Finding the Right Life Insurance Agent

Transcription

1 Finding the Right Life Insurance Agent What you should know: The three mains types of health insurance and which one is right for you 5 Queations you should ask before you sign on the dotted line 10 things you can do to lower your premium The simple phrase that will save you a bundle on your next policy The 1

2 INSURANCE FACTS 1 What is life insurance? Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise. The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Insured. As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.in return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump sums. To be a life insurance policy the insured event must be based upon the lives of the specific people named in the policy. In some cases, serious illness may be an insured event. Life insurance policies are legal contracts and the terms of each contract describe the limitations of the insured events. Specific exclusions are often added into the contract to limit the liability of the insurer. For example claims relating to suicide, fraud, war, and civil commotion are often excluded. Generally, there are two categories of Life based policies : * Protection policies - A common form of this design is term life insurance. These contracts are designed to provide a benefit in the event of specified event, typically a lump sum payment. * Investment policies - The main objective with these policies is to facilitate capital growth. In the US the most common forms of these are whole life, universal life and variable life policies.

3 2 Why do I need life insurance? This is just a quick rule of thumb that works for most American families. Well, through life insurance, you can make sure your family is protected, even in the event of your death. Consider it your last act of love and kindness that you can perform. It really depends on what your debt is. In general, your life insurance policy should be about double what you owe on your house and credit cards. The idea of having a good life insurance policy is to take care of your family, With a properly sized life insurance policy, you won t have to worry about your family needing to rush right back to work, and you ll know that they will be able to take the necessary time to heal a bit before heading back out into the world. You ll need to have enough to pay off the house and any major outstanding debts, pay for your burial or cremation, and still leave enough that your family is able to take a little time off to properly grieve. No child or newly widowed man or woman wants to immediately jump up and go back to work after having lost a loved one. How much better it would be to leave something in reserve, so they could take a few weeks or a month off and be still be ok. Nobody knows when their time here will end, however, you can rest assured that your life insurance will be there to help your family through the rough time, and allow them a little more freedom of action than they might otherwise have.

4 3 What is term life insurance? Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the most inexpensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis. Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired, and does not expect a return of Premium dollars if no claims are filed. As an example, auto insurance will satisfy claims against the insured in the event of an accident and a home owner policy will satisfy claims against the home if it is damaged or destroyed by, for example, a fire. Whether or not these events will occur is uncertain, and if the policy holder discontinues coverage because he has sold the insured car or home the insurance company will not refund the premium. This is purely risk protection. 4 What is whole life insurance? Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company.the primary disadvantages of whole life are premium inflexibility, and the internal rate of return in the policy may not be competitive with other savings alternatives.riders are available that can allow one to increase the death benefit by paying additional premium.premiums are much higher than term insurance in the short-term, but cumulative premiums are roughly equal if policies are kept in force until average life expectancy.also, the cash values are generally kept by the insurance company at the time of death, the death benefit only to the beneficiaries.dividends cannot be guaranteed and may be higher or lower than historical rates over time.the primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The death benefit can also be increased through the use of policy dividends. The cash value can be received at any time by taking a policy "loan". These loans decrease the death benefit if not paid back and payback is optional. Cash

5 values are not paid to the beneficiary upon the death of the insured. The beneficiary receives the death benefit only. If the dividend option Paid up additions is elected, dividend cash values will be used to purchase additional death benefit which will increase the death benefit of the policy. 5 What s Universal Life Insurance? Universal life insurance (UL) is a relatively new insurance product intended to provide permanent insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of return. There are several types of universal life insurance policies which include "interest sensitive" (also known as "traditional fixed universal life insurance"), variable universal life insurance, and equity indexed universal life insurance. A universal life insurance policy includes a cash account. Premiums increase the cash account. Interest is paid within the policy (credited) on the account at a rate specified by the company. Mortality charges and administrative costs are then charged against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash account less applicable surrender charges, if any. With all life insurance, there are basically two functions that make it work. There's a mortality function and a cash function. The mortality function would be the classical notion of pooling risk where the premiums paid by everybody else would cover the death benefit for the one or two who will die for a given period of time. The cash function inherent in all life insurance says that if a person is to reach age 95 to 100 (the age varies depending on state and company), then the policy matures and endows the face value of the policy. Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age 95, then the mortality function alone will not be able to cover the cash function. So in order to cover the cash function, a minimum rate of investment return on the premiums will be required in the event that a policy matures. Universal life insurance addresses the perceived disadvantages of whole life. Premiums are flexible. Depending on how interest is credited, the internal rate of return can be higher because it moves with prevailing interest rates (interestsensitive) or the financial markets (Equity Indexed Universal Life and Variable Universal Life). Mortality costs and administrative charges are known. And cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows it. And universal life has a more flexible death benefit because the owner can select one of two death benefit options, Option A and Option B.

6 Option A pays the face amount at death as it's designed to have the cash value equal the death benefit at maturity (usually at age 95 or 100). With each premium payment, the policy owner is reducing the cost of insurance until the cash value reaches the face amount upon maturity. Option B pays the face amount plus the cash value, as it's designed to increase the net death benefit as cash values accumulate. Option B offers the benefit of an increasing death benefit every year that the policy stays in force. The drawback to option B is that because the cash value is accumulated "on top of" the death benefit, the cost of insurance never decreases as premium payments are made. Thus, as the insured gets older, the policy owner is faced with an ever increasing cost of insurance (it costs more money to provide the same initial face amount of insurance as the insured gets older). Universal life insurance policies how they work? 6 What s No Load Life Insurance? It's a dirty little secret that insurance agents don't want you to know. But some companies sell life insurance at little or no commission. That can mean big savings for you, if you're the type who doesn't need much handholding to make a decision. A few of them even sell whole life policies this way. CHOOSING THE RIGHT LIFE INSURANCE AGENT Do I really need an agent to buy life insurance? If it's so easy to find a policy, you may be asking yourself why you would ever need an agent. The answer is simple. Good insurance agents are well versed in all of the little intricacies involved in the insurance business. You, as a noninsurance agent, are on the outside of the glass looking in. Agents can find you things like multi-policy discounts, different policy riders applicable to your individual needs as well as assistance with a host of other things. An agent that is really dedicated to you can get you inside information that you may never be able to obtain on your own. They may also be able to find policies for you that you may not be able to uncover on your own. The truth is that it often pays to go to a professional for things like life insurance. If you decide to go with a professional to find the perfect life insurance policy, you need to know about the types of agents out there. There are two types of agents. Independent agents write policies for more than one company. They can often give you a variety of choices from the companies they represent. Contract agents

7 work for a single company. Since they work for one company, their selection of policies is going to be limited to whatever that one company offers. Keep in mind that limited doesn't necessarily mean worse. QUESTIONS YOU SHOULD ASK YOUR AGENT FIRST 1 Are you a full time agent? Due to agent commissions being reduced and expenses rising, it is becoming increasingly more difficult for agents to maintain a business office and overhead expenses. Some agents are forced to operate out of their spare bedroom and work a second job to make ends meet. You wouldn t want to go to a part-time doctor so why would you use a part-time agent? Make sure the agent you are speaking with is stable and not desperate to make a sale. You deserve a competent, well-established agent. 2 What area of life insurance is your specialty?

8 There are many products an insurance agent can offer other than standard life insurance. These products include disability income protection, long term care insurance, Annuities or Retirement vehicles. Make sure the agent you are speaking with fully understands the products you re after and how they relate to your needs. 3 Do you have errors and omission insurance? Reputable insurance agents carry errors and omissions insurance that will help protect themselves and the client in the event of a wrongful act or misrepresentation by the agent. You should make sure they have a policy with a face amount of at least $500K. 4 How accessible are you? The Internet has made shopping for many types of products as easy as clicking a mouse. Life insurance is no exception; there are many life insurance companies that assume you will go to their Web site, click the policy you want and pay. There are consumers who prefer to do business this way. But if you are a not one of them, make sure you select a life agent who shares your views on the importance of personal attention. 5 How often will we talk? Many policyholders believe that buying a life insurance policy is a once-and-done deal. The reality is that your life insurance needs change as your life changes; getting married, having a new baby, earning a big promotion or buying a big home can require changes in your policy. You will not always remember to call your agent every time there is a significant change in your life. An agent who will periodically assist in evaluating your needs could be a blessing, especially if he or she initiates the contact. 6 What companies do you represent? Asking this question is important for several reasons. First, an agent who has access to several different insurance companies will be able to shop for you more choices means more opportunities for better terms, premiums, etc. In

9 addition, knowing what companies your agent will go to for coverage can help you determine the financial strength and integrity of the company before the policy is offered. There are several insurance company rating services available to research this information as well as your state s insurance department. And, by all means, question any agent who suggests placing your business with a financially unstable insurance company. Lastly, a greater selection of products may give your agent the tools he or she needs to always act in your best interest, even as your needs change over time. 7 What other services do you provide? This question can really go either way. You either are looking for a specialist that works closely with the life insurance product you are shopping for, or you want one person who can handle your laundry list of needs. Personally I tend to think that it s better to go with an independent agent who is a specialist in a particular field. This way the agent is not held to one company and but they work with specific products that they know inside and out. 8 Is my policy convertible? Up to what age? Know whether your policy is convertible and for how long. Your policy likely has a conversion clause. That s the line on your agreement that discusses how you may exchange your renewable term policy for another type of policy without evidence of insurability. You want to find out how for how many years your policy is convertible. And if your policy is convertible, you want to make sure you know and understand the rules. This question can really go either way. You either are looking for a specialist that works closely with the life insurance product you are shopping for, or you want one person who can handle your laundry list of needs. Personally I tend to think that it s better to go with an independent agent who is a specialist in a particular field. This way the agent is not held to one company and but they work with specific products that they know inside and out. 9 How do I make a claim if I need to? Finally, know what you need to do to make a claim on the policy. Make sure it s clearly written on your policy whom you contact and under what time guidelines you re required to act. Also, become aware of what options the insurance

10 company has when you make a claim. Learn how long the company has to respond to your claim. 10 Why do you feel this product is in my best interests? This question will quickly drive out whether or not your agent was listening to your needs in the first place. The simple answer to this question should first state what you asked for and then address how this policy fulfills those needs. TIPS TO SAVING MONEY ON YOUR LIFE INSURANCE POLICY Get healthy Insurance companies are also on the lookout for something that's all too often taken for granted... a good medical exam. The good news is that it s easy they ll send someone out to your home or office. Smoking, obesity, high blood pressure, etc. will all result in significantly higher premiums. So Leading a generally healthy lifestyle will save you a lot of money on your life insurance premiums. Your medical exam is conducted absolutely free of charge. It's done at your convenience at your choice of locations. It usually takes about 30 minutes or less to complete. Now here's the hard fact... If your medical exam doesn't turn out good, you're probably in for a higher premium. That means you could end up paying more for your term life insurance than you should. Getting the best possible medical exam results are easier than you think. Carefully read the "inside secrets" below and save money! The BIG inside secret is in the way you prepare for your exam. If you just follow these seven easy steps 24-hours before your exam, you'll be on the right track to qualifying for the lowest rates in town...

11 Insurance companies are also on the lookout for something that's all too often taken for granted... a good medical exam. Before any life insurance company will issue you a policy, it will want to know the details of your medical history. It may investigate your medical records through the Medical Information Bureau (a very common practice) and more often than not, it will require that you take a medical exam. Your medical exam is conducted absolutely free of charge. It's done at your convenience at your choice of locations. It usually takes about 30 minutes or less to complete. Now here's the hard fact... If your medical exam doesn't turn out good, you're probably in for a higher premium. That means you could end up paying more for your term life insurance than you should. The BIG inside secret is in the way you prepare for your exam. If you just follow these seven easy steps 24-hours before your exam, you'll be on the right track to qualifying for the lowest rates in town... You should get plenty of sleep the night before your exam. 2. You should try to avoid stress of any kind. It can cause artificially high blood pressure and pulse readings. 3 You should avoid alcoholic beverages of any kind. They also can cause artificially high blood pressure and pulse readings. 4. You should avoid all tobacco. 5. You should avoid all forms of caffeine beverages including cola. (Same reason. Tobacco and caffeine, like alcohol, can cause artificially high blood pressure and pulse readings.) 6. You should avoid all foods high in salt content. Read the labels on any frozen or packaged food before you eat them. 7. You should avoid eating eggs and all other high cholesterol foods at least a day, or even two days, before your exam. 8. One EXTRA point! Don't forget to follow all the fasting requirements you were told about when you made your medical appointment. **This information has been provided as a guide and you should consult your insurance agent for help in deciding what type of insurance is correct for your needs, and what steps you can take to lower your premium.

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