Navigating Life Insurance

Death can be difficult emotionally and even financially when loved ones struggle to get the money to bury the one they lost. Life insurance can ease that burden by paying medical bills, burial fees, and other debts that remain after you are gone.   

You may want to consider life insurance if you have one of these significant concerns:

• Age. You are getting older, and you want to provide for your loved ones after you are gone.

• Assets. You want the insurance money to pay off debts you owe so your things can be more easily transferred to the people you choose.
• Future Financial Support. Others depend on you, and you want to continue to provide for their care and maintenance, education, and other types of financial support.

Yes. There are two major categories: term life and permanent life.

Term life is for a set term or time period, usually from 1-30 years. You pay the same amount for the entire time frame. When you renew, it usually goes up because it is based on your age. When you pass away, the death benefit is a lump sum.

Permanent life is for a form of life insurance that is tied into growth indices, stocks, and bonds. This means that there is a cash value deposited in an account that can later be withdrawn, invested, borrowed, or used to pay premiums. The monthly premiums for this option tend to be higher because of the additional savings feature.

Two common subcategories of permanent life insurance are:

• Whole life insurance stays in effect for your entire life unless you cash it in or stop paying. Some policies also pay dividends, but the dividends are not guaranteed.
• Universal life insurance stays active until the maturity date, which is normally 95 or 100 years old, as long as you have at least one dollar's worth of cash value. Once the policy ends, you get the cash value.

This option is more flexible than the whole life insurance because you can adjust the amount you pay and the death benefits your loved ones will get. The policy won’t cancel as long as your cash value does not reach zero. Each year, your insurance company will give you a report that will estimate the current cash value and the potential duration of the policy. Then, you can talk to your insurance agent to make adjustments as needed.

The amount you pay is a combination of numerous factors, including:

• Your age. The younger you are, the less you tend to pay.
• Gender. Women tend to live longer than men, and they often pay less for life insurance.
• Health. Your height, weight, chronic conditions, required medications, and major hospitalizations are all considered.
• Tobacco use
• Hobbies. You pay more when you put yourself at risk for injury or death with things like skydiving, flying planes, hunting, scuba diving, or mountain climbing.
• Occupation. High-risk occupations are those that have more than 3.5 deaths per 100,000 people. Examples include law enforcement, firefighters, active military, pilots, flight attendants, oil and gas workers, miners, and bartenders.

Note: Active military will usually have access to government life insurance.

• Lifestyle. Your driving record, previous arrests, and international travel are valid considerations.
• Income. The more you make, the more coverage you can buy.

No. Life insurance companies choose whether or not to sell to you based on your health issues, dangerous jobs, or risky hobbies like rock climbing or skydiving. 

A few common ways to make sure your life insurance policy meets your needs are:

• Additional Term Life Insurance. If you have permanent life insurance, you can add a term life policy as well.
• Guaranteed Insurability. Your age or health will not keep you from being able to buy additional insurance if you’re under 50.
• Accidental death
• Disability Waiver of Premium. Insurance will not cancel if you become disabled and unable to pay.
• Accelerated Death Benefit. You have the option to ask your life insurance to help pay for long-term care while you are living. You must be terminally ill with a letter from your doctor stating you have two years or less to live.
• Riders. Spouses and children as young as 14 days old can be added to your policy.

Most insurance policies have a no-lapse guarantee, or grace period, which allows you to keep your insurance active as long as you pay within 30 days of the due date.

Some types of life insurance build a cash value and provide several options:

• Withdraw the cash value
• Take a loan out based on the cash value
• Sell the insurance policy.

Yes. The most common option is the lump sum, but other choices include:

• Interest Option. The insurance company invests the money, and the beneficiaries receive payments of only the interest according to a specific schedule.
• Fixed Period. At the time frame you choose, the insurance company will pay the beneficiaries money with the interest.
• Life Refund. The beneficiary will receive a certain amount each month for the rest of their lives.

Both real and fake insurance agents will appear to know a lot about insurance and want to guide you through the process. Real insurance agents use your personal information to gather quotes and provide services, while fake ones commit identity theft. Be sure you’re dealing with a real licensed agent from an actual company by using the Texas Department of Insurance (TDI) tool to look up an agent or a company.  You can also call the TDI Consumer Help Line at 800-252-3439.

Beneficiaries are people you want the insurance money, also called the death benefit to go to after you die.

Yes, you can have more than one. You will simply need to decide what percentage will go to each one. You may want Aunt Sally to get 55% and cousin Lisa to get 45%, or 75% to your dog Skittles and the other 25% to your favorite charity.  

Primary beneficiaries are your first choice to receive life insurance money once you die. Contingent or secondary beneficiaries are another group who serve as backup recipients if primary beneficiaries die before you do.

For example, Steve chose his children Tanya and Joseph as 50-50 primary beneficiaries. He also chose his sister Stella as a contingent or secondary beneficiary. When Tanya and Joseph die in a car accident, his sister Stella is next in line to receive the money Steve originally wanted to give his children.

Scammers are constantly brainstorming new ways to trick people, but they tend to do a few things:

1. They contact victims who have not requested to be contacted.
2. Salespeople just share information and allow you to choose to take advantage of the offer. Scammers can be extremely persistent in trying to make you decide right away.
3. Their only goal is to get your personal information for your credit card, social security card, and bank account. 

One of the easiest ways to protect yourself from scammers is to ask lots of questions and research before taking advantage of any offers for them to help.  

• Fake Agents. You may get a random call for a special offer.
• Identity Theft. Hackers disguised as agents will call or text about an overdue payment. Then, they offer to help you make the payment by giving your personal information to verify your account along with your credit card or bank account numbers.  
• Beneficiary Scams. Imagine that a loved one recently passed, and someone calls to say you are about to inherit money. All they need is your personal information and bank account information to set up the transfer, but they take all your money.
• Overpaying. Scammers want to sell you little or nothing while and they take the rest. With insurance, they try to sell you more than you want to buy. They may push you to add on family members called "riders" or pitch special offers for more coverage at a lower price. The reality is that they lower your coverage and keep even more of the money for themselves.