Dear Certificate Owner:
Congratulations! Sample Name is now one of over two million Americans whose life insurance is with Globe Life And Accident Insurance Company.
You have already paid the introductory premium for the first month. You will receive a statement for your second premium payment within the next few days. Be sure to make this second payment on time.
Now that your certificate has been delivered, it’s good until the first certificate anniversary after your 80th birthday -- as long as the premiums are paid when due.
This low cost plan does not include any extra charges for cash values. This means you are buying maximum insurance protection for your premium dollars.
Please take a moment and verify the enrollment form information you provided. You’ll find a copy of the enrollment form at the back of your certificate. If everything is correct, sign your enrollment form and put this certificate in a safe place. If any information is wrong, please correct, sign, and return the corrected enrollment form or call (405) 270-1410 and ask one of our customer service representatives for assistance, or e—mail us at CS@2701410.com.
You have joined millions of other Americans who rely on Globe’s strength, integrity and personal service. Thank you for entrusting Globe with this important part of your financial planning.
Very truly yours,
Mark McAndrew
Chairman & Chief Executive Officer
P.S. Help us help you. Always give us your certificate number when making changes or requesting information.
Beneficiary Designated is: 00 —M1 12345 Sample Name
123 Main Street Anywhere, USA 00000
Privacy Policy
Globe Life And Accident Insurance Company cares about protecting its policyholders’ privacy. In the process of providing the products and services you requested, we will collect, use and share certain information you or other persons provided. This Privacy Policy explains what information we collect and how we use that information. The policy also explains how we protect the security and confidentiality of your information.
Collection of Information
We collect and retain the information necessary for us to provide the products and services you requested. In that process we may collect non—public information from you as a result of your completion of an insurance application or other forms, information about your transactions and experience with us, or from a consumer reporting agency such as the Medical Information Bureau. We may also collect personal information about you from other persons or entities.
Sharing Information
We may share information with certain non—affiliated companies or individuals, including providers inquiring about benefits, family or legal representatives acting on your behalf, and to comply with legal or regulatory requirements. We may also share information about you with non—affiliated entities that contract with us to perform marketing and administrative services. We may also disclose your information to our affiliated companies. The information disclosed without your authorization will be only as much as is reasonably necessary to accomplish the intended purpose.
Your Right To Access
You can request to be informed as to the nature and substance of personal information we collect about you. You can also request that we correct, amend, or delete any such information.
Internal Protection of Information
We restrict access to non—public personal information about you to those employees who need o know that information to provide the products and services you requested. We maintain physical, electronic and procedural safeguards to comply with federal regulations to guard this information.
Disclosure of Our Privacy Policy
We are sending you this Notice for informational purposes and may amend this Privacy Policy at any time and will update it as required. We post our current privacy notice at www.globeontheweb.com.
GLOBE LIFE AND ACCIDENT INSURANCE COMPANY
A Legal Reserve Stock Company * Globe Life Center * Oklahoma City, Oklahoma 73184
GROUP RENEWABLE TERM LIFE INSURANCE POLICY
Globe Life And Accident Insurance Company certifies that it has Group Policy GRTG, and that the person named in this certificate is insured, subject to the terms and conditions of the Group Policy.
DEATH BENEFIT PAYABLE
We will pay the proceeds of this certificate to the Beneficiary when We receive due proof that the Insured’s death occurred while this certificate was in force.
30 DAY RIGHT TO EXAMINE CERTIFICATE
Please examine Your certificate carefully. Within 30 days after this certificate is first received, it may be returned to Us. If returned, the certificate will be as though it had never been issued. Any premiums paid will be returned.
THIS IS A LEGAL CONTRACT - READ YOUR CERTIFICATE CAREFULLY
In this certificate:
Insured —— means an eligible person who is named in the Certificate Specifications.
You, Your —— means the Owner of the Certificate.
We, Us, Our —— means Globe Life And Accident Insurance Company.
Age —— means age on the last birthday of the Insured.
Signed for Globe Life And Accident Insurance Company at Oklahoma City, Oklahoma.
Secretary President
PLEASE READ The basis for this certificate is the information in the enrollment form. Incorrect information in the enrollment form could void the certificate or cause an otherwise valid claim to be denied. Advise Us immediately if any information is wrong or if any past medical history has been left out.
CERTIFICATE SPECIFICATIONS
GROUP POLICY NUMBER: GRTG-1
HOLDER: GLOBE FAMILY SERVICES TRUST
INSURED: Sample Name
CERTIFICATE NUMBER: 00-M106543
CERTIFICATE EFFECTIVE DATE: JUL 12, 2004
ISSUE AGE AND SEX: 30 Male
PREMIUM CLASS: STANDARD
AMOUNT OF INSURANCE: $5,000
REINSTATEMENT INTEREST RATE: 6.00%
BENEFICIARY: AS STATED IN THE ENROLLMENT FORM, UNLESS SUBSEQUENTLY CHANGED BY THE CERTIFICATE HOLDER.
GROUP RENEWABLE TERM LIFE INSURANCE POLICY - Renewable and Convertible for the periods shown on Page 2 — Premiums Payable as shown on Page 2 - Amount of Insurance Payable as shown on Page 2 — Non—Participating — No Dividends are paid.
BENEFIT AND PREMIUM SCHEDULE
DESCRIPTION OF BENEFITS: RENEWABLE TERM TO AGE 80
END OF INITIAL TERM PERIOD: JUL 12, 2005
RENEWAL TERM PERIOD: 5 YEARS
END OF CONVERSION PERIOD: JUL 12, 2039
AMOUNT OF INSURANCE: $5,000
METHOD OF PAYMENT ELECTED: ANNUAL
PREMIUMS:
PREMIUM PERIOD MONTHLY
BEGINNING PREMIUM
JUL 12, 2004 $1.00
AUG 12, 2004 $4.46
JUL 12, 2005 $5.24
JUL 12, 2010 $6.15
JUL 12, 2015 $7.18
JUL 12, 2020 $8.33
JUL 12, 2025 $9.65
JUL 12, 2030 $11.22
JUL 12, 2035 $13.23
JUL 12, 2040 $16.42
JUL 12, 2045 $21.86
JUL 12, 2050 $29.56
JUL 12, 2054 END OF RENEWAL PERIOD
TABLE OF CONTENTS
Page Page
Certificate Specifications....................1 Renewal...........................3
Benefit and Premium Schedule..................2 Conversion........................3
Amount of Proceeds............................3 General Provisions................3
Owner and Beneficiary.........................3 Payment of Proceeds...............3
Premiums and Reinstatement....................3
AMOUNT OF PROCEEDS
The proceeds payable at the death of the Insured will be: (a) the Amount of Insurance provided by this certificate on the date of death of the Insured; less (b) the portion of any premium due and unpaid which applies to a period prior to the date of death of the Insured.
OWNER AND BENEFICIARY
RIGHTS OF THE OWNER — This certificate belongs to You, the Owner. Unless You provide otherwise, You may receive all benefits and exercise all rights granted by this certificate during the Insured’s lifetime.
BENEFICIARY — If no named Beneficiary survives the Insured, the proceeds will be paid to the Owner, if living; otherwise to the Owner’s estate.
CHANGE IN CERTIFICATE OWNER AND BENEFICIARY - Unless You provide otherwise in writing to Us, You may change the Owner or Beneficiary during the lifetime of the Insured. Changes must be made by written request filed with Us. The change will take effect on the date the request was signed, but it will not apply to payments made by Us before We accept the request in writing.
ASSIGNMENT — You may assign this certificate. However, no assignment will bind Us until it is filed in writing at Our Home Office. When it is filed, Your rights and the rights of any Beneficiary will be subject to it. We will not be responsible for the validity of any assignment.
PREMIUMS AND REINSTATEMENT
PREMIUMS - Premiums are payable in advance at Our Home Office. We will issue You a receipt upon request.
GRACE PERIOD — This certificate has a 31—day grace period. This means that if any premium after the first is not paid on or before the date it is due, it may be paid during the following 31 days. During the grace period, the certificate will stay in force. At the end of the grace period, the certificate will lapse.
REINSTATEMENT — If Your certificate lapses, You may ask that it be put back in force. We will do so provided: (a) Your written request is received at Our Home Office within one year of the due date of the first unpaid premium; (b) You show that the Insured is still insurable according to Our normal rules; and (c) You pay all overdue premiums, plus compound interest at the reinstatement interest rate shown on page 1.
RENEWAL
If this certificate is in force at the end of a term period, it may be renewed by payment of the renewal premium shown in the Benefit and Premium Schedule of the certificate on page 2. Renewal will be effective upon payment of that premium within 31 days of its due date. Each Renewal Term Period shall begin at the end of the preceding term period and will be for the period of time shown on page 2.
CONVERSION
You may exchange this certificate for an Individual life policy without evidence of insurability, provided that: (a) this certificate is in force; (b) the certificate anniversary following the Insured’s 65th birthday has not passed; and (C) You submit a written application for the conversion. The new policy will be issued: (a) on a level premium whole life plan; (b) for an amount of insurance equal to or less than the insurance provided by this certificate on the date of exchange; (c) at a premium according to Our rates then in use for the age of the Insured; and (d) in the same premium class as this certificate. Riders may be included in the new individual policy only with Our consent.
TERMINATION OF COVERAGE
The coverage of any Insured shall terminate at the end of the Grace Period following any premium due date for which the Insured’s required premium has not been paid. Any premium paid for any period after the date coverage terminates will not continue the Insured’s coverage in force and will be returned. Coverage will automatically terminate on the Certificate Anniversary as shown in the Benefit and Premium Schedule on Page 2.
GENERAL PROVISIONS
THE CONTRACT — This certificate, including the enrollment form, is the entire contract between You and Us. Any change must be made in writing by one of Our officers. All statements in the enrollment form are representations and not warranties. No statements shall be used to void this certificate or to defend against a claim unless contained in the enrollment form.
PAYMENT OF BENEFITS - All benefits are payable at Our Home Office. We may require You to submit this certificate before We approve changes or pay benefits.
ERRORS IN AGE OR SEX — If the Insured’s age or sex is misstated, the benefits under this certificate will be those the premium paid would have purchased at the correct age and sex.
SUICIDE EXCLUSION — If the Insured commits suicide, while sane or insane, within two years from the certificate date, Our liability will be limited to the premiums paid.
INCONTESTABILITY — This certificate will be incontestable after it has been in force during the lifetime of the Insured for two years from the Certificate Effective Date except for non—payment of premiums.
PAYMENT OF PROCEEDS
PAYMENT UPON PROOF OF DEATH - We will pay the life insurance proceeds in one sum subject to due proof of the Insured’s death and of the claimant’s interest. Such proof must be submitted on forms acceptable to Us.
OTHER PAYMENT OPTIONS - While the Insured is living, You may elect to receive the life insurance proceeds in any other manner agreed to in writing by Us and may change or revoke such election. At the time the proceeds become payable, a Beneficiary may elect to receive the proceeds in another manner agreed to in writing by Us subject to the Owner’s right to restrict payment.
CLAIMS OF CREDITORS — To the extent permitted by law, proceeds will not be subject to any claims of creditors of the Insured or Beneficiary.
NOTICE TO CONSUMERS
Should any dispute arise concerning your coverage, contact the agent or write to:
GLOBE LIFE AND ACCIDENT INSURANCE COMPANY
Globe Life Center
Oklahoma City, Oklahoma 73184
(405) 752—5500
If the problem is not resolved, You may then contact:
Consumer Affairs Division
California Department of Insurance
300 South Spring Street
Los Angeles, CA 90013
The toll—free Consumer Hotline Number is 1—800—927—HELP (4357).(Calling from within California).
Los Angeles area and outside California (213) 897—8921.
TDD — Telecommunications Device for the Deaf (800) 482—4833.
IMPORTANT
YOU HAVE PURCHASED A LIFE INSURANCE POLICY. CAREFULLY REVIEW IT FOR LIMITATIONS.
THIS POLICY MAY BE RETURNED WITHIN 30 DAYS FROM THE DATE YOU
RECEIVED IT FOR A FULL REFUND EITHER BY RETURNING IT TO THE
AGENT OR THE INSURANCE COMPANY. AFTER 30 DAYS, CANCELLATION
MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A SURRENDER CHARGE.
GLOBE LIFE AND ACCIDENT INSURANCE COMPANY
Globe Life Center * Oklahoma City, Oklahoma 73184
EXTENDED TERM INSURANCE RIDER
This Rider amends and is made a part of the certificate to which it is attached. It is subject to all provisions, conditions, exclusions and limitations of the certificate which are not in conflict with this rider.
NONPAYMENT OF PREMIUM: If a premium is not paid by the end of the grace period, the certificate will lapse as of the due date of the overdue premium. All insurance will terminate at the time of lapse unless the certificateholder qualifies for EXTENDED TERM INSURANCE. The certificateholder qualifies for such if:
1) the certificateholder has an attained age of 65 or older on the due date of the overdue premium, and
2) the certificate for which premiums are due has been in effect for at least ten years as of the due date of the overdue premium.
The length of the EXTENDED TERM INSURANCE will be one year from the due date of the overdue premium. The amount of the Extended Term Insurance will be the amount of insurance of the attached certificate.
Secretary President
UNDERWRITTEN BY GLOBE LIFE AND ACCIDENT INSURANCE COMPANY * OKLAHOMA CITY, OK
(PLEASE PRINT) ENROLLMENT FOR $5,000 LIFE INSURANCE
1. Name: Sample Name 2. Sex: M F 3. Birthdate: 12/15/73
4. Street Address 123 Main Street Tele. Number (800) 555-5555
City: Anywhere, USA Zip Code: 00000
5. Name of Beneficiary: Sample Name 6. Relationship: Mother
7. Is the Proposed Insured currently disabled due to illness, confined to a hospital, nursing facility or does the Proposed Insured require the use of a wheelchair? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .YES NO
8. In the past 3 years, has the Proposed Insured been diagnosed as having or treated by a member of the medical profession for:
(a) Cancer, coronary artery disease, or any disease or disorder of the heart, brain or liver? . . . . . . . . . . . . . . . . YES NO
(b) Chronic kidney disease or kidney failure, muscular disease, mental or nervous disorder, chronic obstructive lung disease, drug or alcohol abuse, or hospitalized for diabetes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .YES NO
(c) Acquired Immune Deficiency Syndrome (AIDS) or AIDS Related Complex (ARC)?. . . . . . . . . . . . . . . . . . . . . . . . . YES NO
9. Does the Proposed Insured have any chronic illness or condition which requires periodic medical care or may require future surgery? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . YES NO
10. Does the Proposed Insured intend to replace or change any existing life insurance policies or annuities in connection with this enrollment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . YES NO
If yes, list company name: _____________________________________________________________________________
I AM ENCLOSING THE INITIAL PREMIUM AND UNDERSTAND THAT THE INSURANCE APPLIED FOR WILL BECOME EFFECTIVE ON THE DATE THIS ENROLLMENT IS APPROVED IN THE ADMINISTRATIVE OFFICE OF GLOBE LIFE AND ACCIDENT INSURANCE COMPANY.
Should the enrollment be declined, the amount paid will be refunded. I hereby authorize the Medical Information Bureau, if it has any records of me or my health, to give any and all such information to Globe Life And Accident Insurance Company. I acknowledge receipt of the Medical Information Bureau Notice. A photographic copy of this authorization will be as valid, as the original.
Date: 07/06/04 ___________________________________________
Applicant—Owner Signature
This enrollment with check or cash should be mailed in the return envelope enclosed. Make check payable to Globe Life And Accident Insurance Company.
CALIFORNIA LIFE INSURANCE
AND COVERAGE LIMITATIONS
NOTICE CONCERNING GENERAL PURPOSES
GUARANTY ASSOCIATION ACT
Residents of California who purchase life insurance and annuities should know that the insurance companies licensed in this state to write these types of insurance are members of the California Life Insurance Guaranty Association. The purpose of this Association is to assure that policyholders will be protected, within limits, in the unlikely event that a member insurer becomes financially unable to meet its obligations. If this should happen, the Guaranty Association will assess its other member insurance companies for the money to pay the claims of insured persons who live in this state and, in some cases, to keep coverage in force. The valuable extra protection provided by these insurers through the Guaranty Association is not unlimited, however, as noted in the box below.
The California Life Insurance Guaranty Association may not provide coverage for this policy. If coverage is provided, it may be subject to substantial limitations or exclusions, and require continued residency in California. You should not rely on coverage by the California Life Insurance Guaranty Association in selecting an insurance company or in selecting an insurance policy.
Coverage is NOT provided for your policy or any portion of it that is not guaranteed by the insurer or for which you have assumed the risk, such as a variable contract sold by prospectus.
Insurance companies or their agents are required by law to give or send you this notice. However, insurance companies and their agents are prohibited by law from using the existence of the guaranty association to induce you to purchase any kind of insurance policy.
Policyholders with additional questions may contact:
The California Life Insurance Guaranty Association
P.O. Box 10069
Los Angeles, CA 90070
California Department of Insurance
100 Van Ness Avenue — 17th Floor
San Francisco, California 94102
The state law that provides for this safety—net coverage is called the California Life Insurance Guaranty Association Act. On the back of this page is a brief summary of this law’s coverages, exclusions and limits. This summary does not cover all provisions of the law nor does it in any way change anyone’s rights or obligations under the Act or the rights or obligations of the Association.
COVERAGE
Generally, individuals will be protected by the California Life insurance Guaranty Association if they live in this state and hold a life insurance contract, or an annuity, or if they are insured under a group insurance contract, issued by a member insurer. The beneficiaries, payees or assignees of insured persons are protected as well, even if they live in another state.
EXCLUSIONS FROM COVERAGE
However, persons holding such policies are not protected by this Association if:
* they are eligible for protection under the laws of another state (this may occur when the insolvent insurer was incorporated in another state whose guaranty association protects insureds who live outside that state);
* the insurer was not authorized to do business in this state;
* their policy was issued by a charitable organization, a fraternal benefit society, a mandatory state pooling plan, a mutual assessment company, or by an insurance exchange, or a grants and annuities societyholding a certificate of authority under Section 11520.
The Association also does not provide coverage for:
* any policy or portion of a policy which is not guaranteed by the insurer or for which the individual has assumed the risk, such as a variable contract sold by prospectus;
* any policy of reinsurance (unless an assumption certificate was issued);
* interest rate yields that exceed an average rate;
* dividends;
* credits given in connection with the administration of a policy by a group contract holder;
* unallocated annuity contracts;
* any plans or program of an employer or association that provides life or annuity benefits to its employees or members to the extent the plan is self—funded or uninsured.
LIMITS ON AMOUNT OF COVERAGE
The act also limits the amount the Association is obligated to pay out: The Association cannot pay more than 80% of what the insurance company would owe under a policy or contract. Also, for any one insured life, the Association will pay a maximum of $250,000 — no matter how many policies and contracts there were with the same company, even if they provided different types of coverages. Within this overall $250,000 limit, the Association will not pay more than $100,000 in cash surrender values, $100,000 in present value of annuities, or $250,000 in life insurance death benefits — again, no matter how many policies and contracts there were with the same company, and no matter how many different types of coverages.
LIFE INSURANCE BUYER’S GUIDE
This guide can help you when you shop for life insurance. It discusses how to:
• Find a Policy That Meets Your Needs and Fits Your Budget
• Decide How Much Insurance You Need
• Make Informed Decisions When You Buy a Policy
Prepared by the National Association of Insurance Commissioners
The National Association of Insurance Commissioners is an association of state insurance regulatory officials. This association helps the various Insurance Departments to coordinate insurance laws for the benefit of all consumers.
This Guide Does Not Endorse Any Company Or Policy
IMPORTANT THINGS TO CONSIDER
1. Review your own insurance needs and circumstances. Choose the kind of policy that has benefits that most closely fit your needs. Ask an agent or company to help you.
2, Be sure that you can handle premium payments. Can you afford the initial premium? If the premium increases later and you still need insurance, can you still afford it?
3. Don’t sign an insurance application until you review it carefully to be sure all the answers are complete and accurate.
4. Don’t buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.
5. Don’t drop one policy and buy another without a thorough study of the new policy and the one you have now. Replacing your insurance may be costly.
6. Read your policy carefully. Ask your agent or company about anything that is not clear to you.
7. Review your life insurance program with your agent or company every few years to keep up with changes in your income and your needs.
Buying Life Insurance
When you buy life insurance, you want coverage that fits your needs.
First decide how much you need—and for how long—and what you can afford to pay. Keep in mind the major reason you buy life insurance is to cover the financial effects of unexpected or untimely death. Life insurance can also be one of many ways you plan for the future.
Next, learn what kinds of policies will meet your needs and pick the one that best suits you.
Then, choose the combination of policy premium and benefits that emphasizes protection in case of early death, or benefits in case of long life, or a combination of both.
It makes good sense to ask a life insurance agent or company to help you. An agent can help you review your insurance needs and give you information about the available policies. If one kind of policy doesn’t seem to fit your needs, ask about others. This guide provides only basic information. You can get more facts from a life insurance agent or company or from your public library.
What About the Policy You Have Now?
If you are thinking about dropping a life insurance policy, here are some things you should consider:
• If you decide to replace your policy, don’t cancel your old policy until you have received the new one. You then have a minimum period to review your new policy and decide if it is what you wanted.
• It may be costly to replace a policy. Much of what you paid in the early years of the policy you have now, paid for the company’s cost of selling and issuing the policy. You may pay this type of cost again if you buy a new policy.
• Ask your tax advisor if dropping your policy could affect your income taxes.
• If you are older or your health has changed, premiums for the new policy will often be higher. You will not be able to buy a new policy if you are not insurable.
• You may have valuable rights and benefits in the policy you now have that are not in the new one.
• If the policy you have now no longer meets your needs1 you may not have to replace it. You might be able to change your policy or add to it to get the coverage or benefits you now want.
• At least in the beginning, a policy may pay no benefits for some causes of death covered in the policy you have now.
In all cases, if you are thinking of buying a new policy, check with the agent or company that issued you the one you have now. When you bought your old policy, you may have seen an illustration of the benefits of your policy. Before replacing your policy, ask your agent or company for an updated illustration. Check to see how the policy has performed and what you might expect in the future, based on the amounts the company is paying now.
How Much Do You Need?
Here are some questions to ask yourself:
• How much of the family income do I provide? If I were to die early, how would my survivors, especially my children, get by? Does anyone else depend on me financially, such as a parent, grandparent, brother or sister?
• Do I have children for whom I’d like to set aside money to finish their education in the event of my death?
• How will my family pay final expenses and repay debts after my death?
• Do I have family members or organizations to whom I would like to leave money?
• Will there be estate taxes to pay after my death?
• How will inflation affect future needs?
As you figure out what you have to meet these needs, count the life insurance you have now including any group insurance where you work or veteran’s insurance. Don’t forget Social Security and pension plan survivor’s benefits. Add other assets you have: savings, investments, real estate and personal property. Which assets would your family sell or cash in to pay expenses after death?
What Is The Right Kind Of Life Insurance?
All policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. Your choice should be based on your needs and what you can afford.
There are two basic types of life insurance: term insurance and cash value insurance. Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.
Term Insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.
You can renew most term insurance policies for one or more terms even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at some age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage and premiums may increase.
You may be able to trade many term insurance policies for a cash value policy during a conversion period—even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.
Cash Value Life Insurance is a type of insurance where the premiums charged are higher at the beginning than they would be for the same amount of term insurance. The part of the premium that is not used for the cost of insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy’s cash value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die, or from the cash value if you stop paying premiums and take out the remaining cash value. You can also use your cash value to keep insurance protection for a limited time or to buy a reduced amount without having to pay more premiums. You also can use the cash value to increase your income in retirement or to help pay for needs such as a child’s tuition without canceling the policy. However to build up this cash value, you must pay higher premiums in the earlier years of the policy. Cash value life insurance may be one of several types; whole life, universal life and variable life are all types of cash value insurance.
Whole Life Insurance covers you for as long as you live if your premiums are paid. You generally pay the same amount in premiums for as long as you live. When you first take out the policy, premiums can be several times higher than you would pay initially for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years.
Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher since the premium payments are made during a shorter period.
Universal Life Insurance is a kind of flexible policy that lets you vary your premium payments. You can also adjust the face amount of your coverage. Increases may require proof that you qualify for the new death benefit. The premiums you pay (less expense charges) go into a policy account that earns interest. Charges are deducted from the account. If your yearly premium payment plus the interest your account earns is less than the charges, your account value will become lower. If it keeps dropping, eventually your coverage will end. To prevent that, you may need to start making premium payments, or increase your premium payments, or lower your death benefits. Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.
Variable Life Insurance is a kind of insurance where the death benefits and cash values depend on the investment performance of one or more separate accounts, which may be invested in mutual funds or other investments allowed under the policy. Be sure to get the prospectus from the company when buying this kind of policy and STUDY IT CAREFULLY. You will have higher death benefits and cash value if the underlying investments do well. Your benefits and cash value will be lower or may disappear if the investments you chose didn’t do as well as you expected. You may pay an extra premium for a guaranteed death benefit.
Life Insurance Illustrations
You may be thinking of buying a policy where cash values, death benefits, dividends or premiums may vary based on events or situations the company does not guarantee (such as interest rates). If so, you may get an illustration from the agent or company that helps explain how the policy works. The illustration will show how the benefits that are not guaranteed will change as interest rates and other factors change. The illustration will show you what the company guarantees. It will also show you what could happen in the future. Remember that nobody knows what will happen in the future. You should be ready to adjust your financial plans if the cash value doesn’t increase as quickly as shown in the illustration. You will be asked to sign a statement that says you understand that some of the numbers in the illustration are not guaranteed.
Finding A Good Value In Life Insurance
After you have decided which kind of life insurance is best for you, compare similar policies from different companies to find which one is likely to give you the best value for your money. A simple comparison of the premiums is not enough. There are other things to consider. For example:
• Do premiums or benefits vary from year to year?
• How much do the benefits build up in the policy?
• What part of the premiums or benefits is not guaranteed?
• What is the effect of interest on money paid and received at different times on the policy?
Once you have decided which type of policy to buy, you can use a cost comparison index to help you compare similar policies. Life insurance agents or companies can give you information about several different kinds of indexes that each work a little differently. One type helps you compare the costs between two policies if you give up the policy and take out the cash value. Another helps you compare your costs if you don’t give up your policy before its, coverage ends. Some help you decide what kind of questions to ask the agent about the numbers used in an illustration. Each index is useful in some ways, but they all have shortcomings. Ask your agent which will be most helpful to you. Regardless of which index you use, compare index numbers only for similar policies—those that offer basically the same benefits, with premiums payable for the same length of time.
Remember that no one company offers the lowest cost at all ages for all kinds and amounts of insurance. You should also consider other factors:
• How quickly does the cash value grow? Some policies have low cash values in the early years that build quickly later on. Other policies have a more level cash value build-up, A year-by-year display of values and benefits can be very helpful. (The agent or company will give you a policy summary or an illustration that will show benefits and premiums for selected years.)
• Are there special policy features that particularly suit your needs?
• How are nonguaranteed values calculated? For example, interest rates are important in determining policy returns. In some companies increases reflect the average interest earnings oh all of that company’s policies regardless of when issued. In others, the return for policies issued in a recent year, or a group of years reflects the interest earnings on that group of policies; in this case, amounts paid are likely to change more rapidly when interest rates change.