Life Insurance: Coverage for you and your family

by zhl203 » Tue Dec 08, 2009 04:26 am
Posts: 10
Joined: 08 Dec 2009

When you have family members depending on your income, saving for the future of your loved ones is a good idea. Investing in life insurance will give you enough financial support to take care of the future of your loved ones when you are no longer around. A life insurance plan also makes provision for a cash value where a part of your premium is put into a savings account. Hence, while you invest for a secured future, you can make savings too.

What is life insurance?

Life Insurance means insuring your life to save for the future of your family. If you have family members depending on your income you may invest in life insurance. This is a contract between you and your insurance company where your insurer agrees to pay a certain amount of money to your beneficiary in the event of your death.

What are the types of life insurance?

  • Term Life Insurance:

    For those who are running on a budget, you can opt for a simple life insurance. Term life insurance allows the beneficiary death benefits for a specific period or 'term'. This term may be 1 or more years and the benefits are paid only in the event of death of the policy holder within the term of the policy.

    There are certain term life insurance that can be renewed for more than one additional term. However, if you do so, your premiums may go higher. You may even sometimes be allowed to trade your term life insurance for a whole life insurance policy.

    Term Insurances are of 5 types:

    1. Annual renewal term insurance: Allows you to renew your term insurance every year till you reach a specific age which often freezes at 65.
    2. Renewable term insurance: With expiry of the term of the policy (generally 5-20 years), you can automatically renew the policy even if your health condition has worsened. It is similar to the annual renewable policy but this one is for a longer period of time.
    3. Level premium term insurance: Ensures that your premiums will not go higher for the term (between 5 and 20 years) of your policy.
    4. Decreasing term insurance: Allows your premiums to stay level throughout while decreasing your cash benefits each year. Such policies are usually used to cover items whose costs decrease with time.
    5. Convertible term insurance: With this policy you may convert your term insurance into any other type of life insurance policy that the company offers.

  • Whole Life Insurance:

    A whole life insurance covers a policy holder for his entire life. There is no date of expiry like in a term life insurance and the death benefits will be received by the beneficiary mentioned in the policy only in the event of the death of the policy holder. If you buy a whole life insurance you will have to pay a higher premium as compared to a term life insurance. The reason for this is that a certain portion of the premium paid for whole life insurance is put away into a savings program.

    When you compare the total premiums paid for whole life insurance and the total premiums paid for term life insurance it is seen that whole life insurance is less expensive. Even if you pay higher premiums for whole life insurance, the fact is that the premiums remain the same throughout the tenure of the insurance. But in the case of term life insurance, you may be paying lesser premiums in the beginning, but as you renew your term policy, premiums will increase. Hence, the total value accrued in term policy is bigger than a whole life insurance.

    Certain clauses in a whole life insurance allow you to pay premiums for a lesser period of time. The greatest advantage in this policy is that the premiums develop cash values that may be claimed or used for purchasing rider policies for more protection. Few of the whole life insurance benefits are:

    • Guaranteed death benefits
    • Guaranteed cash values
    • Fixed annual premiums

    A whole life insurance also known as "straight life" or "ordinary life" insurance, is not just an investment for your future alone, but also for the future of your family.

    To understand the basic difference between term life insurance and whole life insurance click here.

  • Universal Life Insurance:

    Universal life insurance is a flexible policy that provides security for you and your family. To know more please click here.


How to save money on life insurance policy?

When you shop for life insurance coverage, there are certain ways by which you can save money on your policy. You must look for a policy that meets your needs and the right kind of benefits received. If you think that buying a policy with a low premium will save your money think again. If you buy inadequate insurance, it will be a sheer waste of money. However, you can maximize your life insurance dollars using some of the tips provided here.
  1. Seek financially sound companies: Look for companies that are financially strong so that when your beneficiary(s) make a claim, he may receive the benefits of life insurance without hassle.

  2. Shop around: Get life insurance quotes from more than one insurance provider. You may even ask an insurance agent or an insurance broker to get you few insurance quotes from different carriers. You may then compare the quotations and find a policy that suits your needs as well as pocket.

  3. Seek group insurance: Employer provided group life insurance is often given at subsidized rates so you may find a less expensive policy here. Even if you have to pay premiums out of your own pocket this might be a good idea for the subsidized rate they provide. However, premiums paid by you will probably be through payroll deduction which is convenient. But a comparison of group and individual rates depending on your age, health must be done to assess which is the best policy for you.

  4. Change in lifestyle: Maintain a healthy lifestyle. Smoking may rate you as a risk option and you may have to pay higher premiums. Exercise regularly and consider making more lifestyle changes if necessary.

How to decide on the type of life insurance to choose from?

You may go for term life insurance if:
  • You need to make a short term investment and not a permanent one. With term life insurance benefits you can ensure the education of your children if you can invest in time. If there is a debt that you have to pay off, you may invest in term life insurance. Term life insurance covers you for a term of 5 to 20 years.

  • You need a big amount of life insurance with a premium that suits your pocket. A term insurance usually pays only in the event of death of the policyholder. However, if you are alive at the time the policy ends, term life insurance coverage will stop until you renew it. But here, you will not build a savings like in a whole life insurance.
You may opt for whole life insurance if:
  • You need life insurance stretching for the tenure of your life. A whole life insurance would pay the beneficiary the death benefit no matter when the policyholder dies.

  • You feel the need to accumulate a savings on a tax-deferred basis. A whole life insurance has its own savings program that puts aside a certain portion of the amount you pay as premiums into the savings program.
Click here to know more.

Can you pay your mortgage with life insurance?

Yes. With mortgage life insurance your mortgage loan can be paid for in the event of your death in a time when the loan is not paid off fully. This insurance is available for 15 and 30 years where for the first 5 years, the amount of insurance is level and then decreases on an annual basis. The premiums for mortgage life insurance can be paid annually, semi-annually, quarterly or monthly.

How should you choose a life insurance company?

When choosing a life insurance company, take the following into consideration:
  • Identity of companies - Make sure to know the full name, office location and affiliation of the insurance company that you plan to buy from.

  • Product sold - Check out what products the company is selling. Most often the companies provide a wide range of policies. Check for what you need and if they have it you may consider buying from them.

  • Financial Security - Select a company that is strong financially and has been in business for long. Your life insurance is an investment to secure your lifetime. Be sure that your insurance company will make life easy for you and not otherwise.

  • Ethics - Check if your company abides by the codes of conducts and principles of the Insurance Marketplace Standards Association. This non-profit organization promotes ethical conduct in life insurance marketing.

  • Agent - An agent is supposed to help you out with your insurance needs on behalf of the company. You must consider taking help from a reliable person only. If there is any discomfort in dealing with the agent, move to another one.

  • Cost of insurance - Based on your age, type of policy and features, and the amount of insurance to be purchased, compare one insurance company with the others. Find out one which offers a better coverage.

  • Claims - A national claims database will give you the complaints (if any) against an insurance company. You may want to check to find if the company you are considering buying from is listed for consumer complaint.

How does a life insurance company choose you?

Your application for a life insurance policy has to go through the insurance underwriting process before it's approved. The underwriters evaluate the risks associated with your application and forward it to the insurance processing department of the company.

Factors that influence underwriting procedure for Life Insurance
  1. Age of the individual to be insured.
  2. Gender of the person
  3. Pre-existing medical conditions
  4. Medical records of the family
  5. Smoker or non-smoker
  6. Mental health of the person
  7. Occupation
  8. Hobbies or lifestyle habits (activities like race car driving, mountain climbing or bungee jumping might be marked as risky)
  9. Driving records
  10. Credit history
  11. Selection of coverage limits, benefits etc.
  12. Medical reports after thorough health check-up including tests like :
    • > Blood pressure level
      > Blood sugar level
      > Cholesterol level
      > Weight of the individual
      > Urine tests
      > Blood tests
      > EKG/ECG
      > X-Rays
      > Stress tests etc.

Click here to know how the above mentioned factors affect the rates of a life insurance policy.

Your life insurance policy might not come to your assistance in your lifetime. However it'll help securing the future of your loved ones when you won't be there to take care of them. A small amount spent at regular intervals will thus be able to give you the sense of security, as you hand over the risks to your insurer. Top

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My parent bought whole life insurance that pays dividends many years ago. The sales representative told my parent that she can stop paying premium in approximately 12 years because the it policy would be able to pay for itself at that time. And at the same time the policy will make annual distributions to my parent. What does that mean? Is there such thing?

The reason why I'm asking is because they're into the 13th year now and they are still paying the expensive premium. When I called the representative, they told me that the account has accumulated certain cash value and dividend, but the accumulated dividend can only cover approximately 3 years of premium.

I did some research, I understand that the cash value is like equity, but is it truly equity like we really own the money? if yes, when can we cash out the equity? if we cash out, the policy terminates? I understand that when the insured dies, the beneficiary would get paid the face amount, but what happen to the cash value? who gets it? Also, what happen if the insured dies of old age (not due to accident), is it still covered by the policy? what happen to the cash value?

Thanks in advance for your help.

Total Comments: 282

Posted: Fri Jun 17, 2011 06:56 am Post Subject: Dishonest agent

I had a variable life insurance that I bought from an agent in Orange County, CA. I decided to stop funding the policy and asked the agent to take an action to stop auto-payment 8 days prior to the payment day. He did not do anything and consequently my monthly payment was made. He then said his policy requires 10 days to process the request. I called the institution (Mass Mutual) and heard that they only need 2-3 days for processing, and have not got any information about my account from my agent. I explained this to my agent and requested to process the refund. He agreed to do it but did not contact me at all for the next two months. I finally got him after asking my friend, who is also a client of my agent, asked my agent to contact me. My agent said my emails for last two months must have gone to the junk mailbox, which is totally unbelievable. My agent emailed me several time before, and I was still receiving his new letter. Further, if my emails were indeed directed to the junk mail box, that means he intentionally sent my emails to junk and thus avoid my contact on purpose. I believe this is totally against his responsibility and duty. He further said he will contact Mass Mutual but if I do not hear from him, that means no refund. At this point, I was so mad and shocked. I invested almost 10K for last 16 months and this is how he treated me at the end. I wonder if there is any way that I can file a complain or sue him so that he will be corrected or out of business. I appreciate any comments. Thank you.

Posted: Fri Jun 17, 2011 03:45 pm Post Subject:

I assume you are no longer funding the policy?

Before you make any formal complaints, read the information available from FINRA here:

FINRA makes the following recommendation to investors:

Investors' Responsibilities

Before you make an investment, be prepared, do your homework and don't be caught off-guard. Investigate thoroughly any potential investment before you make it, as well as the broker and securities firm that are recommending it to you. Research all materials available to you, such as a prospectus, annual report and other offering information. Get to know the firm and the individual you are dealing with. Beware of exaggerated claims and high-pressure tactics. Become better informed about investing by attending classes, seminars or checking the business reference section of your public library.

If you choose to rely solely on a broker, make sure the firm has correct information regarding your financial situation and investment objectives and that the firm and broker fully understand your limits on risk.

And, if you believe you have been wronged, act quickly. It is your responsibility as an investor to seek redress for any loss. Immediately question any transaction or entry that you do not understand or did not authorize with your broker. Keep good records—the better records you retain, the more successful you will be in resolving your claim.

Organize your records logically so they provide a chronology of events. Following are a list of documents that could be useful in pursuing a potential problem:

account statements
confirmations of transactions
notes of discussions with your broker
copies of correspondence
written material (e.g., prospectus or offering materials) provided to you by the broker
any research material you may have received from the broker

Don't be timid or ashamed to complain. The securities industry needs your help so it can operate successfully.

You should CALL the agent or, better yet, GO TO HIS OFFICE and speak to him face to face about the matter. This is no longer an email situation.

The agent actually has little responsibility in this matter. If you wanted to stop payments to your policy, you should have contacted Mass Mutual directly. While the agent was remiss in not handling your request in a timely manner, your contract may have language in it that tells you to contact the insurance company directly to discuss such matters.

You will probably not be entitled to a refund of the full premium paid to the insurance company -- only the market value of the amount that eventually made it into the separate account. Given current market conditions, you probably have a "gain" in the separate account, but there is a difference between the premium paid and the amount that eventually finds its way to the separate account. If you are considering cancelling your insurance, within the first two years, you will be entitled to a refund of a portion of the sales charges, but not the other charges related to the insurance portion of the contract, since there was coverage provided during this time.

Premiums paid are first reduced by a sales charge (commonly 8%), then by cost of insurance, then by administrative expenses and/or policy fees, then by other fees in the separate account itself. So today's "value" may still be significantly lower than the premium paid.

Now, having said that, because your Variable Life policy is also a securities product, here's what you may want to say to the agent about the matter when you talk to him:

"You failed to execute my customer order in a timely manner. Additionally, you failed to respond to my several written customer inquiries. And you privately agreed to reimburse me for the premium taken from by bank account, which you have not done. These are all violations of FINRA rules, and I am ready to make a WRITTEN COMPLAINT about these matters to you, to Mass Mutual, and to FINRA."

As a Registered Representative, your agent should immediately respond to this with huge apologies and an appeal to you not to put anything in writing. Written complaints must be reported to his "principal", are a "disclosure" event on his "Form U-4" and NEVER go away, even if eventually determined to be unjustified. Some securities firms will terminate (or not hire) a Registered Representative who has even one such complaint recorded on their U-4.

If, on the other hand, your agent is not phased by your words, and instead feeds you more BS, then you need to immediately send him that written complaint, and you need to send a copy to Mass Mutual, and another copy to FINRA along with your formal complaint. See this web page for more information:

In your written complaint, you want to state what your original "order" was, and what your expectation was. You want to mention specific dates of your first request to stop the automatic payment, every other oral communication, phone call, and/or email, and include printed copies of every email you sent (you do have those, don't you?) -- which will show the email address to which they were sent and the subject line.

If your agent made a private agreement to refund money to you, and has not, it is likely that he has no ability or intent to do so, and may never had any ability or intent to do so, and this, too, is a problem between him, his securites firm, and FINRA, so it definitely needs to be mentioned in each of your written complaints.

When it comes to email correspondence, FINRA requires Registered Representatives to maintain correspondence files, and that all email correspondence must be maintained in a trackable system that does not generally permit messages to be deleted. Does that prevent emails from ending up in a "junk" folder? No, but even those junk emails have to be read and responded to as necessary, and to be moved to an appropriate folder. Such "junk mail" can only be deleted if they genuinely have nothing to do with a Registered Representative's business. So if your agent is not maintaining his correspondence files as required, this will be an additional problem for him.

FINRA takes complaints very seriously, and acts fairly quickly on all complaints that appear to have merit. You have not been "defrauded", but you may have suffered a "loss" as the result of your RR's inaction. FINRA cannot guarantee that you will be indemnified, but they will do what they can to make that happen, if possible.

The effect of your complaint will be to get everyone's attention. The insurance company will be on notice that it may not be supervising its agents closely enough, as they are required to do, the agent will be on notice that FINRA will be contacting him shortly for information, and FINRA will be on notice that all of this has happened. You can look at to get a better idea of the action that FINRA takes in response to complaints from the public or others.

Posted: Fri Jun 17, 2011 04:49 pm Post Subject:

A similar, but not identical, situation resulted in a short suspension and substantial fine imposed on a Registered Representative, as reported by FINRA in its January 2011 Disciplinary Actions report:

Leslie David Kruse (CRD #4541523, Registered Representative, Sioux Falls, South Dakota) submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000 and suspended from association with any FINRA member in any capacity for 10 business days. The fine must be paid either immediately upon Kruse’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Kruse consented to the described sanctions and to the entry of findings that he entered into a settlement agreement regarding a customer complaint without authorization from, and without notifying, his member firm. The findings stated that Kruse sold a customer a variable life insurance policy which required payment of monthly premiums by automatic withdrawal from the customer’s bank account. The findings also stated that at a later date, the customer complained to Kruse that he had not been aware of the monthly withdrawals from his bank account and about the performance of the policy. The findings also included that the customer threatened to direct his complaint to the state insurance commissioner if Kruse did not resolve the situation to his satisfaction; Kruse then paid the customer $4,000 to settle the complaint.

(emphasis added)

FINRA does not ignore complaints!

Posted: Fri Jun 17, 2011 05:14 pm Post Subject:

Is it ok for a non-registered person, Max Herr, to give advice on registered products in a public forum?

Max, you are still the king of posting information as factual that simply is not. Sales charge commonly 8%? I challenge you to find any company that sells a decent amount of vul that charges that.

Anonymous, the easy way to handle this is to simply call his office and speak to his GA.

Posted: Sat Jun 18, 2011 01:34 am Post Subject: Can I sue an insurance company to cancel a policy?

I just discovered that my ex-husband has purchased a sizeable life insurance policy in my name where he is the beneficiary. The policy is now active without my approval or signature and he refuses to cancel the policy. I receive monthly payments from him and owe him no debts. I wrote directly to the insurance company a week ago, explaining the situation. They have not responded. Can I sue the insurance company to force termination of the policy?

Posted: Sat Jun 18, 2011 02:07 am Post Subject:

Asked and answered in the Auto Forum. You cannot sue the insurance company, but your state's insurance code may require that the policy be voided. You should get a response from the insurance company in the next 7-10 days. Then you may want to come back here with more questions.

Posted: Sat Jun 18, 2011 04:51 am Post Subject: Can I sue an insurance company to cancel a policy?

Thank you. I will make sure to repost in Life Insurance Forum.

Posted: Sat Jun 18, 2011 05:16 am Post Subject:

Max, you are still the king of posting information as factual that simply is not. Sales charge commonly 8%? I challenge you to find any company that sells a decent amount of vul that charges that.

You are a FOOL! I challenge you to name an insurance company that doesn't charge 8%. In fact, if you look at some VUL prospectuses, you might even see that they show first year "return on investment", in a worst-case scenario, approaching negative 30% of premium, after sales charges and other policy "expenses" are taken into account.

And, truth be told, there is no real limit on VUL sales charges (they must simply be "reasonable" and not exceed the contractual lifetime limit of 9%), and this is what allows some companies to charge more than that in the first one or two years -- I've seen up to 20% -- as long as the total sales charges do not exceed 9% over the first 20 years of the policy. That's a FINRA regulation that applies to contractual plans, of which VUL is one type.

You delight in throwing lots of stones, but you never back any of it up with facts.

Posted: Sat Jun 18, 2011 05:26 am Post Subject:

Is it ok for a non-registered person, Max Herr, to give advice on registered products in a public forum?

Try it and find out. No one is soliciting VUL sales here.

Posted: Sun Jun 19, 2011 02:01 am Post Subject:

Max, why can't wan930 sue?

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