Understanding Life Insurance

Understanding Life Insurance


UnderstandingLife Insurance - Life insurance provides money to help your beneficiaries pay their bills and other living expenses after you die. Some policies clever also provide benefits while you’re alive.

Not everyone necessitys life insurance. To decide whether life insurance is a good choice for you, conmiddler your age, your assets, and whether anyone depfinishs on you for support.

Before you buy insurance, make sure the agent and company are licensed to sell insurance. To study whether an agent or company is licensed, call the Texas Department of Insurance Consumer (TDI) Help Line at 1-800-252-3439. You may also view agent and company information utune the Agent Seeup or Company Seeup features on the TDI website.

Life Insurance Basics
People buy life insurance for many reasons, including:

ensuring that their beneficiaries have enough money to maintain their standard of living,
paying burial expenses and outstanding debts, and
meeting the requirement for business loans.
Beneficiaries are the people you designate to get the money from the life insurance policy after you die. The money is called a death benefit and is typically tax free to the beneficiary.

You may designate one or more beneficiaries. If you designate more than one, you must decide how to divide the money. You may also choose a secondary or contingent beneficiary to receive the money if the primary beneficiary dies before you. You may also designate an institution as your beneficiary.

Life insurance isn't an investment. An investment is a financial risk -- you might make money but you also might lose some or all of your money. Life insurance has some financial risk, but it pays a guaranteed death benefit if you pay your premiums.

Whole life, global life, and variable life insurance clever build a cash value you clever use while you’re alive. Although you clever use this money for retirement income, agents and companies may not call life insurance an investment or retirement income source. If an agent or company tries to sell you a life insurance policy as a good investment, be wary. Also, don't mix up life insurance with annuities. People often buy annuities for retirement because they clever provide steady income over a long period.

Insurance companies use a process called underwriting to decide whether to sell life insurance to someone and how much to charge them. The company will conmiddler these fbehaveors to decide the premium to charge:

your age,
gfinisher,
medical condition,
whether you use tobacco, and
your hobbies and occupation.
Younger people and people in good health, who don't use tobacco, and who don't have a danger, riskous task or hobby will have lower premiums because the company expects these policyhancienters to live longer. People who are ancienter, have health problems, use tobacco, or have a danger, riskous task or hobby will pay more.

Companies may charge you a higher premium or decide not to sell you a policy because of your potential risk. If a company won't sell you a policy, keep storeping. Underwriting clue, hint, instructionlines vary by company. You might find coverage with another company.

Who Necessitys Life Insurance?
People who have others who rely on them financially should conmiddler life insurance. You might want enough insurance to pay your debts and to provide your beneficiaries with some income. Conmiddler your circumstances and the quality of life you want your depfinishents to have when deciding whether to buy life insurance and how much you should buy.

Ask yourself these questions to help you decide if life insurance is right for you:

Do you necessity to replace your income to provide for your spouse, children, or other family members?
Do you have debt, such as a mortgage, credit cards, student loans, or other debt?
Do you want to help your children pay for college?
Will your family necessity money to pay for your funeral costs or the cost to settle your estate?
Do you have a big estate that could be subject to state or federal estate taxes?
Do you own a business that’s financially depfinishent on you or someone else?
Would you love to abandon money to a charity?
If you replyed yes to these questions, conmiddler buying life insurance.

Buying Life Insurance for You or Someone Else
You may buy a life insurance policy for yourself or for anyone who gives you permission and agrees to the company's underwriting process. The person who buys the policy is the policyhancienter or owner and usually pays the policy premiums.

People usually buy life insurance for themselves to provide money for a spouse, depfinishent child, or other family member. Sometimes, you might want to buy a life insurance policy on someone else and name yourself as the beneficiary. For example, if you’re divorced and get child support, you might want to buy a life insurance policy on your former spouse to make up for lotune child support if your ex-spouse dies.

Creditors may buy life insurance on people they loan money to. The policy would pay the balance of the loan if the person dies before it’s rephelp. Businesses sometimes buy policies to cover the lives of employees or partners who are important to the company.

Provide for charitable organizations by buying life insurance coverage and malord them the beneficiary to your life insurance policy.

Zero premium life insurance
TDI urges consumers to proceed with caution if they're asked to participate in what is generally called a "zero premium life insurance policy." The policies are most often sancient to people between the ages of 65 and 85. In these arranpearlents, the policy is owned by a stranger and the consumer receives a lump sum payment or the consumer's beneficiaries receive a portion of the death benefit. These nontraditional products in the stranger-owned life insurance market are also called "estate maximization plans" or "no cost to the insured" policies.

If you enter into one of these contrbehaves, be sure you:

understand the contrbehave and your obligations,
tell the company you are applying with,
are careful approxifriendly disclotune confidential information,
conmiddler the tax consequences,
understand that the policy might count as an asset when determining eligibility for public benefits, and
make sure the people involved in your transbehaveion are licensed and registered by TDI.
Types of Life Insurance
There are different types of life insurance: term life, permanent life, a combination of the two, and accidental death and dismemberment.

Term Life Insurance
Term life policies are typically cheaper and less complicated than permanent life policies. There are two types of term life policies, annual renewable term and stage term:

Annual renewable term is a one-year term where the premium adonly, merely, solelys each year based on your age when you renew your policy.
Stage term is sancient with term periods of five, 10, 15, 20, 25, 30, or more years. The premium is the same during the period of the term. Some stage-term policies guarantee that the premium won't change, but other policies only guarantee that the premium won't change for a few years even though the term may be for a longer period. It's important to read the policy to tell how long your premium is guaranteed to be the same.
Term life insurance policies typically only provide a death benefit. If you die during the term, your beneficiaries get the death benefit. Term policies seldom include a cash value or a savings component and aren't designed to provide coverage for your entire life.

Term life insurance provides indear coverage during a time when many people necessity it most, such as when they're raitune a family, paying off debt, or going to college.

Term life clever be a good choice for young families with children. You might necessity coverage only until your children are adults and are earning their own income.

Term Life Features
The two most general provisions of most term life policies are the convertibility provision and the renewability provision.

Convertibility puposes you clever exchange the policy for permanent life insurance of equal value without talord a medical exam or going through any underwriting. This puposes you could transfer a policy without having to reply questions approxifriendly your health or medical hitale, narrative.

Converting a policy will increase your premium because permanent coverage usually costs more than term life. Convertibility clever be an important feature if:

your health worsens after you buy the term policy,
you clever't qualify for another life insurance policy, or
you want to own a policy for your lifetime that builds cash value or savings.
Companies usually only permit policyhancienters to convert term life policies for a period of time, typically before they turn 65.

Renewability puposes you may extfinish the policy for additional terms, regardless of your health and without having to pass a medical exam. This clever be another advantage of term life coverage. Most companies offer term life insurance only up to a sure age, usually 70 or 80.

Premiums generally go up at each renewal term. Annually renewable premiums clever get high for people past middle age. If you're paying high annually renewable premiums, conmiddler another type of term coverage, such as stage term.

Term Life Payouts
Term life insurance is typically phelp out in one of three ways:

Stage term coverage pays a death benefit that remains the same over the term. For example, a 20-year stage term policy with a $100,000 death benefit will always pay $100,000, whether the insured dies in the fifth or 15th year. Depfinishing on the policy, your premium for stage term coverage will either remain the same or increase at a scheduled swift.
Decreatune term coverage pays a death benefit that diminishs over the term at a scheduled swift. For example, a 20-year decreatune term policy may start with a $100,000 death benefit that diminishs by $5,000 per year. If you die in the 11th year, the policy pays $50,000. Decreatune term coverage clever be a good option for parents since a child's necessity for financial support typically diminishs as the child gets ancienter. A disadvantage of decreatune term coverage is that its convertibility value also diminishs each year. Premiums typically remain approxifriendly the same over the term. Mortgage life insurance is a version of this type of term life insurance.
Increatune term coverage pays a death benefit that increases over the term at a scheduled swift, which is often linked to inflation. For example, a 20-year increatune term policy may start with a $100,000 death benefit that increases by 5 gratuity of the face value per year. If you die in the 12th year, the policy would pay approxifriendly $155,000. Premiums typically increase each year relative to the benefit increase.
Permanent Life Insurance
Permanent life policies usually have higher premiums because they provide coverage for your entire life and have other features and benefits. The main feature of most permanent life insurance is a cash value or savings component that grows over time and may be withdrawn, invested, or borrowed against during your lifetime. You clever also use it to pay for future premiums to keep the policy during your retirement years.

Your initial premiums for permanent insurance are typically higher than for term life. There are two main reasons for this. First, the policy lovely has a cash or cash value savings feature, and second, you're buying coverage for a longer period of time based on your current age. Generally, the premiums on a whole life policy never change. Global life or variable life insurance premiums may change over time because the cost of insurance usually gets higher as you get ancienter. Be sure you understand how your premiums might change over time.

If you buy a permanent policy when you're young and continue the policy into middle age, your premium will lovely be lower than a term life policy bought when you're ancienter. This is true even if the death benefit is similar.

A portion of each premium is placed into an account – telln as the cash value – that grows over time. The amount may grow at a fixed interest swift for whole life or global life policies. It may be tied to indexed interest swifts in an indexed global life policy. In a variable global life policy, the cash values may increase or diminish if the sub accounts you choose increase or diminish based on their underlying kemampuannce. These sub accounts are invested in stocks, bonds, or both and are subject to their own expenses.

A policy might permit you to withdraw from the cash value, use it as collateral for a loan, or use it to make future premium payments. Sometimes, if you withdraw the cash value, the company will clevercel the policy. If that happens, the coverage will finish and it might affect your taxes.

When you die, beneficiaries get the policy's death benefit. Depfinishing on the policy, your beneficiary may get the death benefit and the cash value.

It might take a few years for a policy to build a cash value. The policies might also apply a surrfinisher fee if you withdraw the money early. You might also be liable for income taxes on the money you withdraw from the cash value that exceeds the premiums you phelp.

Conmiddler your necessitys before deciding which type of life insurance is best for you. Buying a permanent life insurance policy and surrfinishering it early might not be a good financial decision.

Types of Permanent Life Policies
The two most general variations of permanent insurance are whole-life insurance and global life insurance, also telln as flexible premium adonly, merely, solelyable life insurance.

Whole-life insurance remains in effect for your entire life unless you cash the policy in or stop paying premiums. The policy is guaranteed renewable so you never have to renew the policy. Premiums are fixed at the age you buy a policy. Therefore, your premium will be lower the younger you buy.

Some whole-life policies are participating. This puposes the insurance company might pay an annual dividfinish to policyhancienters. You clever usually get the dividfinish in cash, add it to your policy's cash value to buy additional death benefits, or use it to pay future premiums.

Dividfinishs aren't guaranteed. Some policies don't pay dividfinishs at the company's projected swift and others might be higher than the projection. Ask for the company's hitale, narrative of projected dividfinishs versus dividfinishs behaveually phelp before buying a policy.

Global life insurance permits you to choose the amount of coverage, the amount of your premium, and the cash value you build. This policy also provides flexibility to change your premium payments and to make withdrawals or take a loan against the cash value. Remember that any changes you make may affect your coverage. The interest swift your cash value earns might get higher or lower over time based on the interest swift markets. The underlying expenses and charges could also change, which could affect future premium amounts or the longevity of your life insurance coverage. The policy may remain in force until the maturity date, which is generally age 95 or 100 if you have $1 or more in cash value. At the maturity date, coverage finishs and you get the cash value. Because of the flexible nature, review the policy annually. Ask for an inforce illustration to make sure the policy hasn't changed. If it has, adonly, merely, solely the policy premiums or death benefit amounts to permit it to continue to the maturity date.

Some global life policies pay a guaranteed swift of return. Others are variable global life policies whose value depfinishs on the kemampuannce of the sub accounts that an insured chooses, which are invested in stocks, bonds, or other investments. Agents who sell variable life insurance in Texas must have a federal securities license and a standard state insurance license. The rules and policy terms for flexible premium policies are complicated. Talk to a life insurance professional to understand a policy before you buy it.

A global life policy will permit you to change the amount you pay for the premium, the death benefit, or the cash value. Any adonly, merely, solelyment you make will affect one or both of the other areas. For example, increatune your payment will increase either your cash value, death benefit, or both.

Many global life policies give you the option to lower your premium payments below the amount necessityed to pay the cost of the insurance. Any shortfall in the payment versus the cost of insurance will be deducted from the cash value. Be careful to review your policy if you make a lower premium payment because, if the cash value arrivees zero, you must pay the full cost of insurance or the policy will cycle, loopse. The company must sfinish you an annual report with your cash value amount and how long the policy might last based on the cash value, cost of insurance, and interest swift credited to the cash value. Review the report regularly to monitor the future duration of the policy.

Some global life policies have a secondary guarantee, or a no-cycle, loopse premium benefit. The primary guarantee is the premium payment to cover the cost of insurance. If the primary guarantee isn't enough, a secondary guarantee keeps the policy from cycle, looptune even if the cash value is zero. However, the no cycle, loopse premium is typically a fixed amount that must be phelp to maintain this no-cycle, loopse benefit.

For another explanation of how global life insurance policies work, watch TDI's video approxifriendly global life policies.

Other Types of Life Insurance
These types of life insurance provide only specific coverages or are sancient in unique circumstances:

Credit life is a type of policy that lfinishers offer and borrowers buy to pay the balance of a loan if the borrower dies before repayment. A bank or lfinisher might require you to buy a credit life policy as a condition of a loan.

If you already have a life insurance policy, you might not necessity credit life. You might instead agree to assign some of the death benefits to the lfinisher to repay the loan balance.

Credit accident and health coverage pays the balance of the loan if you get sick or hurtd and clever't repay the loan. A creditor who requires this coverage will usually add the cost of the premium to your loan payments.

You might have to go through underwriting for credit life insurance. Texas verdict prohibits lfinishers from requiring that you buy credit life or credit accident and health insurance for some loans. Here are some restrictions:

A lfinisher may not require credit life or credit accident and health coverage as a condition of any home loan. Instead, the lfinisher may require you to buy a mortgage guaranty policy, a type of coverage that protects a lfinisher from default under more general circumstances.
A lfinisher may not require you to buy credit life and credit accident and health coverage for any loan of more than 10 years.
A lfinisher may not charge a loan recipient more than the company's premium for the coverage or otherwise fortun by requiring the coverage.
A lfinisher may not require you to buy coverage from a specific company.
Prephelp funeral insurance is a special type of policy to pay for funeral services in advance. An advantage of this insurance is that it locks in the cost of the funeral at current prices.

Funeral insurance clever be dear compared to other types of life insurance. The premium amount might exceed the death benefit. Also, many policies won't pay the full funeral expenses if you die before paying a required amount.

A regular life insurance policy or savings may be a better way to pay funeral costs. Store carefully before you buy funeral insurance.

Home service life, or industrial life, is usually sancient door to door. Some home service life policies clever be a good deal, but many offer low death benefits, build cash value at a low swift, or have high premiums.

Individual versus Group Policies
Individual life insurance is bought by individuals and insures the life of one or more people in a tunele policy. This coverage gives you the most choice because you're free to store among companies to find the policy that best meets your necessitys. Many companies sell individual policies with the features you necessity.

Individual policies usually have strict underwriting clue, hint, instructionlines because the company's risk is based on one person. Younger people in good health usually pay less for coverage than those who are ancienter or have high risk fbehaveors. A company might not sell a policy to someone conmiddlered a high risk.

Group life insurance is bought by employers, governmental entities, and other organizations, such as professional organizations, unions, churches, and fswiftrnal groups, and insures a group of people under a tunele contrbehave. State and federal verdicts restrict the companies' underwriting criteria for group policies. If you don't qualify for an individual policy because of age or health reasons, group life coverage might be a good option.

Any organization that sponsors a group life policy must make it available to all members of the group regardless of age or health status. It is against the verdict to require group members to buy a policy as a condition of membership. Group life insurance may be sancient as term life, whole life, or global life coverage.

Modifying your Coverage
Policy riders and finishorsements are additional policy benefits you might add to a policy to expand the coverage, usually for an additional premium. Some of the most general finishorsements are:

Additional term insurance adds term life coverage to a whole life or global life policy. For instance, if you necessity $500,000 worth of total coverage, you could buy a $100,000 permanent life policy with a $400,000 additional term insurance rider. As you make more money, you could convert the term rider into the global life policy or buy an additional whole life policy at your current age.
Guaranteed insurability assures that you clever buy additional coverage from the company, regardless of your age or health condition. These fbehaveors may still determine your premium swift. You usually must buy the additional coverage by a specified date or life event, such as retirement or before arriveing age 50.
Accidental death provides a death benefit if you die because of an accident. Sometimes, an accidental death provision in your policy will pay double. Restrictions might apply.
Disability waiver of premium covers the premium for you if you meet the policy's definition of disabled. This rider is typically only available to people younger than 60.
Acceleswiftd death benefit option prepays some or all of the death benefit while you are still living and are analyzed with a terminal illness, specified sickness, or a long-term care illness. People often buy this rider to help pay for the care you necessity at the finish of your life. The rider typically requires a doctor to confirm that you clever’t perform sure tasks, called behaveivities of daily living, such as bathing, drestune, or eating
Spousal rider provides term insurance coverage for your spouse. Essentially, this rider combines two policies into one.
Children's rider provides term insurance for your children. Most companies require the child to be at least 14 days ancient, and coverage typically lasts until the child turns 21 or 25.
Settlement Options
Companies usually pay the death benefit as a tunele lump sum, but there are other settlement options. Either you or your beneficiary chooses how the death benefit will be phelp. General settlement options include:

Interest option. The death benefit remains with the insurance company, and the company pays the interest to the beneficiary regularly.
Fixed period. The company pays the death benefit at regular intervals, with interest, over a chosen period of time.
Life refund. The insurance company pays a set monthly amount to the beneficiary for the remainder of his or her lifetime. Under this option, it's possible for the beneficiary to receive more than the policy's stated death benefit if he or she lives longer than expected.
Tell Your Rights
Prompt Payment of Death Benefits
Insurance companies must pay the proceeds of the life insurance policy to the beneficiary within two months of receiving proof of death and verifying the beneficiary. For an individual life policy, the company must also pay interest on a death benefit from the time the company receives the proof of loss statement to the time the company accepts the claim and offers to pay the death benefit.

Mistune a Premium Payment
Most policies have a 31-day grace period after your premium's due date, during which you may pay the premium with no interest charged and still have coverage. If you die during this period, your beneficiary receives the death benefit minus the premium owed.

If Your Policy Cycle, loopses
To reinstate a cycle, loopsed policy, the company may require you to pay the overdue premium with interest. If you had a loan against your cash value when the policy cycle, loopsed, the company may also require you to pay any unphelp interest and reinstate the loan. Most companies will reinstate a policy within a five-year period, but may require you to reply additional health questions or take another medical exam.

Buying Life Insurance
When you apply to buy a life insurance policy, the company will conmiddler your risk fbehaveors. Based on the information you provide, the company will decide whether to sell you a policy and what to charge you. This evaluation is called underwriting. You’ll probably have to fill out a health questionnaire. You might also have to provide medical records, take a physical exam, or thorough a financial questionnaire.

Contestable Period
It's important that you thorough the entire application tellingly. Life insurance policies have a two-year contestable period. If you die within this period, the company may investigate the cause of death and review the information you provided on the application. If the company studys that you gave intelling information or withheld information, it clever deny payment of the death benefit. This might be the case even if the information is unrelated to the behaveual cause of death. If a company denies payment, it must refund the premiums you phelp into the policy.

Most companies won't pay the death benefit during the first two years of the policy if the cause of death is suicide. If the company doesn't pay the benefit because of suicide, it will return the amount of the premiums phelp.

Once your policy has been in effect for more than two years, however, the company must pay the death benefit regardless of the cause of death. The only exception is if you don’t pay your premiums. The company may not use information you disshutd truthfully to deny payment.

Chootune the Right Amount
There is no formula to decide how much life insurance you necessity. Some consumer groups recommfinish buying five to seven times your annual homehancient income, while others recommfinish 10 times your income during low interest swift environments.

To decide the amount that's right for you, conmiddler the debt you have, the amount of income your family must replace, and whether your survivors will have other expenses to pay, such as college costs or funeral expenses. Also conmiddler whether you want to abandon a heritage or prize, reward, present to your beneficiaries.

It's also important to conmiddler the value of services provided by nonwage earners. For example, a stay-at-home parent's child care and homehancient administerment should be included.

Storeping Smart for Life Insurance
Research the company. An insurance company's financial strength and complaint record clever tell you a lot approxifriendly the quality of service it provides. You clever study a company's financial rating and the number of complaints against it by calling the Consumer Help Line or utune the Company Seeup feature on our website. Store for a low-load (commission) or no-load policy. You might save money, particularly on permanent life insurance, if you buy a policy with low commissions and administrative fees, gatherively telln as the load. Financial planners who are licensed insurance counselors often sell these policies. Generally, financial planners charge clients a flat service fee. Since low load policies have fewer initial fees, you will also lose less money if you cash out early.
Make sure your company and agent are licensed. It is illegal for an agent or company to sell insurance in Texas without a state license. The Texas Life and Health Insurance Guaranty Organization pays some or all of most claims for Texas-licensed companies that go bankrupt or become insolvent. If your company is unlicensed and goes bankrupt, your beneficiary might not get the death benefit. You clever study whether a company is licensed by calling TDI's Consumer Help Line or by utune the Company Seeup feature on our website.
Get cites from several companies. Each insurance company uses its own underwriting clue, hint, instructionlines. One company might sell you a policy at a much lower premium than another. There are two types of life insurance agents, and they earn income through salaries, commissions, bonuses, or a combination of the three.
Captive agents sell policies only for the insurance company they work for.
Indepfinishent agents sell policies for multiple companies. An indepfinishent agent should be able to give you premium cites from several companies during a tunele phone call or visit.
Compare "apples to apples." Be sure the policies you compare offer similar stages of coverage. The more features, options, and benefits a policy provides, the more it will cost. A less dear policy could have fewer features or a lower death benefit. A more dear policy might be a better value when you conmiddler the amount of the death benefit per premium dollar charged. Don't choose a policy based on price alone.
Use your free-see period. Texas policies will give you a free-see period of at least 10 to 20 days. During this time, you may clevercel the policy for any reason and get a full refund. Use this time to read your policy carefully to be sure the coverage is right for you.
Here are some additional trik to help you store for life insurance:

Agents often use charts to demonstrate how a policy's cash value might grow. Be sure that the chart also demonstrates a cash value that is guaranteed by the insurance company, and not a financial projection on what the company is currently paying. Projections are based on assumptions and you shouldn't rely on them as a promise of policy's kemampuannce. You might earn much less than the projection. Ask your agent for a hitale, narrative of a company's projections versus the behaveual growth of cash values. The agent shouldn't object.
Be careful if an agent tells you that interest or dividfinishs earned on your policy will cause your premiums to disseep during the life of the policy. If interest swifts or dividfinishs drop, you may have to pay higher premiums or pay longer than you expected.
Some agents also sell retirement investments and student loans. The verdict prohibits agents from offering reductions on an investment or loan, or offering a prize, reward, present to encourage you to buy life insurance. If you think an agent has made an improper offer, report it to TDI by calling the Consumer Help Line.
Insurance companies sometimes market life insurance policies as retirement savings tools, estate plans, election funds, or mortgage protection. Not clearly identifying a policy as life insurance is a misrepresentation and a violation of the verdict. If you trust an agent or company has misrepresented a policy, call our Consumer Help Line to report it.
A few simple clue, hint, instructionlines clever help you avoid fitting a victim of insurance fraud:
Never pay cash for a policy.
Never sign a blank application.
Conmiddler the company before you buy insurance over the phone or on the first visit.
If you think you necessity help chootune the right policy for you, have a frifinish or family member visit the agent with you. The agent shouldn't object.
Financial Implications of Owning Life Insurance
Medichelp
The cash value of a life insurance policy is conmiddlered an asset when determining if you're eligible for Medichelp. The earnings from a loan utune the policy as collateral might also be an asset in some circumstances. If you're on Medichelp, talk to an attorney or financial adviser to understand any consequences of owning life insurance.

Taxes
The cash value of a life insurance policy generally build ups tax-deferred. This puposes you don't pay taxes on it until later, if ever. Withdrawals from the cash value are generally nontaxable until the cash value exceeds the total premiums phelp into the policy.

The verdict generally conmiddlers a death benefit to be reimbursement for a beneficiary's loss, and not income. Beneficiaries seldom have to pay federal income taxes or an inheritance tax on a life insurance settlement.

If a policy doesn't list a beneficiary, or the beneficiary is deceased, the death benefit is phelp to the insured's estate. Heirs to the estate may have to pay taxes on the money they received from the estate. If you're conmiddlering buying life insurance, talk to an attorney or financial adviser to understand the tax consequences.

Bankruptcy
Unless a legal exception -- such as fraud -- applies, the cash value and death benefit of a life insurance policy are exempt from:

creditors;
demands in bankruptcy proceedings; and
execution, attachment, garnishment, or other legal processes.
Replacing Your Policy with a New One
Review the price and coverage of your policy every few years to make sure you're still getting a good value and the coverage you necessity. However, replacing an ancient insurance policy with a new one is not always a good thought. Conmiddler the following:

New policies usually take longer to build cash values and to pay dividfinishs.
The two-year contestable period starts again under the new policy. During this period, if you die and the company finds out that you gave error information on your policy application, your beneficiary might not receive the death benefit.
If changing to a new policy puposes withdrawing early from a permanent life policy, your cash value might be reduced by surrfinisher fees.
You could become underinsured if the new policy doesn't provide the same coverage or benefits as the ancient one.
You will probably have to reply additional health questions or have another medical exam.
State verdict requires agents to give you a notice advitune you to carefully conmiddler whether replacing a policy is in your best interest.
If you exchange a policy, your agent might earn a commission on the sale. An agent who persuades someone to switch to a new policy to earn a new commission, without regard to the implications for coverage, is against the verdict. This is called churning. If you trust an agent has improperly encouraged you to sell a policy to purchase a new one, you may complain to TDI.

Life Settlements
Sometimes you might necessity to convert your life insurance policy to cash or use some of the money that would have phelp the death benefit. People sometimes do this because they outlive their retirement savings or become ill and necessity dear care or treatment.

A life insurance policy is personal property. You clever sell it only, merely, solely as you would your other property, but there are special rules. You clever sell your life insurance policies to an authorized life settlement provider for a gratuityage of the policy's death benefit.

If you have a terminal illness, you clever sell your life insurance policy and get a life settlement, previously telln as a viatical settlement. To do this, a doctor must determine that you have two years or less to live. Under federal verdict, all earnings from a viatical settlement are tax-free.

If you don't have a terminal illness, you might still be able to sell your policy and get a life settlement. You’ll probably have to pay taxes on the money you earn from a life settlement.

Sale Amounts
The settlement provider will only pay a gratuityage of the policy's face value. For example, a life settlement provider might pay $75,000 for a life insurance policy that will pay $150,000 when the policyhancienter dies. There are no verdicts requiring a sure minimum sale amount. Settlements typically range from 10 gratuity to 75 gratuity of a policy's face value.

It's a good thought to talk to several settlement providers because prices vary. Settlement providers usually see at these fbehaveors to decide how much to pay for a policy:

Your life expectancy. Settlement providers will pay more for policies if you have a shorter life expectancy. Therefore, the sale price for a viatical settlement, as it was previously telln, is usually much higher than that of a life settlement. Most settlement providers won't buy a policy in a life settlement unless you are 65 or ancienter.
Policy premiums. Because the settlement provider assumes all future payment obligations, a policy with lower premiums is worth more.
The income you earn from a life settlement could affect your eligibility for Medichelp or other government benefits. The income might not be exempt from bankruptcy or creditor proceedings. Before entering into life settlement, talk to an attorney or financial adviser.

Life settlement providers and brokers (agents who represent policyhancienters to negotiate settlement transbehaveions) must register with TDI. For a list of registered life settlement providers and brokers, call the TDI Consumer Help Line.

Alternatives to Conmiddler
There are other ways to convert a policy to cash. Here are some other options:

If your policy has a cash value, you might be able to cash it in.
Many lfinishing institutions may give you a loan utune your policy as collateral.
A policy with an acceleswiftd death benefits provision or rider will prepay all or some of the death benefit before you die if you are analyzed with a terminal illness, specified sickness, or long-term care illness.
Annuities
Life insurance companies, agents, and indepfinishent agents may sell annuities as a type of investment. Annuities clever provide a place to build savings or provide an immediate income.

There are two primary types of annuities: fixed and variable annuities. Each type provides sure features.

Fixed annuities have a guaranteed minimum interest swift. The money you invest and your earnings are guaranteed not to lose money.
Variable annuities permit you to choose sub-accounts that may range from conservative to very aggressive. The earning potential is greater with a variable annuity, but so is the risk. The money placed in a variable annuity isn't guaranteed and you could lose money.
Bemiddles the two primary types of annuities, each annuity may be deferred or immediate.

A deferred annuity is generally used to build savings. The money invested grows tax-deferred and is withdrawn , typically during retirement or at death. A deferred annuity has two phases: the accumulation phase, when money is being invested, and the payout phase, when money is withdrawn or phelp to the owner and annuitant.
An immediate annuity provides a "pension love" stexplore of income immediately from the money you give the insurance company. You clever choose to receive payments for a sure period, for the rest of your life, or for the rest of your and your spouse's life. Read your contrbehave and understand what happens to your money in an immediate annuity when you die.
Annuities might not be right for everyone. It depfinishs on your necessitys and goals. Typically, surrfinisher charges may apply during the first seven to 10 years. Therefore, annuities are usually not good short-term investments.

Many investors buy versions of the same annuity. The buyer's premiums are pooled into a fund that earns fortuns. In return for an administrative fee, a bagikan of the fortuns, or both, the company managing the annuity agrees to pay you a return on your investment.

If you are conmiddlering buying an annuity, talk to an insurance professional or financial adviser. For more information, read TDI's Understanding Annuities publication.

Get Help from TDI
For insurance questions or for help with an insurance-related complaint, call the TDI Consumer Help Line at 1-800-252-3439 or visit our website.

Visit HelpInsure.com to store for automobile, homeowners, condo, and renters insurance, and TexasHealthOptions.com to study more approxifriendly health insurance and your options for coverage.

The information in this publication is current as of the revision date. Changes in verdicts and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an finishorsement by TDI of any service, product, or company.


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