When a loved one dies - there’s not a standard process for submitting life insurance claims to the insurance company and then receiving the death benefit. In fact, no two life insurance claims are ever the same. It’s an unfortunate reality that the majority of life insurance companies are looking for reasons to deny death benefit claims.  Yes, there are times when certain claims should be denied due to fraud, but more often than not, death benefit claims are denied for the wrong reasons.

Examples of initial death claim that were denied:

• A woman was denied because the she paid her premiums from her life savings. The insurance company claimed that she didn’t have enough earned income for them to issue a policy and therefore were not liable to pay the benefit.
• A man was initially denied because there was no named beneficiary… despite the fact that he lived with his disabled mother and had no wife or children and the intent was obvious.
• And another one where the autopsy report was misread by the claim underwriter who accused the insured of being a drug abuser.  Later, statements from the man’s doctor disputed this accusation and the claim was paid.

These are just some examples of why you need to prepare your life insurance death benefit claim before you submit. It’s important that you know what you need and what to expect from the insurance company.

Make sure you:

1. Read through the policy to determine and restrictions or stipulations for receiving the death benefit.
2. Check the date of the application. Is it the same as the policy issue date? Benefits don’t actually start until the date the policy was issued.
3. Know that if the insured person dies within two years of the policy date - the insurance company will almost certainly challenge the claim.
4. Review the death certificate for the cause of death. If you’re submitting a claim under an accidental death policy, the cause of death will be extremely important in collecting your claim.

Know that the insurance company will do several things when they receive a life insurance claim. First, they’ll ask the beneficiary to meet with a claims underwriter for an interview.  You’ll be asked about the insured’s personal life, their medical history, work history, and the cause of death… They’re looking to uncover anything that might have been hidden from the insurance company. In this case - it’s important that you bring someone along to support you, but also as a witness to the questions and answers. Then they’ll perform an investigation. They’ll look at autopsy reports, toxicology reports, old doctor visits, tax returns, social security records, and financial aide applications. It can be a lengthy process so stay in tune and record any conversations and meetings that take place.

If your claim is denied you must be notified - in writing - as to the reason why. From this information, and from the information you’ve collected  throughout the process, you can make an appeal. It’s best to have good representation if this happens… someone who knows the laws pertaining to insurance benefits so that you can complete the process quickly and correctly and collect the death benefit that your loved one intended you to have.

Credit Line Insurance - This type of life insurance will help pay credit card bills if something were to happen to you. However, keep in mind that the benefits from a term life insurance policy can also be used to make sure those creditors are paid as well as other bills.

Mortgage Life Insurance - With many people buzzing about mortgages, whether they’ve paid too much, or it’s the perfect time to buy with low rates, it’s not no wonder this type of insurance seems appealing. But don’t forget that a term life insurance plan can often do the same thing and usually with lower rates then what mortgage companies are offering.

Air Travel Life Insurance -  Aviatophobia: the fear of flying. What about the fear of overpaying? Even if you fly quite frequently, you still have a greater chance of dying in a Walmart parking lot than in an airplane. A term life policy will cover you whether you die in a plane or a parking lot.

The key lesson here is to do yourself a favor and avoid specialty policies. Often times, coverage is limited and rates are expensive. Term life insurance rates are inexpensive and your loved ones won’t be restricted on how to use the benefit. Making your life insurance policy as simple as possible will bring you peace of mind that your final wishes will be carried out the way you’ve planned.

Whole Life Insurance

Whole life, also referred to as “straight life insurance,” provides a set dollar amount of coverage, and a fixed premium that can never be canceled or exchanged for other premiums. Because these payments stay the same throughout your life, the premiums are higher compared to your ’statistical risk of death’ in the early years of the policy. This is why the reserves are built up. Assuming you live a long time after the policy was issued, your payments become lower based on your risk of death. Simply Put: During the first few years of a whole life policy, insurance companies take in substantially more money than they pay out!

Some of this surplus goes to the agent’s commission and some of it becomes your cash reserve, which the company puts in fixed-income investments. Then after several years, you’ll be able to borrow against the reserve, or cancel the policy and receive it’s cash surrender value.

Hint: This option is generally undesirable for younger people with small children who can’t afford the high premiums during the early years of the policy.

Universal Life Insurance

Universal Life combines some of the desirable features of both term and whole life insurance and offers some additional perks. For example, over time, the net cost of a Universal policy is lower than whole life insurance. You can also build up a cash reserve, as with whole life, and vary the premiums payments, coverage amount or both, from year to year. In contrast, whole life requires one set payment amount, which cannot be varied.

Another advantage to a Universal policy is that it normally provides you with more consumer information. Get details such as the amount of premiums going toward company overhead expenses, reserves and policy proceed payments. You can also find out how much is retained for your savings.

Variable Life Insurance

A Variable policy is where the cash reserves are invested in securities, stocks and bonds. In this case, policies combine insurance features with mutual funds. Therefore, your investment return is tied to the financial markets’ performance. In today’s economic times, this may seem like an absurd option, but talk to a qualified agent to learn more. You may be surprised at what this option can do for you!

Variable Universal Life

In this option, your policy is similar to that of a Whole Life policy, but combines the premium payment and coverage flexibility of Universal coverage with the investment opportunity (and risk) of Variable life insurance.

Single-Premium Life Insurance

A Single-Premium policy is just like it sounds. You pay, up-front, all the premiums due for the full duration of the policy. Typically, any policy with a savings feature can be purchased with a single premium. As you can imagine, this obviously requires a huge lump sum of cash — usually $5,000, $10,000 or much more depending on your age and the dollar amount of the policy.

You’re probably wondering: Who does something like this? Well, one reason to commit to such a policy is that it enables you to give the fully-paid-for policy to new owners, which can result in major estate tax savings.

Survivorship Life Insurance

This is also called “second to die,” or “joint” insurance, the latter sounding a little nicer… don’t ya think? It’s relatively new in to the insurance word. It provides a single policy that insures two lives, usually spouses. When the first spouse dies, no proceeds are paid. Instead the policy pays off only upon the death of the second spouse. Why does this work?
Estate Planning: Those wealthier couples who expect substantial estate taxes will be assessed on the death of the second spouse may use this policy as part of estate planning. It’s usually not needed for small to moderate sized estates.
Family Business or Real Estate Interests: A Survivorship policy may be desirable when a major family asset, or family business is on the line. These are assets that aren’t liquid and that the survivors may not want to sell.
Health Issues: Having poor health often times makes alternative insurance options nearly impossible to get or come with a much higher cost. Here, because two lives are insured, premiums for Survivorship policies are relatively low compared to policies on just one person’s life. Therefore, if the other spouse is in reasonably good health, the couple can usually obtain Survivorship Life insurance.

Keep in mind that this is just a broad overview of some different policies available. As always, you should consult with a licensed insurance agent to discuss the best options for your individual situation.

The thought of having to buy life insurance for your parents can be a daunting one. Between the research involved and the realization and preparation of a parents death, many choose to ignore the situation all together.

Although buying life insurance (level term or permanent) for your parents is not a pleasant experience, it may be a necessary one. If for no other reason, ensuring that your parents have a life insurance policy in place can alleviate worries about taking care of their funeral expenses when the time comes. Especially when you consider that the average funeral costs today are $8,000.00! Plus, if your parents have any outstanding debts, a life policy will help guarantee the estate is squared away properly at the time of their death.

It is possible to buy life insurance for your parents, but you’ll have to display what is referred to as “insurable interest” to the insurance company. In other words, it’s required that you can prove you would suffer a financial loss in the event of your parents’ death. This is becoming a common practice to avoid serious crimes in which people would commit murder to obtain a policy holder’s death benefit.

In most cases, however, it is not difficult for a child to demonstrate insurable interest when it comes to insuring their parent and placing themselves as the beneficiary. Once this is established, you need to determine the type and amount of coverage you’ll need.

Whether it be a whole life policy or a term life policy, be sure to read all of the terms and conditions before deciding which one will benefit you the most. Keep in mind that the amount of the death benefit should depend on the purpose of the life insurance, If you’re looking to simply cover the burial expenses, a small payout of around $10,000 may be sufficient. On the other hand, you may need to a larger policy that can be borrowed against in case of medical expenses or other debts.

Regardless of what you choose, making the choice to prepare now for the death of a parent can help to lessen the blow of the loss by allowing you time to grieve instead of worrying about the costs.

1. Didn’t Buy Enough Coverage
It’s recommended by some experts that you purchase a policy which has a death benefit equal to 10 times your annual salary, however, everyone’s situation is different. The best thing that you can do is calculate your current expenses and estimate your futures ones. This includes rising costs of childcare, household maintenance, college expenses, mortgage payments, medical bills, and of course, you should always calculate your funeral expenses. There are numerous tools and resources to help you calculate these and other costs, but it’s important to speak to a qualified agent to get an exact idea of what you need versus what you can afford.

2. Going Cheap and Skimping on Value

There are a dime a dozen of companies who promise the lowest rates around and it lures many of us in, but all too often, people aren’t reading the fine print of the policies. Before selecting the lowest price, realize that you may not qualify. In these cases, if it sounds to good to be true, it probably is. The lowest rates go to the young and healthy because the companies believe they will still make money off of these individuals. If you’re over a certain age, smoke or are slightly overweight - your rates will most certainly be higher. Also be sure that you study the financial strength of such companies and their policies. Learn the length of guaranteed periods, convertibility rights, available riders, etc. Most likely, if you’re willing to pay just a little bit extra, you’ll have a policy with better features, more flexibility and from a company you can trust.

3. Opting For a Short Term Period

The shorter periods may provide lower rates, but the more often you have to renew your policy, the more your rates increase. In addition to higher costs, you also have the added expense of worrying when the policy ends. Every time you renew your policy, you run the risk of letting it lapse and losing everything. Therefore calculate your financial goals and figure out what you can realistically afford. But keep in mind that if you’re purchasing a term life policy, the longer you can go, the better.

4. Buying Life Insurance Is Not a One-Time Activity

It’s important to re-evaluate your life insurance needs once every year or so because your circumstances are always changing (marriage, birth, jobs, etc) and the plan you originally purchased could now be insignificant. You may also decide to convert your term life policy to a permanent policy if possible.

5. Assuming You Have to Pay A Lot More If You Smoke

While it’s a general rule that smoking (or any tobacco use) causes increased monthly premiums, you may be surprised to find that you can actually save a little money by researching the right companies. Some companies have much harsher penalties for tobacco users while others treat you more favorably by offering lower rates than their competitors.

6. Canceling a Policy Prematurely

With today’s economy, companies are offering new policies with more attractive rates. It’s possible that you may want to switch life insurance providers, but make sure you’re new policy is in place before canceling your existing life insurance.

7. Delaying Buying Insurance

It can be difficult to think about life insurance when you’re in young and healthy. Few people enjoy thinking about their own mortality and it’s affects on others. So they go on living their life, choosing to delay the subsequent cost and headache of life insurance. But the fact is that the longer you stay without insurance, the more vulnerable you are. As you age, your premiums and health risk causing you to be a greater liability for insurers. By waiting you may find yourself with little to no coverage at all.

8. Purchasing Life Insurance Without a Medical Exam

This is fine for those of you who suffer from poor health and are willing to pay a little extra to receive some coverage. But, if you’re healthy, you can potentially save quite a bit of money in the long run by opting for a simple medical exam. An accurate health profile will place you in the correct category and your insurance company can then charge you rates according to your specific health situation (which may be much lower).

9. Employer Coverage Only

Employer-provided life insurance simply doesn’t offer enough protection. While it’s certainly a perk, it is rarely based on your financial and personal goals. It is therefore important to have a personal life insurance policy that is more closely tailored to your needs in addition to your workplace coverage. Also, keep in mind that should you lose or leave your job, you will lose that coverage and be very vulnerable.

10. Buying Insurance for the Breadwinner Only

Some people think that they may not need life insurance for family members that don’t work and therefore only purchase policies for the breadwinners. On the contrary, it’s important to consider that the person maintaining the home or looking after the family has quite a bit of financial value, even if they are not currently earning an income. For example, in their absence consider the costs of childcare or home maintenance. Time that will have to be spent away from work. All of this will add up over the years and having the right policy can help a great deal.

The words “renewable” and “convertible” are two of the need-to-know terms when discussing term life insurance policies. They play a big role in the quality of your plan and therefore you should know what they mean and what they do.

The first is a renewable term life policy. This means that you can renew the your life insurance coverage without having to take a physical exam to re-qualify. In other words, as long as you’ve paid your premiums on time and are in otherwise good standing with your provider, this option allows you to automatically renew your coverage without getting a physical or answering personal health questions. NOTE: Many renewable policies include a clause that will only allow you to renew up until a certain age because your overall health generally deteriorates with age.

The other highly valuable adjective in term life insurance is “convertible.”  No, we’re not talking about your dream car. Having the option of convertible term life insurance means that at the end of your current term policy, you’re able to turn it into a permanent policy. A term policy is generally purchased by those with an illness or those needing to get through other trials in which financial concerns are paramount. But as life circumstances change, this is a great option to have. The advantages of a permanent policy are the ability to cash out any accrued earnings and the opportunity to erase the big question mark that looms over the end of a traditional term policy.

Whether you’re interested in continuing with the less expensive term policy, or looking to convert into a more permanent solution, you should talk to a certified life insurance provider today to find out how to add one of these options to your plan. Misfortune seems to follow those who are least prepared. The sooner you act, the sooner your loved ones are prepared and safe.

Level Term Life Insurance

The first is level term insurance. This is semi-self explanatory. It means that your death benefit protection that you originally purchased will remain constant throughout the term period. Premiums paid for this level amount of death benefit may continue to remain level, or may be level only for a specified period, and may even increase later on in the term.

Decreasing Term Life Insurance

The second type of term life insurance is called decreasing term insurance. Here, the death benefit protection will actually decrease over time, but premiums usually remain level though the term period. It is generally purchased by those with financial obligations such as a loan or mortgage, which will decrease over time. Later, the beneficiary may decide to sell the item for a significant amount.

Annual Renewable Term Life Insurance

And finally, the third type of term insurance is called annual renewable. In this case, the amount of the death benefit that was originally purchased will remain the same for the entire term period, but premiums for this level will increase with each year. This is a good option for those needing a guaranteed amount of coverage, but who can’t afford a whole life insurance plan. These buyers usually want to maintain a certain quality of life for the beneficiaries and have calculated what will be needed for them to do so.

As you can see, there are a lot of terms in term life insurance and it is best to learn as many of them as you can before locking yourself into a contract. As always, you should consult a financial advisor and your lawyer to decide what is the best course of action when it comes to your personal life insurance policy, but we hope that you continue to check back here for more helpful information on term life insurance.

Term Life Insurance

When you buy term life insurance, the premiums you pay are solely in exchange for a death benefit over a pre-determined amount of time. It is the least expensive form of life insurance because the death benefit is all that you receive from you premiums. Term life insurance cannot be sold as an investment.

Whole Life Insurance

Whole life insurance, however, will not only provide coverage throughout your life, but can also be used as an investment. In the beginning, you’ll find that your premiums are higher, but they will eventually become comparable and potentially lower down the road. The beauty of whole life insurance is that with the excess premiums that are paid over the actual benefit, your insurance company sets up an investment or an accumulation account.

An accumulation account has great appeal as a retirement investment because of its tax treatment. Your money grows tax deferred! In other words, taxes are postponed on capital gains and income. As a disadvantage, you should know that using a life insurance policy as an investment can yield some high fees and expenses that might erode the returns of ordinary security systems such as mutual funds.

So the question becomes: what is more beneficial? Should you buy an inexpensive term policy and make separate investments or should you you purchase a whole life policy with a built in investment account?

Term or Whole Life Insurance: What To Consider.

• Cost of Premiums: You should never skimp on amount of benefits you need, neither should you over estimate. Figure out how much insurance you’ll need. If you can only afford a term policy, then buy it and make investments down the road.

• State and Federal Tax Brackets: The benefit of tax deferment is only as great as the amount of taxes deferred. In other words, the higher your tax bracket, AND the longer you have until retirement the more valuable the benefit can be.

• Getting Insurance Later In Life: This is a major concern as we age. Our risk for more serious illnesses increase with age which can make it more difficult to obtain a term policy. Be sure to compare guaranteed renewable term policies with the price of whole life policies.

• Be Willing to Shop for No-Load or Low-Load Policies: Unless you buy a no-load or low-load policy, the cost of whole life insurance will overshadow any returns. You could be better off buying term insurance and investing the difference separately.

As you can see there is no cookie-cutter process to choose which plan suites your investment portfolio needs. It’s about weighing the pros and cons carefully, educating yourself and shopping around for the best options out there.

Defining the “Death Tax”

Well, as I’ve grown older, I’ve come to realize the evil truthfulness of that statement. Especially now that they’ve merged into one! At the end of your life, you will be hit with what is known as the “Death Tax.” That’s right… You will be taxed for dying!  The death tax, however, is more commonly referred to as the “estate tax.” It is imposed upon ALL assets owned by the deceased individual.

While every situation is different, the tax rates can start at a measly 18% for amounts under $10,000, but will increase incrementally up to a crippling 55% for assets valued over $2,000,000. Now many of us may not have to worry about our assets ever reaching that amount, but they’ll most certainly be above $10,000. Wherever you think you might fall, you need to prepare for this inevitable conclusion and perhaps even encourage your loved ones to do the same.

Life Insurance Lets You Keep What Is Already Yours

Let’s face it. Most of us don’t think about paying the death tax because, well, we’re not really going to be around to pay it. Unfortunately, it instead, falls upon the shoulders of our family members or beneficiaries. Most people will handle this by selling most or all of your estate. This can include house(s), cars, boats, RVs, land, collectibles, even family heirlooms. But what if you purchased many of these items to be kept and enjoyed by your loved ones?

It is suggested that you meet with an estate attorney. It is their responsibility to total a complete list of your assets. After doing so, you may find that, for example you have an estate with a hefty $500,000 tax bill based on your estate value.

Since most beneficiaries may not have amassed the assets to pay such a steep tax bill, it would be wise you to obtain a life insurance policy for the same amount. In other words, if it is your intention that your family keep a particular asset, such as a house or land (instead of having to sell it in order to pay the estate tax), the idea is to assess the value and the appropriate tax bill for the particular property and obtain a term or whole life insurance policy for that amount.

Still, be sure your premiums won’t cost you the entire amount of your payoff. In most cases it won’t, but you may need to shop around, especially if you’re looking for term coverage latter on in life.

By purchasing a life insurance policy in order to cover the forecast of the death tax, you can ensure that your beneficiaries need not carry the burden of covering this hidden expenditure, and that you will be able to properly execute your final wishes should they be meant for your loved ones to enjoy the properties you’ve worked your whole life to secure.

The Difference Between Mutual and Publicly Owned Insurances

Mutual insurance companies are owned by the policyholders, while publicly owned companies are owned by stockholders. So what does that mean to you? Well, the short and simple answer is that mutual insurers tend to be more conservative in their investments, and they pay their policyholders dividends, which are excess profits. Publicly owned companies on the other hand, focus on higher-risk and higher-return insurances like variable annuities and universal variable life insurance. These let you invest in mutual funds for growth.

A recent study done in August 2009 by Moody’s Investors Services, found that stock-owned insurance companies showed higher growth rates and better earnings than mutuals at the turn of the decade. However, mutual insurance companies experienced less severe credit downgrades than stock-owned companies during the latest recession. The report tributes this to mutuals being “better capitalized” and having a less risky business focus. Because of this, they’re not subject to the investor panics created by the media.

But no matter what you decide, there are certainly some general tips to follow:

• Seek companies that provide good customer service and offer the most benefits for the best price.
• Always work with experienced insurance agents who have been licensed and are a Certified Financial Planner or Certified Life Underwriter
• Stick with the financially strongest companies - those rated A to A++ by A.M. Best
• Check claims-paying history by searching the company online.  The National Association of Insurance Commissioners (NAIC) has a database of consumer complaints that could be useful here.

As you learn more about the differences between mutual and publicly owned companies, you’ll be able to make more valuable decisions that will affect you and your loved ones for years to come.