|Life Insurance Glossary||Life Insurance FAQ||Life Insurance Planning Tools|
Life insurance is a contract under which, in exchange for premium payments, an insurance company agrees to pay a death benefit if the person whose life is insured dies while the insurance is in force.
Guaranty Income Life (“GILICO”) has historically issued Term, Whole Life and Universal Life insurance products. We have thousands of life policy insureds that we cover today, and GILICO has paid millions of dollars in death claims to beneficiaries. In the recent period of low investment yields, we currently do not issue any life insurance products, except for payroll deduction Universal Life. We expect to develop and sell new life policies as the economy improves.
Frequently Asked Questions for Life Insurance*
HOW MUCH DO YOU NEED?
Here are some questions to ask yourself:
BE SURE YOU BUY ONLY THE AMOUNT OF LIFE
INSURANCE YOU NEED AND CAN AFFORD.
As you figure out what you must have to meet these needs, count the life insurance you have now, including any group insurance where you work or veteran’s insurance. Don’t forget Social Security and pension plan survivor’s benefits. Add other assets you have: savings, investments, real estate and personal property. Which assets would your family sell or cash in to pay expenses after your death?
WHAT IS THE RIGHT KIND OF INSURANCE FOR YOU?
All policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. Your choice should be based on your needs and what you can afford.
Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.
Term Insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.
You can renew most term insurance policies for one or more terms even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at some age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase.
You may be able to trade many term insurance policies for a cash value policy during a conversion period – even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.
CASH VALUE LIFE INSURANCE:
Cash Value Life Insurance is a type of insurance where the premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums. You also can use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. However, to build up this cash value, you must pay higher premiums in the earlier years of the policy. cash value life insurance may be one of several types; whole life and universal life are types of cash value insurance.
WHOLE LIFE AND UNIVERSAL LIFE
ARE TYPES OF CASH VALUE INSURANCE.
WHOLE LIFE INSURANCE:
Whole Life Insurance covers you for as long as you live if your premiums are paid. You generally pay the same amount in premiums for as long as you live. When you first take out the policy, premiums can be several times higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years.
Some whole life policies let you pay premiums for a shorter period, such as 20 years, or until age 65. Premiums for these policies are higher since the premium payments are made during a shorter period.
UNIVERSAL LIFE INSURANCE:
Universal Life Insurance is a kind of flexible policy that lets you vary your premium payments. You can also adjust the face amount of your coverage. Increases in face amount may require proof that you qualify for the new death benefit. The premiums you pay (less expense charges) go into a policy account that earns interest. Charges are deducted from the account. If your yearly premium payment plus the interest your account earns is less than the charges, your account value will become lower. If it keeps dropping, eventually your coverage will end. To prevent that, you may need to start making premium payments, or increase your premium payments, or lower your death benefits. Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.
FINDING A GOOD VALUE IN LIFE INSURANCE
After you have decided which kind of life insurance is best for you, compare similar policies from different companies to find which one is likely to give you the best value for your money. A well trained producer can help you compare policies. A simple comparison of the premiums is not enough.
THERE ARE OTHER THINGS TO CONSIDER.
Once you have decided which type of policy to buy, you can use a cost comparison index to help you compare similar policies. Life insurance producers or companies can give you information about several different kinds of indexes that each work a little differently.
One type helps you compare the costs between two policies if you give up the policy and take out the cash value. Another helps you compare your costs if you don’t give up your policy before its coverage ends. Some help you decide what kind of questions to ask the producer about the numbers used in the illustration.
Each index is useful in some ways, but they all have shortcomings. Ask your producer which will be most helpful to you. Regardless of which index you use, compare index numbers only for similar policies – those that offer basically the same benefits, with premiums payable for the same length of time. Remember that no one company offers the lowest cost at all ages for all kinds and amounts of insurance.
YOU SHOULD ALSO CONSIDER OTHER FACTORS:
IMPORTANT THINGS TO CONSIDER
GET AN ILLUSTRATION
You may be thinking of buying a policy where cash values, death benefits, dividends or premiums may vary based on events or situations the company does not guarantee (such as interest rates). If so, you may get an illustration from the producer or company that helps explain how the policy works.
A LIFE INSURANCE ILLUSTRATION WILL HELP
UNDERSTAND WHAT TO EXPECT FROM YOUR INSURANCE POLICY.
The illustration will show how the benefits that are not guaranteed will change as interest rates and other factors change. The illustration will show you what the company guarantees. It will also show you what could happen in the future.
Remember that nobody knows what will happen in the future. You should be ready to adjust your financial plans if the cash value doesn’t increase as quickly as shown in the illustration. You will be asked to sign a statement that says you understand that some of the numbers in the illustration are not guaranteed.
WHAT ABOUT THE POLICY YOU HAVE NOW?
IF YOU ARE THINKING ABOUT DROPPING A LIFE
HERE ARE SOME THINGS YOU SHOULD CONSIDER:
In all cases, if you are thinking of buying a new policy, check with the producer or company that issued you the one you have now. When you bought your old policy, you may have seen an illustration of the benefits of your policy. Before replacing your policy, ask your producer or company for an updated illustration.
DON’T BE AFRAID TO ASK YOUR EXISTING
INSURANCE COMPANY FOR HELP REVIEWING YOUR CURRENT POLICY.
Check to see how the policy has performed and what you might expect in the future, based on the amounts the company is paying now.
*All information listed above is available in the Consumer’s Guide to Life Insurance, Louisiana Department of Insurance.