Evaluating life insurance as an older Ohioan

Evaluating life insurance as an older Ohioan

By Jillian Froment, Director of the Ohio Department of Insurance

Governor John Kasich has declared September as Life Insurance Awareness Month in Ohio to stress the importance of making sure your financial affairs are in order to protect your loved ones. A review of your life insurance needs can be an important step in providing them with a financial safety net upon your passing. For some the amount of coverage may not be as necessary as it once was; while others may be thinking of purchasing initial or additional coverage to establish security for their family.  Regardless of your situation, consider the following tips as you review your own financial affairs.

A good fit

You may be considering how life insurance could provide benefits for your loved ones.  The amount to purchase depends on different factors. Some questions to address are: Who financially depends on you? A spouse, children, parent, brother or sister? How will your family pay final expenses and repay debts after your death? Will there be estate taxes?

If you already have coverage, your lifestyle may have changed since you first purchased these benefits and that means your life insurance may need fine-tuning. Reviewing your current coverage with an insurance agent and answering the following questions can help you determine if decreasing coverage makes sense. Is your home paid off? Are your children financially independent? What other financial assets do you have? Do you hold significant debt or anticipate estate taxes that could affect others?  What income level would your spouse need to meet expenses if you passed away?

Value for the price

There are several different types of life insurance coverage.  Some policies provide a combination of the coverage types listed below. This allows you to purchase a higher death benefit at a lower cost.  Discussing options with an agent will allow you to find coverage that fits your budget.

  • Term Life: Generally less expensive than other life insurance products and is designated for a certain time period or to a certain age. Term is named for the contract’s limited length or “term” and is pure life insurance. Term policies generally last for 1, 5, 10, 15, or 20 years, or to some specified age such as age 65 or age 100.
  • Whole Life: Lifetime coverage at a premium that does not increase with your age after you buy.
  • Universal Life: Premium amount and death benefit are both flexible. You can change the amount of your premium payments and/or death benefit after you buy the policy. Increasing your premium payments as you age is important to maintaining your universal life policy.After you have determined the type of policy most suitable for you and your family, compare similar types from different companies to learn who gives the best value beyond the premium. Make sure you understand the following: Do premiums or benefits vary yearly? How much do the benefits build in the policy? What portion of the premiums or benefits are not guaranteed? What is the effect of interest on money paid and received at different times on the policy? How quickly does the cash value grow? Are there special policy features for your beneficiaries? Finally, many companies offer a “free-look” (or “right to review”) provision. Take advantage of the opportunity to make policy corrections or return the policy for a full refund if the coverage is not issued as you expected.Insurance companies issue an annual statement for universal life policies and most whole life policies.  Review this statement each year to verify your policy costs, check on the status of your cash or policy loan values, and confirm that guarantees stay active. You can request an illustration at any time to ensure that your policy benefits will last as long as you originally planned. The annual statements include information to contact the company with any questions or concerns.Life insurance is about family so it is imperative that they be involved in the conversation and are aware of the policy’s location to access it upon your death. In addition, taking appropriate legal steps to designate a loved one with financial power of attorney authority would legally permit that person to tend to your financial affairs, if you are unable to. That person could address such potential life insurance issues as to why your policy is in jeopardy of cancellation, and make policy changes when necessary. An insurance company cannot legally communicate with anyone but the policyholder unless a power of attorney is in place.Life insurance is complicated and careful evaluation is essential, and that process should include your family, an insurance professional, and a financial advisor. The Ohio Department of Insurance can also be a resource for you. Visit our life insurance information at www.insurance.ohio.gov and call us as at 1-800-686-1526 with any questions. We also provide a service to assist consumers in locating missing life insurance policies and annuity contracts of deceased family members or of close relationship.
  • More information
  • Accessing the policy
  • Maintaining the policy
  • Any policy that includes universal life coverage will require an illustration to be signed at application.  A copy of this is issued with your policy and provides an outline of benefit guarantees for certain periods of time or for the life of the policy. Review your policy and illustration, if applicable, to make sure it includes the benefits you requested.
  • Purchasing coverage