Life Insurance Buyer's Guide Life Insurance - National Association Of .

Life Insurance Buyer’s GuideLifeInsuranceBuyer’s Guide 2018 National Association of Insurance Commissioners

Life Insurance Buyer’s GuidePrepared by the National Association of Insurance CommissionersThe National Association of Insurance Commissioners is an association ofstate insurance regulatory officials. This association helps the various insurancedepartments to coordinate insurance laws for the benefit of all consumers.This guide does not endorse any company or policy 2018 National Association of Insurance Commissioners

Life Insurance Buyer’s GuideBefore You Buy Life InsuranceUnderstand What Life Insurance IsLife insurance pays a death benefit if you diewhile the policy is in effect, in exchange forpremiums you pay before your death. Youcan use the death benefit to protect againstfinancial hardships such as loss of your income, funeral expenses, medical or nursingcare expenses, debt repayments, and childcare costs after your death. You can getinformation from the NAIC InsureU LifeInsurance website -www.insureuonline.org/insureu type life.htmIf You Need Life Insurance, DecideHow Much Coverage to BuyHow much life insurance to buy depends onthe financial needs that will continue after yourdeath. Examples include supporting your family, paying for child(ren)’s education, and paying off a mortgage. Some questions you maywant to ask about your own needs include: Does anyone depend on me financially? How much of the family income do I provide? How will my family pay my final expensesand repay debts after my death? Do I want to leave money to charity orfamily? If I have life insurance through my employer, is it enough to meet my financialobligations?The answers to these questions can help youdecide how much coverage you need. Aninsurance agent, financial advisor, or insurance company representative can help youevaluate your insurance needs and give youinformation about available policies.If You Already Have LifeInsurance, Assess Your CurrentLife Insurance PolicyIt’s important to compare your current policywith any new policy you might buy. Keep inmind that you may be able to change yourcurrent policy to get benefits you want. Also,know that any changes in your health mayimpact your ability to get a new policy or thepremium you’ll pay. Don’t cancel your currentpolicy until you get the new one.Also, while you may have free or low-cost lifeinsurance through your employer, the deathbenefit usually is less than you need. And ifyou leave the employer, you may not be ableto take this coverage with you. 2018 National Association of Insurance Commissioners1

Life Insurance Buyer’s GuideCompare the Different Typesof Insurance PoliciesThere are many types of life insurance policies. You should choose a policy with features that fit your individual needs. Somethings to consider are: Term Insurance vs. Cash Value Insurance. Term insurance is intended toprovide lower-cost coverage for a specific period of time (“a term”). If you wantcoverage for a longer period of time, suchas for your lifetime, cash value insurancemay be more cost effective. Most termpolicies don’t build up cash values thatyou can use in the future.2 Renewable Term vs. Non-renewableTerm. Most term life insurance coverage can be continued (“renewed”) at theend of the term, even if your health haschanged. If you renew a term policy, thenew premiums are higher. Ask what thepremiums will be before you renew thepolicy. Also ask if you’ll lose the right torenew the policy at a certain age. ANon-renewable term policy can’t be continued. You’ll have to apply for a newpolicy if you still want coverage. Whole Life vs. Universal Life. Whole lifeand universal life insurance are two typesof cash value insurance. A key differencebetween the two is how you pay for thecoverage. You typically pay premiums forwhole life insurance according to a setschedule. In a universal life policy, youcan choose a flexible premium paymentpattern as long as you pay enough tokeep your policy in force. Variable Life vs. Non-variable Life. Theinvestments you will choose (suchas stock and bond funds) in a variable life policy directly impact yourcash value. These policies havethe greatest potential to build cashvalue but also the greatest risk oflosing cash value. Non-variable lifepolicies often have guaranteed minimums for some features (interestor cash value, for example) but notall. Non-variable life policies alsohave less potential to build cashvalue than variable life policies. 2018 National Association of Insurance Commissioners

Life Insurance Buyer’s GuideBe Sure You Can Affordthe PremiumBefore you buy a life insurance policy, besure you can pay the premiums. Can youafford the initial premium? If the premiumincreases later, will you still be able to affordit? The premiums for many life insurancepolicies are sensitive to changes in the company’s investment earnings, claims costs,and other expenses. If those are worse thanexpected, you may have to pay a much higher premium. Ask what might be the highestpremium you’d have to pay to keep yourcoverage.Understand theApplication ProcessYou can apply for life insurance through lifeinsurance agents, the mail, and online. Inaddition to basic information, such as yourname, address, employer, job title,and date of birth, you’ll be asked formore personal information. Depending on the type of policy, the insurermay require you to see a doctor,answer health-related questions, orhave a medical professional come toyour home or office to assess yourhealth. Usually a policy that doesn’trequire detailed health informationwill cost more and provide less coverage than one that does.Choose a BeneficiaryA beneficiary is the person(s) or organization(s) you name to receive your life insurance policy’s death benefit. You’ll need toknow the Social Security or tax identificationnumber for all beneficiaries. Experts adviseyou not to name a minor child as a beneficiary. Insurance companies won’t pay a minor.Instead, consider leaving the money to yourestate or trust.Evaluate the Future of Your PolicyDoes your policy have a cash value? In somecash value policies, the values are low in theearly years but build later on. In other policiesthe values build up gradually over the years.Most term policies have no cash value. Askyour insurance agent, financial advisor, or aninsurance company representative for an illustration showing future values and benefits.It’s important to tell the truth on theapplication. The insurance companywill check your answers so reviewthe application before you sign. If theinsurance company discovers falsestatements on your application afterit issues your policy, it could reduceor cancel your coverage. 2018 National Association of Insurance Commissioners3

Life Insurance Buyer’s GuideAfter You Buy Life InsuranceRead Your Policy CarefullyAfter you carefully read your policy, youshould be able to answer the following important questions: Is your personal information correct? Do premiums or policy values vary fromyear to year? What part of the premium or policy valueisn’t guaranteed? How will the timing of money paid andreceived affect any interest the policymight earn?Your insurance agent, financial advisor, or aninsurance company representative can helpyou understand anything that isn’t clear.If you’re not satisfied with your new policy,you can return it for a full refund within a certain period, usually 10 days after you receiveit. The review period usually is stated on thefirst page of the policy.4Review Your Life InsuranceProgram Every Few YearsReview your policy with your insurance agent,financial advisor, or an insurance companyrepresentative every few years to keep up withchanges in your policy and your needs. Have the premiums or benefits changedsince your policy was issued? Do the death benefits still meet yourneeds? Do you need more or less coverageafter life events, such as birth, adoption,marriage, job change, death, or divorce?The insurance company can provide policystatements and illustrations to help with thisreview. As the policy owner, you can changebeneficiaries at no cost. Be sure to reviewyour beneficiaries every few years, especially after major life events that affect your lifeinsurance needs. 2018 National Association of Insurance Commissioners

Life Insurance Buyer’s GuideNotes 2018 National Association of Insurance Commissioners5

Life Insurance Buyer’s GuideNational Association of Insurance Commissioners1100 Walnut Street, Suite 1500Kansas City, MO 64106-2197(816) 842-3600 2018 National Association of Insurance CommissionersLI G - LP -18 2018 National Association of Insurance Commissioners

Life Insurance uers uide Naional ssociaion of Insurance Commissioners Compare the Different Types of Insurance Policies There are many types of life insurance pol-icies. You should choose a policy with fea-tures that fit your individual needs. Some things to consider are: Term Insurance vs. Cash Value In-surance. Term insurance is intended to