Life Insurance Blog | Efinancial

Five Common Life Insurance Questions

  

 Email Article  

Tweet  

  

  

When obtaining life insurance quotes, lots of questions can arise. We’ve heard them all, but there are some that we hear more often than others. We’re sharing the top five life insurance questions and the answers below.

 1. Why Do I Need Life Insurance?

Life insurance is the safety net to protect your family should the worst happen. Everyone should have life insurance, for reasons that range from income replacement to paying for funeral expenses or mortgage payments. 

2. How Do I know How Much I Need?

A life insurance calculator can help you determine how much you need, but a general rule is to factor in the following:

• Your income
• Any debts, including mortgage payments, loans and credit card debt
• Funeral expenses
• Future college education for children

 3. What are the Different Types of Life Insurance?

There are two basic types of life insurance, term life insurance and permanent life insurance. Term life insurance is a policy that lasts for the length of a specific term, typically for 5, 10, 20 or 30 years. A permanent life insurance policy lasts for the entire lifetime of the policyholder, even if they live to 100. Term life insurance is typically a less expensive option, but a permanent life insurance policy can have a cash value option, which helps you save money over time.

4. Can I Have More than One Policy? 

Yes, you can have several life insurance policies. In fact, if you are relying only on a life insurance policy through work, it’s recommended to get another policy. It’s common to have a permanent life insurance policy for long-term needs and a term life insurance policy for more immediate needs, like mortgage payments or college education.

5. How Much Does Life Insurance Cost?

The cost of a life insurance policy can vary, depending on your age, health situation and other factors. A life insurance policy will be cheaper when you are young, because you are typically in better health and not nearing death. As you grow older, the premium rates usually increase.

To get an accurate picture of how much of an investment life insurance will be for you, take the time to get a life insurance quote.

Do you have more life insurance questions? Contact us today.

What to do if you Receive a Poor Risk Assessment during the Life Insurance Underwriting Process

  

 Email Article  

Tweet  

  

  

If there are issues or red flags with your application, the underwriting will be advised by a medical director working for the company as to how they should deal with the case.  Cases of a life insurance application being completely denied are pretty rare.  The odds are much more likely to be that an insurance provider will offer you a policy with a higher premium, decreased benefits, or both. 

Do not be too alarmed about getting a poor risk assessment; there are often some things you can do to improve your health as well as get lower premiums in the future. 

Meanwhile, here are a few tips for dealing with a borderline case in underwriting:

Find Out if You Can Present More Information

If the underwriter is concerned about your case, you will typically be given the opportunity to provide new or additional information to address the issue.  Get as much information about the problem as possible and then take that back to your doctor. 

If you’re considered too risky to insure (or even just want clarification on your rating), write a letter to the insurance firm requesting an explanation.  The Fair Credit Reporting Act requires their response, and they will send the information to your doctor for closer scrutiny. 

They are not obligated to get into the small details with you, as they are not your doctor, but you should be able to get a general reason and the specific results of all medical examinations undertaken.

Open Up the Lines of Communication

Your own perception of any medical conditions you have will naturally be more optimistic than that of the insurer’s. 

Remember that everyone involved comes at a medical condition from a different angle.  As an insurance firm, their business is run on tight margins of risk, and they are paid to be cautious about these things.  With this in mind, it’s important to realize that they might not clearly understand what is going on and simply need some clarification. 

Communication can go a long way in a case like this.  Just speak to the insurance provider.  Find out if there is anything you can do to have them look on your case more favorably or whether there is more information that would help.  Open up the lines of communication.

Do Your Homework Ahead of Time

Sometimes you have merely picked the wrong insurance company. 

Different companies often specialize in providing insurance to people with a particular condition because they understand the risk involved and how to deal with it. 

With this in mind, if you are well aware that you have a tricky medical condition, do the homework ahead of time and apply with a company more likely to feel comfortable with your case.

On Tobacco Usage and Insurability

Insurance firms almost always charge higher premiums to those who use tobacco but are also well known to vary greatly in the way they deal with tobacco usage.  Varying criteria may apply to the different types of tobacco – cigarettes, chewing tobacco, cigars, etc – frequency of use, and length of time passed since last usage. 

Of course, in order to qualify as a non-smoker, you must test negative for nicotine in your medical exam.

Watch Your Weight

Weight deserves special mention because in all but the most extreme cases it is well within your control.

Your build has a significant effect on your life insurance rating, and for good reason.  It comes to no surprise for most that obesity leads to chronic diseases later in life.  The good news – even small decreases in weight can lead to lower premiums.

Try your best to get it within control.  Even after your policy goes into effect, it may be possible get your premium lowered based on this information down the road.

Life insurance is extremely important, and you don’t want to keep putting it off, so make sure to take appropriate measures in order to get the coverage that’s right for you and your budget. 

How the “Conditional Receipt” Provides a Temporary Life Insurance Solution

  

 Email Article  

Tweet  

  

  

Facing the reality of life insurance shakes a lot of people up.  It’s a necessary component in any modern financial plan, and it’s the right thing to do when people you love depend on you, but sitting down for a moment and facing your own mortality is a humbling experience.  Once you gather your courage and take that leap, you fully realize how a lack of coverage puts your family at risk.

From that moment on, you feel as if you can’t rest until they are officially protected.

But a life insurance application for a traditionally medically underwritten life insurance is not instantaneous.  Before the application decision is made you first go through underwriting, an analysis used to determine eligibility before you receive a decision. 

It takes time – sometimes a month or two.  It may require looking into your background to verify details.  It will certainly include a medical exam.  If you have a medical condition or if the underwriting department comes up with something that needs to be cleared up, it can take considerably longer.

This can really overwhelm some people and leave them feeling vulnerable.  What if the unthinkable occurs and you pass away before your life insurance application is complete? 

This is where the concept of the conditional receipt, or binding receipt, comes in handy.  Usually, as soon as you submit your application, you have the option to put down your first premium payment, equal to the amount you stand to pay if your application is accepted.  This is no meaningless act; it actually “binds” your coverage to the date of submission (assuming the underwriter does find you eligible).

So, if you are in pristine physical condition when you apply for your policy and then lose your life in an accident while waiting to hear back from the insurance provider, the underwriter continues with your case.  If it turns out you would have been accepted, the company then awards the death benefit to your beneficiary, even though you only made one premium payment. 

If it turns out you were ineligible for the policy, however, the beneficiary will simply get your premium payment back.

This mechanism ensures your family will get paid out and that you have some type of coverage while waiting for your application to clear.  Of course, there’s always the risk of your application being refused; this is why it’s important to know your health status and be completely upfront and honest about everything during the application.  Remember that it is pretty unlikely to be completely denied if you don’t have a terminal, incurable illness.

Keep in mind that there are sometimes other mandatory conditions involved.  For example, your insurer may declare the conditional receipt invalid until after your medical exam – they will let you know ahead of time, so no surprises here.  Also, in most cases, conditional receipts are only allowed on policies for $250,000 or less.

Some experts point out that holes exist in the protection offered by conditional receipts.  For instance, if your application would have been accepted but not at the rating you applied for, the conditional receipt is then considered invalid and the death benefits go unrewarded. 

For a more stable solution, some companies offer the option of buying “temporary life insurance” which also goes into effect while waiting for application approval.  The considerable advantage is that if you are taken by an accident during this time, the death benefit is given to your beneficiary even if it turns out your application would have been denied.

While more expensive, it obviously offers far more peace of mind than a conditional receipt.

Have you taken the time to protect your family from the potential financial loss and suffering associated with untimely death?  It isn’t always easy to think of these things, but it’s a responsibility too large to ignore.  Find out how you can protect them by speaking with an insurance expert today.

Why is The Contestable Period Important When Buying Life Insurance?

  

 Email Article  

Tweet  

  

  

You are ready to purchase life insurance.  Fantastic.  Isn’t it reassuring to know that your affairs will be in order and no loose ends will be left behind?  Death is uncomfortable to think about, but we can find solace in knowing our families, our businesses, and our estates are protected.   

What about the incontestability clause?

Misconceptions about the contestable period often cause skepticism even after new policyholders secure a strong policy.  Let us clear away some of the hearsay.

Here is how the clause applies.  It basically gives insurance companies two years to contest the validity of a policy even after it has gone in-force.  So within those two years, they can go back and contest your application if they find you were accepted under false pretenses (if you lied to get approved).  If so, the policy may be voided. 

In addition, insurers may deny life insurance claims resulting from a death occurrence within those two years if the applicant lied to get approved, especially in a case where the facts omitted pertain to a condition that ended in death. 

Indeed this is no small matter.  In recent times, insurers have often been allowed to deny claims even after the contestable period was up if new information revealed an omitted condition that led to death.

What about suicide? 

Suicide clauses apply here as well.  Usually, if a policyholder commits suicide within the first two years of a policy, the death benefits go unpaid; instead, the premiums are refunded to the beneficiary. 

After the two years are up, however, death benefits are paid even if the policyholder dies at their own hand.  All facts considered, this is a pretty fair gesture on the part of insurance companies.

A lot of people are pretty weary about the contestable period especially.  Skeptics worry that companies look for holes in life insurance applications every time a policyholder passes away within those two years so they can deny the claim and save money. 

After all, who remembers every single detail about their medical history when applying for life insurance, right?  Surely there must be holes in every application...

This couldn’t be farther from the truth.  Contestable periods exist for one reason and one reason only – to prevent and cut back on instances of fraud.  Misleading information in an insurance application leads to the company charging as if a condition didn’t exist.  On an industry scale, when these higher risks go uncovered, there’s no money to cover deaths caused by them. 

So the cost of fraud becomes the responsibility of the insurance agency and is often passed on to other policyholders.  Dishonesty not only gets the individual a lower rate but compromises the entire system. 

Insurers simply must be diligent about rooting out these challenges to the system and doing everything in their power to eradicate them.

Also, it’s important to realize that not all scenarios end in the insurance company refusing benefits.  In cases where the insurance application would have been accepted for a lesser amount, they usually pay out the face amount of the lesser policy minus the extra premium amounts they would have received had the applicant been honest.

How to “protect” yourself against your policy being declared invalid? 

Once again, these companies are not out to wrong you by any means.  So, number one, just be honest about everything in your application process.  Divulge all medical problems and risks.  Resist the urge to cut your cigarette intake in half, or worse, to take a break from cigarettes long enough for the nicotine test and claim you’re a non-smoker.  Tell the company the truth about your more dangerous activities as well. 

If unsure about the exact details of your medical history, it is all there in your files.  Find out.  Then you can sleep well knowing not only that you told the truth but that your beneficiaries will be promptly paid if you die in an accident.

Rather than think of the incontestability clause as something worthy of suspicion; think of it as a mechanism that helps make insurance possible by protecting the system from fraud.  Without it, you might not have access to these means of financial security for your family or your estate in the event of your absence. 

It’s worth appreciating.

What Happens With Your Life Insurance Benefits if You Pass Away?

  

 Email Article  

Tweet  

  

  

Have you considered how your life insurance benefits will be dealt with in the event of your
death?  Have you devised a plan for your beneficiary so there is no confusion and you can rest assured the claim will be filed and the benefits paid out?  How will you ensure the policy is not forgotten by your loved ones?  Most policyholders at least want to know what the process of filing a life insurance claim is like so they can tell their beneficiaries what to expect. 

It’s Up to You to Get the Process Started

This is crucial.  Make sure your beneficiary knows about the life insurance policy so it does not go unclaimed; devise a foolproof plan for getting the paperwork to them.  If you’d rather not divulge anything about the policy now, leave instructions with your attorney to notify proper parties when the time comes. 

Also, keep the policy in a safe place where they can easily get to it, being careful not to store it somewhere that would be off-limits in the event of your death.  If you have additional forms of life insurance – travel life insurance, credit life insurance, mortgage life insurance, etc – additional preparation is needed to ensure these matters are dealt with as well.

It is the beneficiary’s responsibility to take action and file the claim, which involves contacting the insurer to request the proper paperwork and producing a death certificate, as required by law.  Once the paperwork is reviewed and as long as there are no hold-ups, payment is swift and straightforward.  In most cases, the entire process takes a week or two.

However, if the insurer decides to investigate the claim, it can take months.  This is rare. 

Why Would a Provider Need to Investigate? 

Most investigations concern the contestable period or the suicide clause.  Simply put, these mechanism are in place to protect the insurance company, so they will use them when needed.

The Suicide Clause

This clause states that if the policyholder commits suicide within the first two years of the policy, the death benefits will not be paid out.  Suicides after the two-year period are covered.

The Incontestability Clause

The Incontestability Clause allows your insurer a contestable period of two years from the start of the policy to look for material misrepresentation.  If you hide something from them that would have influenced the decision to approve the policy or resulted in a higher premium, they have grounds to contest claims. 

This is especially true if the circumstances hidden contribute to the policyholder’s death.

Material Misrepresentation Has Two Possible Outcomes

If the company merely would have charged a higher premium had they known about the risk factor, they may simply calculate the amount of insurance the paid premiums would have bought and pay out that amount instead.

In a worst case scenario, however, the policy can be deemed invalid and the claim completely denied.  For obvious reasons, this is a devastating decision when your beneficiary is counting on those funds, which is why it is essential to never jeopardize your policy by hiding details relevant to your case.

How Will Your Death Benefits be awarded?

Many policyholders opt for the lump sum settlement option.  In this scenario, the entire death benefit is paid out to the beneficiary at once, and they retain full control over how to use that money. 

You also can specify a life income option, which is paid out over the beneficiary’s life.  This ensures a lifelong income stream for the ultimate peace of mind.  Yet another option is the specific income provision, which releases the money under a specific, predetermined payment plan. 

Or perhaps you would prefer the interest income option.  In this case, the insurer only pays out interest on the death benefit, which remains in their possession.  When the beneficiary passes away, the death benefit is then paid out to a secondary beneficiary.

If no settlement option is specified when taking out your policy, the beneficiary gets the choice when they make the claim.  No matter the choice, death benefits are tax exempt, so the money is tax-free for your beneficiary.

For more information on your life insurance policy, make sure you contact Efinancial with your questions today. 

Do You Know What Your Home Insurance Covers?

  

 Email Article  

Tweet  

  

  

The Insurance Information Institute notes that a standard home insurance policy provides four kinds of coverage. Those include protection for a home itself, personal belongings, liability concerns and additional living expenses should you but put out of your home by covered damages.

Coverage fort structural damage through a home insurance policy includes protection against fires, hail and lightening, along with other calamities listed in an agreement.

“It will not pay for damage caused by a flood, earthquake or routine wear and tear,” the Institute said. “When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.”

The Insurance Information Institute said that belongings are generally provided for at 50 to 70 percent of the total home insurance amount. In order to ensure consumers have enough coverage for their possessions, they should take an inventory of their items.

Home inventories should include more than just a list of possessions. Receipts, pictures and even videos can help if a consumer should have to make a claim in the future. Experts note it should be kept in a safe place, such as in a bank vault or with a trusted friend or relative.

Liability coverage protects policyholders against lawsuits tied to injuries or damage to other people’s property. It will also pay for court costs for as much as is offered through the policy.

Liability limits generally start at about $100,000.  However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage.

To be protected against floods or hurricanes, consumers should pursue additional coverage. Both types of homeowners insurance can be discussed with the home insurance specialists of Efinancial.

End-of-Life Decisions: Life Insurance Comes Before a Will

  

 Email Article  

Tweet  

  

  

The answer is that the beneficiary designations you make in a life insurance policy will supersede a will.  It’s important to talk to your life insurance representative if you want to review or amend any of the end of life provisions you have established.

Questions often come up concerning the difference between a will, a power of attorney, a health-care proxy and a living will.

A will determines what happens to your assets after you die.  A power of attorney, in part, authorizes someone to take care of your bills. A health-care proxy appoints someone to make medical decisions and a living will states what decisions you do and don’t want that person to make.

All of these documents are important.  Do you have them all in place?

Here’s a question that’s not so difficult.  Where’s the best place to shop for life insurance online?  That’s an easy one. Compare life insurance rates by clicking, picking and sticking with us!

Can Soldiers Get Life Insurance in Time of War?

  

 Email Article  

Tweet  

  

  

Economics Bestseller “Super Freakonomics” Answers “Why Suicide Bombers Should Buy Life Insurance?” (Hint: To make it harder to datamine them!)

  

 Email Article  

Tweet  

  

  

Now, the distinguished writing team of  University of Chicago economist Steven D. Levitt and journalist Stephen J. Dubner has released “Super Freaknonmics: Why Suicide Bombers Should Buy Life Insurance.” The mix of sharp thinking and great storytelling uses the same no holds barred, street-smart approach to exploring societies ills, asking (and answering) questions like” “What’s the best mathematical way to catch a terrorist?” “What do hurricanes, heart attacks and highway deaths have in common?” Or, “Why are doctors so bad at washing their hands?”

Illustrating the statistical science of datamining, the authors showcase research on how economists use information to both unearth and debunk startling trends in society. They examine whether TV has caused a rise in crime? Or whether hospital emergency rooms can do more harm than good for the average patent? Or whether  eating Kangaroo save the planet?  One such case study looks at the efforts to identity terrorists from a databased standpoint by looking at personal financial trends, including life insurance, to tell them apart!

For example, when looking at the metrics of known terrorists or those most likely to become a terrorist, the candidates were predominately men between the ages of twenty-six and thirty-five that were disproportionately likely to: own a mobile phone, be a student and rent, rather than own, a home.

There were also some prominent negative indicators. The data showed that a would-be terrorist was disproportionately unlikely to: have a savings account, withdraw money from an ATM on a Friday afternoon, or buy life insurance.

The no ATM-on-Friday metric would seem to be a proxy for a Muslim who attends that day’s mandatory prayer service. The life insurance marker is a bit more interesting. Let’s say you’re a twenty-six-year-old man, married with two young children. It makes sense to buy some life insurance so your family can survive if you happen to die young. But insurance companies don’t pay out if the policyholder commits suicide. So a twenty-six-year-old family man who suspects he may one day blow himself up probably isn’t going to invest money in life insurance.

In the above example of a bank examiner was able to use these financial and lifestyle ijnfo-metrics to take a database of millions of bank customer and generate a list of about 30, uninsured, and highly suspicious individuals! That’s Super Freakonomics!

Doing a Life Insurance Needs Analysis

  

 Email Article  

Tweet  

  

  

Figure the…

1. Total annual needed by your spouse and children in the event of your death.
2. Number of years you would like to provide this income to your spouse or children.
3. Your gross income annually.
4. Your date of birth.
5. Your spouse’s gross income.
6. Would you like to pay off any outstanding debt? For example, mortgage, loans, credit cards, college. If so, enter the debt amount.
7. Burial expenses. That can include funeral, probate, and any other legal matters.
8. Total amount of your existing life insurance.
9. Interest rate assumption. This assumes the interest death benefit proceeds are invested.
10. Press Total.