How to read a life insurance policy

Surprisingly, one of the most common questions I get from people interested in buying a life insurance policy is how do I read a life insurance policy? I am amazed daily by how many people do not know the terms of their policy. Meaning how many years is the rate guaranteed. Which type of policy they have, either term life insurance, universal life insurance or whole life insurance.  Some people don’t even know what the face amount of the life insurance policy is. Meaning the amount of death benefit paid to the beneficiary upon their death. They all seem to remember fairly well how much the premiums are, especially if they pay for every month. Let’s look at how to read a life insurance policy.

When you open the policy the very first page of any meaning of the life insurance policy is the declaration page or dec page as it is known by your insurance agent. This page tells you almost everything you will need to know. The insurance company information, the face amount or death benefit, the type of policy, if term life insurance, the length of term which is usually 10-20-30 years guaranteed, the premium amounts including amounts after term expires and the issue date and the expiration date. You should always be familiar with the face amount, expiration date and amount you are paying in premium. If you are on a monthly bank draft, most insurance companies will not notify you about the rate increase. They just draft it. Take this client story for example.

I received a referral from a somewhat frantic and upset man we will call “John”. “John” had a big issue with his insurance company bank draft. It seems “John” purchased $1 million 10 year term life insurance 10 years ago online without the assistance of an insurance broker, because he felt he would get a better deal.  “John” was 40 years old when he found his current policy. He was paying $80.01 per month with a very well known nationally recognized life insurance company. It seems that somehow, the 10 years were up and “John” wasn’t paying attention until the life insurance company took out his new adjusted premium of $3,768 per month. Luckily, “John” was still healthy and qualified for another $1 million in life insurance that we needed to get issued a.s.a.p. as paying over $3,700 per month was not a feasible option. I hate to think what would have happened had “John” had a health issue. This is the importance of knowing these numbers on an annual basis or having a good life insurance broker that keeps up with this for you free of charge.

Another important part of the policy includes illustrations pages for cash value if a whole life or universal life insurance policy was purchased. These illustration pages can help project cash values which can be used in a tax free retirement program. They can also give cash loans in case of emergencies years later. However, most of these type policies do not have any cash value for the first few years as the money is used to fund the life insurance face amount first. These type policies are generally more expensive than their term life insurance cousins.

The next pages of the policy will include the names of beneficiaries or person that will receive the death proceeds upon the insured’s death. These can always be easily changed by contact the insurance company or insurance agent for the proper form. Also, be sure and read the policy exclusions and limitations that apply. Lastly, the back pages of the policy includes an item called amendments, a type of limitation or rate up. Any riders that may have been included such as accelerated death benefits. This means that if the insured is diagnosed with a terminal illness they may receive a percentage of the face amount for medical or personal expenses prior to death with the remaining paid to their beneficiary. It may include wavier of premium which means in case of a disability the premiums are waived. There could be a child rider which insures all children of the insured very affordably or a return of premium rider that returns all premiums paid and the insured lived past a specified time period.

Life insurance is a very affordable way to let your loved ones know how much you care about them even after your gone. I suggest you contact a licensed life insurance broker today for a free quote. Once you buy it, be sure and read a life insurance policy, now that you know how. Your loved ones will be glad you did.

Love is not about how much you say ‘I love you’ but how much you can prove it is true”—Unknown

by  – November 4, 2013 Posted in: Educational – Comments: 8

Mystic Shore Insurance assists individuals and businesses in Connecticut and Rhode Island in choosing appropriate coverage plans. This firm brokers disability, funeral trusts and life insurance. The company also helps businesses draft employee retirement packages.

Hours: Mon – Fri, 8am – 6pm; Sat, 9am – noon; Sun, closed

Founding Date: Jan 2, 1998

Specialties (insurance): Life, Annuities

Type (insurance): Business, Personal

Phone: (860) 984-6762

Email: mysticshoreinsurance@gmail.com

LinkedIn: www.linkedin.com/in/willmorrissey/

Facebook:  www.fb.com/mysticshoreinsurance

Website:  www.mysticshore.wordpress.com

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