Comparing Life Insurance
I am a self-proclaimed, savvy shopper. I love to shop for a deal. But I want to get a value, I don’t want to just get a cheap price. I can pay a low price for an inferior product just like anyone else. What I want is a great product for a great price. As a life insurance agent since 1996, I present to you questions for a savvy shopper for term life insurance: Comparing Life Insurance
Does your policy have a rider (supplemental benefit you pay extra for) called “disability waiver of premium?” Comparing Life Insurance
If not, it should. This rider states that, if you become disabled for a certain period of time, say six months, the insurance company will waive the premiums you must pay to keep the policy in force during a period of total disability or illness. For most companies this rider is available up until your retirement age which is usually 65. The specific benefits of disability waiver of premium may depend on the age of the insured at the time the disability begins and the benefit may vary depending on the type of policy such as term, universal life or whole life. Read the contract to know how your policy works. Many consumers do not even know such a provision is available for their policy and I believe many would select this accessory to their policy, given the choice. Likewise, many people do not have sufficient disability insurance coverage in place, so a disability can lead to serious financial problems for the family, including the cancelling of life insurance policies due to the lack of funds. Check your policy to see if you have waiver of premium.
Does your policy have a convertibility privilege (sometimes called an “exchange” option)?
If not, it should. A convertibility option allows you to convert your policy from term to a form of permanent coverage, without having to requalify medically or financially or otherwise. What happens if you buy a 20 year term insurance policy and 8 years into the policy, you find out that your life expectancy is shortened but the doctor thinks you will probably live more than 12 years? You would probably want to have a contingency plan, i.e., a way to keep your life insurance policy in effect for longer than the remaining 12 years of the term without having the premiums increase too exorbitantly. This is why you want to have a convertibility privilege. But here is where we can get tricked as a consumer. Many “cheaper” life insurance policies do, in fact, offer a conversion privilege. But what is the policy convertible to? A good convertible privilege allows you to convert your term to ANY permanent policy the insurance company makes available to the marketplace (universal life or whole life). A bad convertible privilege only allows you to convert your term to a more expensive permanent policy designed specifically for the conversion market. Now, when you buy a 20 year term policy you are probably buying it because you think you will only need the insurance for 20 years and then you won’t need insurance. Or you believe that if you do need the coverage for longer then you can just apply for a new policy and do the whole qualification process at that time. But what happens if your situation changes and you don’t qualify at a good rate or what if you don’t qualify at all? This is where you will read every single word of your existing contract to try to understand your options. If your health changes then the only option at your disposal may be to exercise the convertibility privilege. Be aware of what contingency plan you have in your hands when you buy the term policy. Check your policy to see what the convertibility options are. Call the company and/or your agent to be sure you understand the contract language. Comparing Life Insurance
Is your term insurance with a mutual or a stock insurance company? Comparing Life Insurance
Mutual companies have no stock holders to answer to, they have policy holders. The board members of a mutual insurance company have a responsibility to policyholders as well as to the viability of the company. With mutual companies, the policy holder of a “participating policy” is treated as a shareholder of the insurance company and thus has a say in the direction of the company through voting rights. By contrast, board members of a stock company have a fiduciary responsibility to the stock holders as well as to the policyholders of the company. There can sometimes be a conflict of interest in the shareholders desire for quarterly earnings over the long term viability of the company. This is why I typically recommend mutual company products to clients over stock based insurance companies.
What are the ratings of your term insurance company? Comparing Life Insurance
Troy Wirth has been an agent and financial adviser since 1996. His company, Wirth Financial and Insurance Services is located in Irvine, California. Troy Wirth is an agent with New York Life Insurance Company and a Registered Representative for NYLIFE Securities LLC and an Investment Adviser Representative with Eagle Strategies LLC. He provides fee-based planning solutions to his clients. Troy is a Certified Financial Planner Practioner® and holds the Chartered Life Underwriter designation. Wirth Financial and Insurance Services is not owned or operated by New York Life Insurance Company or its affiliates. 17941 Mitchell South Suite C Irvine, CA 92614. 949-854-4695. Life Insurance is Not a Commodity
About the Author
As Senior.com Director of Sales and Marketing, Kimberly Johnson is passionate about providing Seniors with the resources and products to live well. Kimberly is a seasoned caregiver to her family and breast cancer survivor. Her father battled ALS, Lou Gehrig’s disease and she was a primary caregiver. Today Kimberly lives in Southern California near her 104-year-old grandmother, widowed mother, a mentally disabled sister and second sister who is also a breast cancer survivor. She is happily married to her husband of 24 years and they have 3 children.View All Articles