Life Insurance Types Part 2: Answering Your Questions
In the first part of this short series we answered some concerns and questions about life insurance types on our website. Now we will continue to address issues often heard from clients.
What happens if I fail to make the required payments?
If you miss a premium payment, you typically have a 30- or 31-day grace period during which you can pay the premium. After that, the policy will lapse. You may be able to reinstate with evidence of insurability depending on your policyâ€™s provisions. If your policy has sufficient cash value, the company can, with your authorization, draw from a permanent policyâ€™s cash surrender value to keep that policy in force. This does not apply to term insurance because there is no cash value to draw from. In some flexible premium policies, premiums may be reduced or skipped as long as sufficient cash values remain in the policy. However, this will result in lower cash values.
2. What if I become disabled?
Provisions or riders that provide additional benefits can often be added to a policy. One such rider is a waiver of premium for disability. With this rider, if you become totally disabled for a specified period of time, you do not have to pay premiums for the duration of the disability.
3. Are other riders available?
(Availability, specifics, and costs of these riders vary by carrier and state.)
â€œAccidental death benefitâ€, provides for an additional benefit in case of death as a result of an accident.
â€œAccelerated benefitsâ€, also known as â€œliving benefits.â€ This rider allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care or confinement to a nursing home.
â€œChild riderâ€, provides insurance for all your children, usually from $1,000 to $20,000 of death benefit.
4. When will the policy be in effect?
If you decide to purchase the policy, find out when the insurance becomes effective. This could be different from the date the company issues the policy.
5. How do accelerated death benefits work?
It allows policyholders to receive all or part of the policyâ€™s proceeds prior to death under certain circumstances, including the need for long term health care and confinement to a nursing home. Because payments may affect tax status and Medicare Health Insurance eligibility, and will be deducted from the overall benefits paid later to beneficiaries, policyholders should thoroughly investigate options in advance.
6. By using medical tests are insurers trying to eliminate any applicant likely to develop a serious health condition?
Medical tests can provide accurate and current information about an applicantâ€™s health, thus enabling insurers to charge premiums that reflect the level of risk an applicant represents. Because some health conditions are easily managed through proper medication, therapy or lifestyle changes, medical information sometimes makes it possible for insurers to cover applicants who might not otherwise be insurable. More serious or incurable conditions present an enormous risk that an insurer simply cannot assume.
This is the second in a short series of 3 about Life Insurance Types and things to consider when purchasing Life Insurance. You can read Part 3 on our blog.
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