurance. Our agents can also help you with the sign-up process, and any help you need after that is free of charge. To get started, just type your zip code in the box below or call us at 877-670-3560.

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What Happens If Your Life Insurance Company Fails?

what happens if your life insurance company fails text overlaying image of a fence padlocked shutBusinesses can fail, and when they do, their customers are often left wondering what they should do next. The same goes for life insurance companies. Life insurance companies can go out of business, leaving their policyholders with a lot of questions. Mostly about what will happen to the policy they’ve been paying into and how to find a new policy. The good news is that most states have what’s called a “guaranty fund” that will pay your claims up to a certain limit if your life insurance company goes out of business. Let’s look at what happens when a life insurance company goes out of business, what protections you have, and what you can do.

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Protections

Insurance companies have gone out of business before, but it doesn’t happen very often. Past economic crises in the industry have better prepared for market instabilities that could cause life insurance companies to fail. Most of the time, regulators will try and fix the issues within the insurance company before they close it down. If the rehabilitation isn’t enough, the company will be able to meet policyholder obligations with the help of statutory reserves, reinsurance agreements, and state guaranty associations. Below we’ve detailed what each of these are and how they work.

Statutory Reserves

Statutory reserves are the funds that state insurance regulators require insurance companies to keep on hand at all times. The sole reason for this is to make sure that the insurance companies always have enough money to pay all of their policyholders’ legitimate claims no matter what. State insurance regulators have two ways of setting the level of statutory reserves:

 

  • Rules-Based – The first is a rules-based approach, in which standard formulas and assumptions are used to tell insurers how much of their premiums they need to keep in reserve. 
  • Principles-Based – The second method, which is called the “principles-based” method, gives insurers more freedom in how they set their reserves. In particular, it lets them set reserves based on their own experience, such as actuarial statistics and how their own customers have handled claims in the past, as long as the reserves set by the rules-based approach are the same size or bigger.

Statutory reserves apply to a wide range of insurance products, not just life insurance. The rules can be different from one state to another as well as from one type of insurance to another. For more information on life insurance in your state click here.

Reinsurance 

Reinsurance is essentially insurance for insurance companies. Life insurance companies will buy reinsurance to protect their ability to pay out claims. When they insure their policies, the insurance company spreads out their risk of financial loss. Reinsurance also helps life insurance companies pay out if there is an influx of deaths all at one time such as from a natural disaster or global health crisis. Insurance companies in the U.S can only sell policies with a maximum limit of 10% of the insurance company’s net worth unless they are reinsured. So if the life insurance company wants to grow and offer bigger policies they have to be reinsured. For policyholders this means that if your life insurance company goes out of business, its reinsurer will take over your policy. This lowers the risk for everyone and ensures your beneficiaries will still get the death benefit.

Guaranty Association 

Guaranty associations, like the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), protect life insurance policies if your insurer goes bankrupt. All life insurance companies must be a part of these associations to operate. Every state has its own association and its own limits.

 

 

If an insurance company looks like it might not be able to meet its financial obligations, the association will deem it “impaired”. When this happens the commissioner will decide what steps the insurance company needs to take to lower its risk over a reasonable amount of time. This time frame is called a rehabilitation period. If the insurance company either doesn’t take the necessary steps, or the steps don’t help, the company will then be deemed insolvent.

 

If the insurance company is insolvent, the state guaranty association will step in. They will either give the policies to another insurance company or opt to keep covering the policyholders themselves. So, it’s important for you to keep paying your premium even if your policy is taken over by the state so that your policy remains active. If an insurance company doesn’t have enough money to pay claims, the guaranty association will use the company’s assets and the guaranty funds to pay claims. However, states have a limit on how much they will pay out in claims. Most guaranty associations cap the death benefit at $300,000 and the cash value, if there is one, at $100,000. The amount you get could be different depending on what state you live in, and it could be higher in some states.

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What You Can Do To Avoid Bankrupt Insurers

Check Ratings

To avoid having to rely on a state guaranty association to protect you, you can look into potential insurer’s financial health to ensure that they are stable. There are independent agencies, each with their own rating scale and standard, that look at insurance company financial health statuses then rate them based on how stable they are. These 5 companies are:

 

  • AM Best – Uses a rating scale from A++ to D-
  • Fitch – Using a scale of AAA to D
  • Kroll Bond Rating Agency – Rates with a AAA to D scale
  • Moody’s – Uses a AAA to C scale
  • Standard & Poor’s – Uses a AAA to D rating scale

 

In general, A++, AAA, and A are the best scores. While D, CC, and CA are at the bottom of the scale and represent the weakest or worst ratings. Rating agencies give the highest rating to companies that they think are most likely to uphold their financial obligations. Agencies will give low ratings to companies that appear to have issues keeping their financial promises. The Insurance Information Institute says that you should check ratings from more than one agency because ratings can differ from one agency to the next. So, seeing more than one rating will give you an idea of where the company actually stands.

Switch Insurers

If your insurance company’s rating is in the middle of the rating scales, you don’t have too much to worry about. But if you notice your insurer’s ratings have dropped significantly, you might want to think about switching companies. It may be complicated to switch to a new life insurance company since you may have to pay more for a new policy because you’re older than you were when you bought your original one. Your best bet is to talk to a financial advisor or work with a life insurance agent to look into all of your options. If you do decide to switch policies don’t cancel your old one until your new one is in place, otherwise you risk going without coverage.

Review Customer Complaints

In addition to their financial stability, a strong indicator of an insurance company’s strength can be how they treat their policyholders and handle claims. The National Association of Insurance Commissioners (NAIC) puts out an annual Complaint Index that shows, based on an insurer’s size, how many complaints it gets from customers.

 

The NAIC figures out this rate by dividing the total number of complaints about a company in a given year by the total number of policies written in that same year. You can get an idea of how well your insurance company handles claims and, by extension, how they keep customers and stay in business by looking at their Complaint Index rating.

 

J.D. Power is a market research company that uses consumer intelligence analytics to review and rank different industries, including insurance. Its rating system looks at many things. Like how billing and claims work, how good customer service is, and what kinds of policies are available. Like the NAIC Complaint Index, this rating can give you an idea of how well your insurance company keeps customers.

Finding The Right Life Insurance Company

Nobody wants to think about losing money on life insurance. Especially if you’re counting on your policy to pay a death benefit to your loved ones. Even though there are safety measures, they may not always work, or provide enough coverage. Finding the right life insurance company goes a long way to avoid needing these safety nets. That means finding a licensed insurer that is financially stable that can and will pay out death benefits.

 

Our EZ agents will do everything they can to find you the best company. 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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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.

Pros

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.

Cons

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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