Life Insurance

Because you care

Why purchase life insurance?

Any basic life insurance policy must satisfy its primary element - insurable interest. Insurable interest is essentially a financial or economic interest between two people i.e. the beneficiary of the policy must economically benefit from the insured persons “continued life” or some “financial loss” must be identified as a result of the insured person’s death.

The simplest example of insurable interest is a family. Spouses and children depend upon each others financial participation in the security and stability of the union. In all families; love and commitment are the driving forces behind the acquisition of life insurance.

Insurable interest is not limited to families. In businesses; key individuals, deemed to be irreplaceable, are often insured so as not to jeopardize the stability and continued success of the company should that person’s untimely death occur.

Life insurance can also be an integral part of estate planning. Transfers of wealth from one generation to the next and the tax considerations surrounding that transfer make life insurance an extremely attractive instrument for attaining long range financial goals.

Permanent vs. Term Life Insurance

Permanent life insurance comes in many flavors; Whole life, Universal Life, Variable Life etc... Each type is uniquely different in the way it is designed and funded but all of them are very similar because they are all “life long” contracts. As long as the premiums are paid the insurance will be in force. Permanent insurance premiums are typically a little more expensive in the early years, when compared to term life insurance, but they are usually fixed throughout the life of the policy.

Term life insurance is the most widely utilized form of life insurance. It is very affordable and usually has a fixed term of premium stability followed by a period of continuously increasing premium rates. Most of these policies end at some point - around age 85-95. The term periods come in increments of 5,10,15,20, 25, and 30 years. Following the guaranteed rate period the policy renews annually and premiums begin to increase each year according to “attained age”. In the later years, following the fixed period phase, the policy premiums can sometime become too expensive to maintain and eventually the policy lapses. Some of the better term life policies contain provisions within the contract allowing the policy owner an opportunity, within a specified timetable, to convert the term policy into a permanent policy without proof of insurability or additional underwriting.

So, how much life insurance is needed?

The most unique aspect of life insurance is its ability to create a financial estate immediately. In life, individuals don’t plan to fail they sometimes fail to plan. Life insurance is a key element to any long range goal orientated planning that involves other people. When tragedy strikes a life insurance policy can replace unfulfilled years of hard work, savings and profitable investment.

There are two ways to evaluate how much life insurance a person needs:

Human Life Value (HLV)

Replacing the future income from the insured which would have funded the survivor’s debt liquidation, education, retirement and a bridge to social security.

Needs Analysis

A figure derived at by analyzing the financial commitments and burdens of the proposed insured i.e. how much will it take to clear up the existing debts and provide financial support throughout a “window of adjustment” for the survivor(s).

Underwriting

Insurance company “actuaries” utilize the science of large numbers and specialize in the mathematics of insurance by calculating mortality rates, premiums and reserves. Their ability to maintain a disciplined system of predictable claims service and investment growth plays a key role in the ongoing stability and viability of the insurance company itself.

“Underwriters” comply with actuarial findings and company policy by reviewing each application impersonally and within strict guidelines. Factors used by underwriters in this process are applicant’s age, marital status, occupation, current health, medical history, financial state, income, residency and even moral integrity.

Applicants are rated by the company in order to determine a fair and responsible premium. These ratings are generally expressed as;

Preferred          Excellent health – (non tobacco user)

Standard          Average health – average risk

Sub-standard   Some health issues but still insurable

When a life insurance company concludes that a person is in substandard health, they may still issue a policy - called a “rated policy” for which they charge an extra premium. If the insured dies, the beneficiary receives the full-face amount because there is no exclusion. The extra premium compensates the insurance company for the additional risk involved.

Other sources used by underwriters in addition to the application for life insurance are:

APS (Attending Physicians Statement)

One of the basic sources that an underwriter uses to evaluate a risk is the information supplied by the attending physician about the applicant's health history.  Many regard the Attending Physician's Statement (APS) as the single most important source of underwriting information.  The attending physician is usually the insured's own physician, and the statement could comprise a complete copy of the insured's medical records.

MIB (Medical Information Bureau)

The Medical Information Bureau (MIB) is a nonprofit organization owned by insurance companies that serves as a clearinghouse for information on insurance applicants.  The MIB collects information from insurance applications and shares it

by code with member companies.

The MIB's purpose is to prevent overinsurance and to check for erroneous, misleading, or fraudulent information.

Disclosure: Applicants are told that their information may be shared with the MIB

Authorization: Applicants must sign a “authorization to obtain information” form before information can be shared

Declined: If the application is declined the company must let the applicant know if information from the MIB was used in its decision and if the applicant wants to know the details the company will send it to the applicant’s physician so he can explain what the information means.

FCRA (Fair Credit Reporting Act)

In order to see an applicant's credit report, insurance companies must comply with the

Fair Credit Reporting Act (FCRA), also known as the Privacy Act. 

Permission from the applicant must be made prior to getting the report.

Applicants must be notified within 3 days if the company has ordered a report

If the application is denied then the company must furnish the applicant with the name

and address of the agency that did the investigation

If requested by the applicant the agency that made the report must give the information

to the applicant.

If the applicant disagrees with something in the report they have a right to place a letter of

disagreement in the file and it becomes permanent part of the file.

We look forward to answering all of your questions concerning life insurance.

           Please call 813-482-4458 and you will be connected with a life insurance professional.

Insurance and Annuity products listed within this website are not available to everyone. Certain restrictions may apply based upon age, current and past medical history, existing financial conditions and product availability.