 |
Replace
income for dependents
If people depend on your income, life insurance
can replace that income for them if you die. The
most commonly recognized case of this is parents
with young children. However, it can also apply
to couples in which the survivor would be financially
stricken by the income lost through the death of
a partner, and to dependent adults, such as parents,
siblings or adult children who continue to rely
on you financially. Insurance to replace your income
can be especially useful if the government- or employer-sponsored
benefits of your surviving spouse or domestic partner
will be reduced after your death. |
| |
|
Pay final
expenses
Life insurance can pay your funeral and burial costs,
probate and other estate administration costs, debts
and medical expenses not covered by health insurance. |
| |
|
Create an
inheritance for your heirs
Even if you have no other assets to pass to your
heirs, you can create an inheritance by buying a
life insurance policy and naming them as beneficiaries. |
| |
|
Pay federal
"death" taxes and state "death" taxes
Life insurance benefits can pay estate taxes so
that your heirs will not have to liquidate other
assets or take a smaller inheritance. Changes in
the federal "death" tax rules between now and January
1, 2011 will likely lessen the impact of this tax
on some people, but some states are offsetting those
federal decreases with increases in their state-level
"death" taxes. |
| |
|
Make significant
charitable contributions
By making a charity the beneficiary of your life
insurance, you can make a much larger contribution
than if you donated the cash equivalent of the policy's
premiums. |
| |
|
Create a source
of savings
Some types of life insurance create a cash value
that, if not paid out as a death benefit, can be
borrowed or withdrawn on the owner's request. Since
most people make paying their life insurance policy
premiums a high priority, buying a cash-value type
policy can create a kind of "forced" savings plan.
Furthermore, the interest credited is tax deferred
(and tax exempt if the money is paid as a death
claim). |
| |
How
much life insurance do I need?
In most cases, if you have no dependents and have
enough money to pay your final expenses, you don’t
need any life insurance.
However, if you want to create an inheritance or
make a charitable contribution, you should buy enough
life insurance to achieve those goals.
If you have dependents, you should buy enough life
insurance so that, when combined with other sources
of income, it will replace the income you now generate
for them, plus enough to offset any additional expenses
they will incur replacing services you currently
provide (for example, if you do the taxes for your
family, the survivors might have to hire a professional
tax preparer). Also, your family might need extra
money to make some changes after you die. For example,
they may want to relocate, or your spouse may need
to go back to school to be in a better position
to help support the family.
Most families have some sources of post-death income
besides life insurance. The most common source is
Social
Security survivors’ benefits. Many also
have life insurance through an employer plan, and
some from other affiliations, such as an association
they belong to or a credit card. Although these
sources might provide a significant income, it is
rarely enough. |
| |
A
multiple of salary?
Many pundits recommend buying life insurance equal
to a multiple of your salary. For example, one advice
columnist recommends buying insurance equal to 20
times your salary before taxes. She chose 20 because,
if the benefit is invested in bonds that pay 5 percent
interest, it would produce an amount equal to your
salary at death, so the survivors could live off
the interest and wouldn’t have to “invade”
the principal.
However, this simplistic formula implicitly assumes
no inflation and that one could assemble a bond
portfolio that, after expenses, would provide a
5 percent interest stream every year. But assuming
inflation is 3 percent per year, the purchasing
power of a gross income of $50,000 would drop to
about $38,300 in the 10th year. To avoid this income
drop-off, the survivors would have to tap into the
principal each year. And if they did, they’d
run out of money in the 16th year.
The “multiple of salary” approach also
ignores other sources of income, such as Social
Security survivors’ benefits. These benefits
can be substantial. For example, for a person who
had been earning a $36,000 salary at death ($3000
a month), maximum Social Security survivors’
monthly income benefits for a spouse and two children
under age 18 could be about $2,300 per month, and
this amount would increase each year to match inflation.
(It drops when there is only a spouse and one child
under 18, and stops completely when there are no
children under 18 remaining in the household. Also,
the surviving spouse’s benefit would be reduced
if the spouse earns income over a certain limit.)
In this example, the survivors would need life insurance
to replace only $700 per month (adjusted for inflation)
of lost income; Social Security would provide the
rest. These survivors would need life insurance
to replace about $1,150 per month (adjusted for
inflation) once the nonworking surviving spouse
has only one child under 18 in her care, and the
surviving nonworking spouse would have to replace
the entire $3,000 (adjusted for inflation) when
the youngest child turns 18. |
| |
What
are the principal types of life insurance?
There are two major types of life insurance—term
and whole life. Whole life is sometimes called permanent
life insurance, and it encompasses several subcategories,
including traditional whole life, universal life,
variable life and variable universal life. In 2003,
about 6.4 million individual life insurance policies
bought were term and about 7.1 million were whole
life.
Life insurance products for groups are different
from life insurance sold to individuals. The information
below focuses on life insurance sold to individuals.
|
| |
Term
Term Insurance is the simplest form of life insurance.
It pays only if death occurs during the term of
the policy, which is usually from one to 30 years.
Most term policies have no other benefit provisions.
There are two basic types of term life insurance
policies—level term and decreasing term.
|
|
Level term means that the death
benefit stays the same throughout the duration of
the policy. |
| |
|
Decreasing term means that the death
benefit drops, usually in one-year increments, over
the course of the policy’s term.
|
| In 2003, virtually all
(97 percent) of the term life insurance bought was
level term. |
| |
What
are the types of term insurance policies?
Term insurance comes in two basic varieties—level
term and decreasing term. These days, almost everyone
buys level term insurance. The terms “level”
and “decreasing” refer to the death
benefit amount during the term of the policy. A
level term policy pays the same benefit amount if
death occurs at any point during the term.
Common types of level term are:
|
|
yearly- (or annually-) renewable
term |
| |
|
5-year renewable term
|
| |
|
10-year term
|
| |
|
15-year term
|
| |
|
20-year term
|
| |
|
25-year term
|
| |
|
30-year term |
| |
|
term to a specified age (usually
65)
|
Yearly renewable term,
once popular, is no longer a top seller. The most
popular type is now 20-year term. Most companies
will not sell term insurance to an applicant for
a term that ends past his or her 80th birthday.
If a policy is “renewable,” that means
it continues in force for an additional term or
terms, up to a specified age, even if the health
of the insured (or other factors) would cause him
or her to be rejected if he or she applied for a
new life insurance policy.
Generally, the premium for the policy is based on
the insured person’s age and health at the
policy’s start, and the premium remains the
same (level) for the length of the term. So, premiums
for 5-year renewable term can be level for 5 years,
then to a new rate reflecting the new age of the
insured, and so on every five years. Some longer
term policies will guarantee that the premium will
not increase during the term; others don’t
make that guarantee, enabling the insurance company
to raise the rate during the policy’s term.
Some term policies are convertible. This means that
the policy’s owner has the right to change
it into a permanent type of life insurance without
additional evidence of insurability.
“Return
of Premium”
In most types of term insurance, including homeowners
and auto insurance, if you haven’t had a claim
under the policy by the time it expires, you get
no refund of the premium. Your premium bought the
protection that you had but didn’t need, and
you’ve received fair value. Some term life
insurance consumers have been unhappy at this outcome,
so some insurers have created term life with a “return
of premium” feature. The premiums for the
insurance with this feature are often significantly
higher than for policies without it, and they generally
require that you keep the policy in force to its
term or else you forfeit the return of premium benefit.
Some policies will return the base premium but not
the extra premium (for the return benefit), and
others will return both. |
| |
Whole
Life/Permanent
Whole life or permanent insurance pays a death benefit
whenever you die—even if you live to 100!
There are three major types of whole life or permanent
life insurance—traditional whole life, universal
life, and variable universal life, and there are
variations within each type.
In the case of traditional whole life, both the
death benefit and the premium are designed to stay
the same (level) throughout the life of the policy.
The cost per $1,000 of benefit increases as the
insured person ages, and it obviously gets very
high when the insured lives to 80 and beyond. The
insurance company could charge a premium that increases
each year, but that would make it very hard for
most people to afford life insurance at advanced
ages. So they keep the premium level by charging
a premium that, in the early years, is higher than
what’s needed to pay claims, investing that
money, and then using it to supplement the level
premium to help pay the cost of life insurance for
older people.
By law, when these “overpayments” reach
a certain amount, they must be available to the
policyowner as a cash value if he or she decides
not to continue with the original plan. The cash
value is an alternative, not an additional, benefit
under the policy.
In the 1970s and 1980s, life insurance companies
introduced two variations on the traditional whole
life product—universal life insurance and
variable universal life insurance. |
| |
What
are the different types of permanent policies?
|
|
Whole or ordinary
life
This is the most common type of permanent insurance
policy. It offers a death benefit along with a savings
account. If you pick this type of life insurance
policy, you are agreeing to pay a certain amount
in premiums on a regular basis for a specific death
benefit. The savings element would grow based on
dividends the company pays to you. |
| |
|
Universal
or adjustable life
This type of policy offers you more flexibility
than whole life insurance. You may be able to increase
the death benefit, if you pass a medical examination.
The savings vehicle (called a cash value account)
generally earns a money market rate of interest.
After money has accumulated in your account, you
will also have the option of altering your premium
payments - providing there is enough money in your
account to cover the costs. This can be a useful
feature if your economic situation has suddenly
changed. However, you would need to keep in mind
that if you stop or reduce your premiums and the
saving accumulation gets used up, the policy might
lapse and your life insurance coverage will end.
You should check with your agent before deciding
not to make premium payments for extended periods
because you might not have enough cash value to
pay the monthly charges to prevent a policy lapse.
|
| |
|
Variable life
This policy combines death protection with a savings
account that you can invest in stocks, bonds and
money market mutual funds. The value of your policy
may grow more quickly, but you also have more risk.
If your investments do not perform well, your cash
value and death benefit may decrease. Some policies,
however, guarantee that your death benefit will
not fall below a minimum level. |
| |
|
Variable-universal
life
If you purchase this type of policy, you get the
features of variable and universal life policies.
You have the investment risks and rewards characteristic
of variable life insurance, coupled with the ability
to adjust your premiums and death benefit that is
characteristic of universal life insurance. |
| |
Why
should I purchase permanent insurance?
A permanent life policy provides lifelong insurance
protection. The policy pays a death benefit if you
die tomorrow or if you live to be a hundred. There
is also a savings element that will grow on a tax-deferred
basis and may become substantial over time. Because
of the savings element, premiums are generally higher
for permanent than for term insurance. However,
the premium in a permanent policy remains the same,
while term can go up substantially every time you
renew it.
There are a number of different types of permanent
insurance policies, such as whole (ordinary) life,
universal life, variable life, and variable/universal
life. In a permanent policy, the cash value is different
from its face value amount. The face amount is the
money that will be paid at death. Cash value is
the amount of money available to you. There are
a number of ways that you can use this cash savings.
For instance, you can take a loan against it or
you can surrender the policy before you die to collect
the accumulated savings.
There are unique features to a permanent policy
such as:
|
|
You can lock in premiums when you
purchase the policy. By purchasing a permanent policy,
the premium will not increase as you age or if your
health status changes. |
| |
|
The policy will accumulate cash
savings.
Depending on the policy, you may be able to withdraw
some of the money. You also may have these options:
|
| |
| |
 |
Use the cash value to pay
premiums. If unexpected expenses occur, you
can stop or reduce your premiums. The cash
value in the policy can be used toward the
premium payment to continue your current insurance
protection – providing there is enough
money accumulated. |
| |
|
Borrow from the insurance
company using the cash value in your life
insurance as collateral. Like all loans, you
will ultimately need to repay the insurer
with interest. Otherwise, the policy may lapse
or your beneficiaries will receive a reduced
death benefit. However, unlike loans from
most financial institutions, the loan is not
dependent on credit checks or other restrictions. |
|
| |
How
is life insurance sold?
You can buy life insurance either as an “individual”
or as part of a “group” plan.
Individual Policy
When you buy an individual policy, you choose the
company, the plan, and the benefits and features
that are right for you and your family. You might
be able to buy the policy from the same agent or
company representative who sells you property and
liability insurance for your home, auto or business.
And although you won’t qualify for any discounts
by buying your life insurance and other insurance
from the same representative, working with a single
advisor for all your insurance needs can make your
financial life simpler.
Individual policies are typically sold through insurance
agents or brokers. If you buy a policy through an
agent or broker, you will pay a commission, also
called a “load,” that is built into
the premium rate. The commission compensates the
agent or broker for the time spent advising you
on how much and what type of life insurance to buy,
for facilitating the application process, and for
any further service that’s needed in future
years to keep the policy up-to-date (such as changing
beneficiary designations, arranging policy loans
or coordinating your financial plans with your lawyer
and accountant).
There are two other ways to buy individual life
insurance. In Connecticut, Massachusetts and New
York, you can buy it from a savings bank. Or you
can buy a policy directly from an insurance company
or from a fee-only financial advisor—what’s
known as a “no load” or “low load”
policy. Although there is no sales commission on
these policies, the company will still have charges
built into the premium to cover its marketing expenses,
application processing expenses and subsequent services.
Finding an insurance company that will sell you
a no-load policy isn’t easy; typing in “no
load life insurance” on Internet search engines
will in many cases lead you to an agent or broker.
Group Policy
You might have life insurance automatically from
your employer; many large companies do this. Your
employer also might offer you the chance to buy
additional life insurance under a group policy.
And you might be eligible to buy life insurance
under a group policy from a union or trade association
or other group you belong to (such as a college
alumni association or an automobile club).
Compared to buying an individual life insurance
policy, there are several advantages to buying life
insurance under a group policy:
|
|
Group purchase can sometimes offer
you a lower rate for a given death benefit either
because the employer or other group sponsor subsidizes
the premium or because the rates are averages weighted
by people younger than you. |
| |
|
There are virtually no health qualifications
for getting the group coverage. |
| |
|
Premium payment is usually by payroll
deduction (for employer-based group coverage) or
linked with other payments (e.g., credit card bills),
lowering the chance of missing a payment.
|
| Most employer group
plans are term insurance, but if you leave that
employer your state may require that you be allowed
to convert the policy to a form of whole life insurance
with the same insurance company that provides the
group life insurance. You would then pay premiums
directly to the company and keep the insurance in
force. This can be an advantage if you are older,
or have experienced deteriorating health, as it
gives you the opportunity to qualify for whole life
insurance without having a medical exam. |
| |
BUYING
AND SAVING MONEY
How
should I choose what type of life insurance to buy?
You should consider term life insurance if:
|
|
You need life insurance for a specific
period of time. Term life insurance enables you
to match the length of the term policy to the length
of the need. For example, if you have young children
and want to ensure that there will be funds to pay
for their college education, you might buy 20-year
term life insurance. Or if you want the insurance
to repay a debt that will be paid off in a specified
time period, buy a term policy for that period. |
| |
|
You need a large amount of life
insurance, but have a limited budget. In general,
this type of insurance pays only if you die during
the term of the policy, so the rate per thousand
of death benefit is lower than for permanent forms
of life insurance. If you are still alive at the
end of the term, coverage stops unless the policy
is renewed. Unlike permanent insurance, you will
not build equity in the form of cash savings.
|
If you think your financial
needs may change, you may also want to look into
“convertible” term policies. These allow
you to convert to permanent insurance without a
medical examination in exchange for higher premiums.
Keep in mind that premiums are lowest when you are
young and increase upon renewal as you age. Some
term insurance policies can be renewed when the
policy ends, but the premium will generally increase.
Some policies require a medical examination at renewal
to qualify for the lowest rates.
You should consider permanent life insurance if:
|
|
You need life insurance for as long
as you live. A permanent policy pays a death benefit
whether you die tomorrow or live to be 100. |
| |
|
You want to accumulate a savings
element that will grow on a tax-deferred basis and
could be a source of borrowed funds for a variety
of purposes. The savings element can be used to
pay premiums to keep the life insurance in force
if you can’t pay them otherwise, or it can
be used for any other purpose you choose. You can
borrow these funds even if your credit is shaky.
The death benefit is collateral for the loan, and
if you die before it’s repaid, the insurance
company collects what is due the company before
determining what’s goes to your beneficiary.
|
Keep in mind that premiums
for permanent policies are generally higher than
for term insurance. However, the premium in a permanent
policy remains the same no matter how old you are,
while term can go up substantially every time you
renew it.
There are a number of different types of permanent
insurance policies, such as whole (ordinary) life,
universal life, variable life, and variable/universal
life. |
| |
How
do I pick a life insurance company?
Roughly 1,000 life insurance companies sell life
insurance in the U.S., but many are members of groups
of companies and so aren’t really competitors
with each other. Having separate companies enables
a group to offer its products through separate distribution
channels, to more efficiently meet the regulatory
requirements of particular states, or to achieve
other organizational goals. There are an estimated
three hundred company groups.
Moreover, not every group has a company licensed
to operate in each state. As a general rule, you
should buy from a company licensed in your state,
because then can you rely on your state insurance
department to help if there’s a problem. And
if the insurance company becomes insolvent, your
state’s life insurance guaranty fund will
help only policyholders of companies it has licensed.
To find out which companies are licensed in any
state, contact that state’s state
insurance department.
There are several other points to keep in mind when
selecting a life insurance company:
|
|
Product –
most, but not all, companies offer a broad range
of policies and features, so choose a company that
offers the product and features that meet your needs. |
| |
|
Identity –life
insurance company names can be confusing, and different
companies can have similar names. Life insurance
company names often use words that suggest financial
strength (such as Guaranty, Reserve, or Security),
financial sophistication (such as Bankers, Financial,
or Investors), maturity (such as First, Pioneer,
or Old), dependability (such as Assurance, Reliable,
Trust), fairness (such as Beneficial, Equitable,
or Peoples), breadth of operations (such as Continental,
National, or International), government (such as
American, Capital, or Republic), or well-known and
respected Americans (such as Jefferson, Franklin,
or Lincoln). Be sure you know the full name, home
office location, and affiliation (if any) of any
company you are considering (for an example, click
here). |
| |
|
Financial
Solidity – life insurance is a long-term
arrangement. There is no guarantee for life insurance
policyholders similar to that provided for bank
accounts by the Federal Deposit Insurance Corporation
(FDIC). Select a company that is likely to be financially
sound for many years, by using ratings from independent
rating agencies. |
| |
|
Market ethics
– some life insurance companies subscribe
to the principles and codes of conduct of the Insurance
Marketplace Standards Association, a nonprofit
organization that promotes ethical conduct in life
insurance marketing. |
| |
|
Advice and
service – for many people, life insurance
is a strange, complex product, so that it helps
to deal with a representative with whom you can
communicate and who is attentive to your needs.
This might be connected to the selection of a life
insurance company because some agents represent
only one or a very few life insurance companies.
See How
do I select a life insurance agent? |
| |
|
Claims –
you may want to check a national claims database
to see what complaint information it has on a company.
Also, your state insurance department will be able
to tell you if the insurance company you are considering
doing business with had many consumer complaints
about its service relative to the number of policies
it sold. |
| |
|
Premium and
cost – The premium is the amount you
pay the company for the life insurance contract
with all of its benefits. Even for a given death
benefit and type of insurance (e.g., term life),
the premium can vary widely among companies, either
because some companies’ policies have features
that others don’t, or because some charge
more than others for the same coverage. So the first
step in comparing policies is to make sure you compare
similar insurance plans, based on
Your age
The type of policy and policy features
The amount of insurance you are purchasing
The premium for the policy isn’t the same
as the cost of the protection portion of the policy.
One policy might have a higher premium but also
offer more benefits (for example, it might pay policy
dividends) than another. Or both might promise dividends,
but in different amounts at different points in
time. In each case, the higher-premium policy might
have a lower cost of protection. How can you tell
what a policy’s cost is? Companies should
tell you a policy’s Net Payment Cost Index
and its Surrender Cost Index. Use the Surrender
Cost Index if you’re thinking of keeping the
insurance only for a specific period of time; use
the Net Payment Cost Index if you expect to keep
the policy indefinitely. Generally, the lower the
cost index, the better. |
| |
How
can I assess the financial strength of an insurance
company?
Five independent agencies—A.M. Best, Fitch,
Moody’s, Standard & Poor’s, and
Weiss—rate the financial strength of insurance
companies. Each has its own rating scale, its own
rating standards, its own population of rated companies,
and its own distribution of companies across its
scale. Each agency uses numbers or plusses and minuses
to indicate minor variations in rating from another
rating class.
The agencies disagree often enough so that you should
consider a company’s rating from two or more
agencies before judging whether to buy or keep a
policy from that company. Moreover, agencies will
announce changes of ratings on any day. It’s
probably prudent to check annually on the ratings
of any company you’re interested in.
Some points for using the ratings:
|
|
Don’t rely only on what the
insurance companies say about their ratings from
these agencies. Companies are likely to highlight
a higher rating from one agency and ignore a lower
one from another agency, or to select the most favorable
comments from a rating agency’s report. |
| |
|
To use the ratings from more than
one independent agency, you need to understand that
each agency’s rating code is different from
the others. For example, an A+ from A.M. Best is
the next-to-top rating of its 15 categories, but
an A+ from Fitch or S&P is their 5th-highest
rating (out of 24 categories for Fitch, and out
of 19 categories for S&P). Moreover, Moody’s
doesn’t have an A+ rating.
|
| However, the ratings
can be classified into “secure” and
“vulnerable” mega-categories. Here,
as of August 2004, are the rating scales for each
of the “secure” rating classes, and
all the “vulnerable” classes combined
(source, except for Weiss: The Insurance Forum,
September 2004 issue). |
| |
| Rating
Agency |
Category |
Description |
#
of companies in category |
%
of rated companies
in category |
| A.M.
Best |
A++ |
Superior |
97 |
6.4 |
| |
A+ |
Superior |
223 |
14.8 |
| |
A |
Excellent |
292 |
19.3 |
| |
A- |
Excellent |
325 |
21.5 |
| |
B++ |
Very good |
179 |
11.9 |
| |
B+ |
Very good |
141 |
9.3 |
| |
B and
lower |
Vulnerable |
253 |
16.8 |
| |
|
|
|
|
| Fitch |
AAA |
Exceptionally strong |
32 |
8.2 |
| |
AA+ |
Very strong |
54 |
13.9 |
| |
AA |
Very strong |
60 |
15.4 |
| |
AA- |
Very strong |
78 |
20.1 |
| |
A+ |
Strong |
37 |
9.5 |
| |
A |
Strong |
43 |
11.1 |
| |
A- |
Strong |
36 |
9.3 |
| |
BBB+ |
Good |
18 |
4.6 |
| |
BBB |
Good |
13 |
3.3 |
| |
BBB- |
Good |
6 |
1.5 |
| |
BB+
and lower |
Vulnerable |
12 |
3.2 |
| |
|
|
|
|
| Moody's |
Aaa |
Exceptional |
22 |
7.0 |
| |
Aa1 |
Excellent |
20 |
6.4 |
| |
Aa2 |
Excellent |
42 |
13.4 |
| |
Aa3 |
Excellent |
90 |
28.7 |
| |
A1 |
Good |
20 |
6.4 |
| |
A2 |
Good |
36 |
11.5 |
| |
A3 |
Good |
48 |
15.3 |
| |
Baa1 |
Adequate |
14 |
4.5 |
| |
Baa2 |
Adequate |
4 |
1.3 |
| |
Baa3 |
Adequate |
3 |
1.0 |
| |
Ba1
and lower |
Vulnerable |
15 |
4.8 |
| |
|
|
|
|
| S &
P |
AAA |
Extremely strong |
55 |
8.7 |
| |
AA+ |
Very strong |
9 |
1.4 |
| |
AA |
Very strong |
111 |
17.5 |
| |
AA- |
Very strong |
48 |
7.6 |
| |
A+ |
Strong |
82 |
12.9 |
| |
A |
Strong |
138 |
21.7 |
| |
A- |
Strong |
33 |
5.2 |
| |
BBB+ |
Good |
68 |
10.7 |
| |
BBB |
Good |
39 |
6.2 |
| |
BBB- |
Good |
8 |
1.3 |
| |
BB+
and lower |
Vulnerable |
44 |
7.0 |
| |
|
|
|
|
| Weiss |
A+ |
Excellent |
29* |
3 |
| |
A |
Excellent |
29* |
3 |
| |
A- |
Excellent |
29* |
3 |
| |
B+ |
Good |
282* |
29 |
| |
B |
Good |
282* |
29 |
| |
B- |
Good |
282* |
29 |
| |
C+ |
Fair |
380* |
39 |
| |
C |
Fair |
380* |
39 |
| |
C- |
Fair |
380* |
39 |
| |
D+ and
lower |
Vulnerable |
272* |
28 |
| *As of March 25,
2003 |
|
| |
| Ratings
Agency Contact Information |
| |
|
|
Agency |
Web
site |
Address |
Phone
number |
| A.M. Best Company, Inc |
www.ambest.com |
Ambest Rd.
Oldwick, NJ 08858
|
908-439-2200 |
| Fitch Ratings |
www.fitchibca.com |
1 State Street Plaza
New York, NY 10004
|
1-800-75-FITCH |
| Moody’s Investor Services* |
www.moodys.com |
99 Church Street New York,
NY 10007 |
212-553-0300 |
| Standard & Poor’s
Insurance Ratings Services* |
www2.standardandpoors.com |
55 Water Street
New York, NY 10004
|
212-438-2000 |
| Weiss Research** |
www.weissratings.com |
15430 Endeavor Drive
Jupiter, FL 33478
|
800-289-9222 |
*To use these Web
sites, you have to register, but it’s
free.
**Weiss charges $14.99 for each rating. However,
its public Web site lists the ten highest
and ten lowest ranked companies, and the companies
themselves might reveal their Weiss rating.
|
|
| |
How
should I organize and store my life insurance records?
The last thing you want to happen after you die
is for your beneficiaries to be unable to locate
and submit a claim on your life insurance. To prevent
this, you should have copies of your life insurance
records in at least two places. This is to make
it less likely that you’ll lose them (to fire,
flood, accidental discarding, etc.) and more likely
that, after your death, your beneficiaries will
find them. |
| |
What
information should I keep?
For each individual life insurance policy on your
life, you should record the following information:
|
|
The full name of the life insurance
company that issued the policy |
| |
|
The city and state of the home office
of the company that issued the policy |
| |
|
The name and U.S. headquarters of
the group, if the issuing company belongs to a group
of companies |
| |
|
The policy number |
| |
|
The date the policy was issued |
| |
|
The amount of the death benefit |
| |
|
The name and address of the agent/broker
who sold you the policy
|
| |
|
The type of policy (e.g., term,
whole life, etc.)
|
| |
|
The location of the original life
insurance policy
|
You might have life
insurance automatically from your employer. Your
employer also might offer you the chance to buy
additional life insurance under a group policy.
And you might be eligible to buy life insurance
under a group policy from your union or trade association
or other group you belong to (such as a college
alumni association or an automobile club). For each
of these life insurance benefits, you should record
the following information:
|
|
The name of the employer or group
that sponsors the insurance |
| |
|
The office or person to contact when
it’s time to file a claim |
| |
|
The certificate number (comparable
to the policy number under an individual policy) |
| |
|
The date the insurance was started |
| |
|
The amount of the death benefit
|
Sometimes financial
programs that are mainly designed for income or
other purposes have death benefits as additional
features. This might include pensions, annuities,
workers compensation programs, disability insurance,
travel accident insurance, etc. For each such program,
you should record the following information:
|
|
The type of policy that has a death
benefit as part of its features |
| |
|
The full name of the life insurance
company that issued the policy |
| |
|
The city and state of the home office
of the company that issued the policy |
| |
|
The policy number |
| |
|
The date the policy was issued |
| |
|
The amount of the death benefit |
| |
|
The name and address of the agent/broker
who sold you the policy |
| |
|
The location of the original insurance
policy
|
Credit cards and lending
institutions may offer life insurance to pay off
your outstanding loans in the event of your death.
For each life insurance benefit on your life dedicated
to paying off a loan, you should record
|
|
The full name of the lending institution
through which you obtained the life insurance |
| |
|
The loan number and issue date of
the loan |
| |
|
The name of the person or office
to contact when it’s time to file a claim |
| |
|
The policy number of the life insurance
policy that pays off the loan |
| |
Where
should I keep the information?
Keep one set of these records in your home, in a
place where others who need this information are
likely to find it (and after you put the information
there, tell the people who’ll need it where
it is). This might be with your other financial
records (such as income tax, checking account, investment
records), with your other legal papers (such as
a copy of your will, living will, health care proxy,
etc.), or anywhere your survivors are likely to
look for them.
Keep another set of these records “off site”—that
is, outside of your home, perhaps in a safe deposit
box, or with a professional or a relative who can
be counted on to produce them when they’re
needed.
On each page, record the date on which the information
was last updated. That way, if the copy in your
home differs from the one in the safe deposit box,
it’s easy to tell which is the more current.
|
| |
How
often should I review my policy?
You should review all of your insurance needs at
least once a year. If you have a major life change,
you should contact your insurance agent or company
representative. The change in your life may have
a significant impact on your insurance needs. Life
changes may include:
|
|
Marriage or divorce |
| |
|
A child or grandchild who is born
or adopted
|
| |
|
Significant changes in your health
or that of your spouse/domestic partner
|
| |
|
Taking on the financial responsibility
of an aging parent |
| |
|
Purchasing a new home
|
| |
|
A loved one who requires long-term
care
|
| |
|
Refinancing your home |
| |
|
Coming into an inheritance
|
| |
|
| |
|
