LIFE INSURANCE – Review Your Policy To Secure Your Family’s Future
Life insurance protects your family’s financial security after your death. It helps to ensure that your estate passes to the beneficiaries you have named.
You should consider the financial responsibilities that your family will inherit, such as a car loan or mortgage, when buying life insurance. Also, consider long-term goals like your spouse’s retirement or the education of your children. If you decide you need more coverage, you can determine whether you need coverage for a certain time period (“term”) or for the remainder (whole, universal, or variable life) insurance.
Term insurance has lower premiums during the first years, but it does not accumulate a cash value which you can access. This can make it prohibitively expensive and costly over time. While whole-life, universal, and variable life insurance have higher premiums at first, the premiums can decrease as you age. Policies provide coverage for your entire life. It is vital to understand which type of policy your have, as well as how the benefits are paid in case something happens to you or your spouse.
Stop. Call. Confirm.
Before speaking with an agent, or buying a life insurance policy from them, verify that they are licensed to offer insurance in the District. Call DISB (202) 727-8000 to verify or visit disb.dc.gov.
What to review
Your insurance needs will change over time as your life circumstances change. Regular review of your life insurance coverage can be very important.
Before you begin reviewing your policy, make sure to read it carefully. You will find the answers to these questions.
- What is the impact of premiums on benefits?
- What is the value of the policy’s benefits?
- What percentage of the benefits and premiums are not guaranteed?
- What happens to interest paid on money received or received at different times during the policy?
- Cash values can be accessed in what circumstances and by what means?
- Can the policy convert into another type of insurance or annuity.
Check that your benefit meets your current needs before you update your policy. If you have any changes, such as a marriage, divorce or new mortgage, it is possible to need to amend your life insurance policy.
Your death benefit may be increased in the case of the birth of your child or the marriage of a new spouse. Your agent can tell you if your insurance company requires that you have a physical exam to increase your coverage.
Your life circumstances might also allow you to lower your premiums or insurance coverage. You might have paid off your mortgage, retired, or had children finish college. A life insurance company may offer “conversion privileges” that allow you to switch from your current term insurance policy to a new whole-life policy. You might be eligible for valuable benefits while you are still alive. Ask your company or insurance agent about these benefits.
The most important decision you can make about life insurance is who will receive your benefits. You should review your beneficiaries every couple of years.
Your life insurance policy can have two types of beneficiaries. If they live beyond you, the policy benefits will be divided among primary beneficiaries. If the primary beneficiary dies, the proceeds go to the contingent beneficiaries. If you choose to name multiple beneficiaries in each category, make sure you include the percentages of death benefit proceeds you wish each beneficiary to receive.
Name your spouse, your domestic partner, your children, grandchildren or relatives as your beneficiary. Naming individuals instead of an estate allows them to receive the proceeds immediately without any taxation. The proceeds of your estate will typically go through probate along with your other assets. Estate taxes may apply. Unless the sum is to your estate, your will will not affect how your life insurance proceeds are distributed. You can ask your lawyer, tax advisor, or insurance agent about the distribution of your life insurance benefits after your death.
Tips for naming beneficiaries
Spouse The legal name of an individual should be used, as in John Wayne Johnson, rather than “husband”. If you have a second marriage, the “husband”, could refer to either the husband who bought the policy or the current spouse. Think about who will make the most important family and financial decisions upon your death.
Children A specific group of individuals should be qualified, such “my children”, by using “per stirpes” or “per capita” (per head) according to their family tree or branch. The designation “my children per stirringpes” indicates that your children will receive their share of your benefits if you have two children and your oldest child dies before you. The designation “my children pro capita” means that your oldest son would get the full benefit, while the living son would get the remainder.
Minor Children Most life insurance companies do not offer life insurance proceeds to minors. You have the option of designating a trust to be the beneficiary. The trust will allow an individual or institution access to the funds to benefit your children. With the help of your tax advisor and family attorney, you will need to carefully set up trusts. A second option is to name two people you trust as beneficiaries. They will share the responsibility for your children’s welfare and care. Your beneficiaries should be updated as your children grow older.
If are the owner of your policy, most cases, you can change beneficiaries by sending a written notice to your insurance company. When changing your beneficiaries, you should consider any changes in your personal and professional relationships. To avoid unintended results, your tax advisor, family attorney or insurance agent will help you to choose the right wording.
Locate the company that services your life insurance policy
It’s possible that the company who issued your life insurance policy has changed its identity, merged or sold it to another insurance company. You should have been informed of any changes at the time they occurred. You should ensure that your address on your policy is current. You will need to contact the life insurer who services your claim if you do not have an updated policy.
This information is required to search for company information.
- You must have the complete legal name of your insurance company. This information should appear on the policy.
- Verify that the policy/binder has a postal address and a telephone number.
- Find out in which state and at what time the policy was bought.
Once you have these details, contact the state department of insurance in the jurisdiction where the insurance company was situated at the time that the policy was issued. Many times, the state department of insurance will be able track name changes and/or merges that affected the insurance company. You can also use Life Insurance Company Location System.