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Should I get life insurance on my own or through work or occupation?
Either or both, depending on your own personal needs. Build your financial plan around personal life insurance that you buy on your own and can control. Then your group coverage can be used to add to your personal coverage and help meet your total insurance needs. You should review your plans regularly and consider your current needs in light of job changes or other things that affect your group coverage. You may decide that the insurance coverage you have through your employer is adequate by itself. But you should keep in mind that this coverage may not be permanent. When you are no longer employed, you are no longer covered through the group plan. So you need to consider what your total insurance needs are, and then you can decide whether you need personal life insurance, group life insurance, or both.
Some companies offer group life insurance that continues after retirement. The amount of coverage typically declines in steps over several years after retirement. Eventually it ends or drops to a final, reduced amount. Companies that do not offer post retirement life insurance coverage generally have an option to convert to permanent (non-term) insurance within 30 days of retirement without evidence of insurability and without a medical exam.
I am being laid off. Will my employer's group coverage continue during my layoff period?
It depends. Is your layoff temporary or permanent? Does your company have a salary continuation plan (as some major industrial companies do)? If you work for a company that has such a plan, you will continue to be paid some or all of your wages during the layoff, and your benefits will continue. If you do not have such a plan, but the layoff is considered short term and temporary (such as when a factory is shut down for a few weeks for maintenance or because product inventories have to be trimmed) your life insurance and other benefits will probably continue. On the other hand, if you are being laid off permanently, with no expectation that you will be rehired soon, then your benefits will terminate. You will then have an option to covert your life insurance to a permanent individual policy within 30 days. Other benefits may also have a conversion option, such as benefits under a COBRA plan, which are required by law.
Yes. Most group life insurance policies provide for an option to covert to a permanent individual policy within 30 days without a medical examination or other underwriting. Your benefit representative or human resources person should advise you about how to do the conversion.
What are the advantages of a group plan to the employee?
The employer usually pays some or all of the cost. For a noncontributory plan the coverage is a nontaxable benefit up to $50,000. Above $50,000, the IRS charges tax on "imputed income."
Because many people are getting their coverage under one policy, the per employee cost tends to be low and the underwriting minimal.
You do not have to write checks to pay the premiums. If you contribute to the cost, it will usually be deducted from your pay.
What are the limitations of a group plan?
It is not portable if you leave your employer and go to work elsewhere. In addition, the employer makes the decisions about whether to continue the insurance, how much coverage you will have, and who the insurer will be. Some recent benefit plans, though, do offer a degree of choice in so called "cafeteria plans."
If your employer goes out of business or eliminates your job, you lose not only your job, but also your benefits.
What are some of the contrasts with individual insurance?
Life insurance under a large group plan usually involves little or no underwriting. If you work at the company, you are automatically covered. Smaller group plans sometimes require some underwriting-the smaller the group, the more underwriting they may require. Individual policies often require you to prove insurability by supplying medical information and perhaps submitting to a medical examination.
Continue reading "What are some of the contrasts with individual insurance?" »
What are the basic types of group life insurance?
The life insurance coverage provided by most group plans is one-year term. The plan comes up for renewal each year, and both the insurance company and the employer have the opportunity to consider whether to continue it. For the insurance company, it is also an opportunity to revise the rates. The employer is the policyholder and each covered individual is issued a certificate showing his or her certificate number.
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Do I need a lawyer to help me buy insurance?
Generally, no. But a review of your insurance may make you realize that you need to look at http://FreeAdvice.com or obtain the professional assistance of a lawyer. You may find, for example, that you require a new or revised Will, or legal documents to establish a Trust, or a thorough estate tax evaluation and plan. Drawing up business related insurance arrangements would also call for the advice and professional services of a lawyer.
Do I need a financial planner?
You can do a basic "needs analysis" on your own using the resources provided here or with a simple computer program or do-it-yourself book. But, if your needs are complex, or you want guidance from a professional, there are numerous trained financial planners who will provide an analysis. Some "fee only" planners charge for an objective analysis and do not sell anything. Still others charge a fee and credit you back with any commission they earn from any insurance or other financial products you purchase based on their recommendations.
Will a life insurance policy affect my eligibility for medicaid benefits?
Life insurance is considered to be an asset under federal guidelines for Medicaid eligibility. Therefore, having a life insurance policy could affect eligibility and the policy may have to be relinquished before Medicaid is granted. However, Medicaid is administered by the states, so the details of eligibility requirements may vary from state to state.
Should I buy life insurance on my children?
If you have extra money, and want to give them a base of life insurance to "start them off", it is okay. Otherwise your life insurance dollars can be better spent for adequate coverage on the person who brings in income to support the family.
Will I need life insurance when I retire?
In general, the need for life insurance tends to decline with age because some of the reasons for buying it (college for children, income for dependents) either become non-existent or are needed for fewer years. In addition, other assets, from savings and investments, that could pay for these expenses tend to increase. So the need for life insurance will be small or non existent for many people after retirement. Exceptions include those with large estates or those who have business needs for life insurance. Circumstances like these often present special needs for life insurance that should be analyzed on an individual basis.
Ask your insurance company contact or go to the MIB web page at mib.com. Or you can contact the MIB at:
MIB, Inc.
P.O. Box 105
Essex Station
Boston, MA 02112
Phone number 617-426-3660
They give details of how they use information, show a sample report, and tell you how to get a copy of your own report (if one exists).
What happens to the medical information from my application?
It is properly used only for underwriting insurance. Certain excerpts may be shared with an insurance industry organization known as the Medical Information Bureau (MIB) located in Boston which helps provide a check on the accuracy of some information provided on application forms. The insurance company must get your written approval before submitting any data from you or your application to the MIB or getting any information about you from the MIB. You can get more information about the MIB by asking the insurance company, or by checking their website at mib.com.
What about companies that advertise no physical exam?
Life insurance is sometimes sold with the promise that no physical exam will be necessary. Such policies are often offered through newspaper or magazine ads or made available to members of professional or fraternal associations. The amount of coverage may be limited to small sums. As with other life insurance policies, there will be a period of a year or two (called the "contestable period") when the company can modify or cancel the policy if it finds that the application did not fully reveal any relevant medical problems. Because the rates are sometimes rather high and the available coverage low, these plans are often used to supplement existing coverage, rather than provide the basic insurance.
Do I need to give personal information about my medical condition and finances to get insurance?
Often, yes. In addition to medical tests, which help to classify the risk the company is taking in insuring you, the company will likely ask for some basic medical history on you, your parents and siblings. Sometimes, financial information is also required in connection with certain insurance applications to verify that there really is a need for the insurance. (Companies have learned that an inappropriately large amount of life insurance is sometimes associated with an increased risk of suicide, hidden health history, or the possibility that the applicant may be murdered.)
Will I have to be examined by a doctor to buy life insurance?
Rules vary from company to company and for different types and amounts of insurance. For very small amounts of insurance or association or group plans, no exam usually would be needed, but company underwriters need to examine and collect medical information on most new customers in order to properly classify the level of risk and set the appropriate premium charge. Answers to questions about the applicant's health will usually be the first requirement, and may determine if a physical examination is required. If an exam is needed, the company should arrange a convenient time and place for you to meet the doctor or paramedic at no charge to you. Usually, the exam will involve only basic medical tests and medical history unless large amounts of insurance are applied for.
How is lif insurance cost determined?
The cost of life insurance is determined by the insurance company's actuaries who take the following into consideration:
Continue reading "How is lif insurance cost determined?" »
What is a "needs analysis"? Do I need one to determine how much life insurance I should have?
A "needs analysis" (sometimes called "programming your life insurance") is a systematic procedure that looks at your overall life insurance and other assets (investments, social security, pension, etc.) as a portfolio and relates those assets to needs that would have to be covered. Some versions of "needs analysis" would also include a review of other types of insurance (car, homeowners, etc.) you have or might need.
What should I do if I have problems in getting coverage?
Life insurance companies do not issue life insurance to all people who want it, in any amount they want to buy. If they did, people who are very sick -- and thus have a very short life expectancy -- would buy lots as they'd only pay premiums for a very short time, then die, and their beneficiaries would collect the face amount.
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I have a hard time saving money. Should I buy life insurance as a form of forced savings?
You would probably be better off by using your investment money to buy mutual funds or some other investment vehicle, and use your insurance money to get the most coverage for your insurance dollar. If you need forced savings to provide discipline, you can use payroll deduction savings plans or a plan that uses bank drafts to regularly deduct the amount you want to save from your checking account.
Is there a certain amount of life insurance i'm required to buy?
Unlike the situation with car insurance, no law requires you to buy life insurance. You decide if you want to purchase life insurance, and how much to buy.
If you do apply for life insurance, you will find that companies have various rules about the lowest amount they would like you to buy. These range from home service companies with very low minimums (a few thousand dollars), to companies that sell primarily to business people and high-income individuals (hundreds of thousands to millions).
Some reasons to buy life insurance are:
1. Income Replacement
2. Funeral Expenses
3. Pay Off Debts
4. Pay Off Medical Bills
5. Mortgage life insurance
Wouldn't my group insurance from work or social security or mutual fund assets pay these needs?
Maybe, but usually not. The needs are often greater than the available funds. To determine if your other "insurance" would be adequate, you should get a more extensive examination of your needs and currently existing sources of funds. We've made it easy to do this on this web site.
You need life insurance if some person would experience a significant financial loss in the event of your death. A common example of this is the family breadwinner whose income totally or partially supports a family. The death of that person would result in loss of income and financial harm for the remaining family members. Other reasons are to put your kids through school, pay the car note, mortgage, or other debts you have left behind, and pay funeral expenses. Those who might be leaving estates of $650,0000 or more often need life insurance to pay for estate taxes.
Business partners are another important example. The death of one partner might obligate the other partners to buy out the heirs: the life policy can be the source of funds.
What is the connection between risk and life insurance?
Life insurance, like other types of insurance, is based on the concept of sharing risk. For example, everyone understands that people who are 95 years old are far more likely to die in the coming year than those who are 35.
Continue reading "What is the connection between risk and life insurance?" »
Life insurance is a contract, often called a "policy", between you and an insurance company to provide money to a person you designate, in the event that you die during the time the contract is in force. In essence, during your lifetime you pay money, known as the insurance "premium", to the insurance company. It promises to pay money to the persons you name, the "beneficiaries", at your death. Some types of life insurance also give the policy owner the right to "borrow" a portion of the "cash value" within a policy, or to receive an "accelerated death benefit" if you become terminally ill or require confinement in a long term care facility.
Should I get life insurance on my own or through work or occupation?
Either or both, depending on your own personal needs. Build your financial plan around personal life insurance that you buy on your own and can control. Then your group coverage can be used to add to your personal coverage and help meet your total insurance needs. You should review your plans regularly and consider your current needs in light of job changes or other things that affect your group coverage. You may decide that the insurance coverage you have through your employer is adequate by itself. But you should keep in mind that this coverage may not be permanent. When you are no longer employed, you are no longer covered through the group plan. So you need to consider what your total insurance needs are, and then you can decide whether you need personal life insurance, group life insurance, or both.
Some companies offer group life insurance that continues after retirement. The amount of coverage typically declines in steps over several years after retirement. Eventually it ends or drops to a final, reduced amount. Companies that do not offer post retirement life insurance coverage generally have an option to convert to permanent (non-term) insurance within 30 days of retirement without evidence of insurability and without a medical exam.