What is a Life Cycle Policy?

What is a Life Cycle Policy?

In order for a policyholder to obtain life insurance, one that will benefit his or her significant ones in an event of death or sickness, one has to go through a process. It is short a one, but it entails specific requirements that a future policyholder needs to adhere with.

Insurance policies are essential to make income and protect beneficiaries from financial difficulties, especially after a catastrophic event. Even though insurance policies include property-casualty, health, life insurance and disability, the process to obtain one is similar to each one.

For various purposes or intents, a life cycle policy is also another term for a whole life insurance policy. First and foremost, the process starts with the application process. It is required for insurance policies to have an application as well as payments for the premium in order to become effective. During the process of application, a series of questions are asked from the applicant. This aide the underwriter for the insurance to decide upon the level of risk involved in insuring the person.

The second step on the life cycle policy is having or creating the contract. Such insurance policies can be accepted and approved or denied, with some changed provisions. Policies can be rated as an exceptional risk, may demand a premium that is higher, or may have exclusions. This allows the company to deny claims in certain particular events.

When an untimely event or situation happens, the policyholder has to file a claim. Basic information, such as what happened is necessarily asked by insurance companies as part of their thorough investigation for the claim. The adjusters for the insurance then decide on the validity of the claim, and how much payment is required, based on the contract.

After this, a payout may happen. Claims are paid out by insurance companies to an individual or to a provider of service. This is based on the terms of the insurance policy contract. If the premiums for the policy have been paid by, either an employer or with pretax dollars, then the payout will be deemed taxable. Premiums that were paid with money that is after-tax are also said to be free from tax.

The payout is also the end of a policy’s life cycle. When the insured person passes away, it presumably leaves behind a family or beneficiaries who will gain from the policyholder’s insurance policy.

A policy’s life cycle is also said to be applied to the processing end of a certain life insurance policy. In a nutshell, it starts with a potential application and grows into a life insurance policy that is complete and goes around a repetitive schedule on premium, gets processed and may be even modified as time goes by, and eventually becomes a claim that is payable against a certain insurance company. In such a way, the life cycle term can be applied to almost any undertaking, and not solely on the creation of an insurance policy.

As time goes by, the process of carrying out an insurance policy for a potential policyholder becomes customer-centric. There is much more than just adhering to the life cycle. There is also an exchange of explanations or discussions between insurance representative and client before an application is started.

What if an Insurance Company Declares Bankruptcy?

What if an Insurance Company Declares Bankruptcy?

Life insurance policies are deemed as essential. Significantly, the money obtained through it will be beneficial for the loved ones left behind by a policyholder after his death or illness.

Life insurance policies pay for the taxes and debt of a policyholder. He or she may leave behind taxes or debts which need to be settled. Thus, life insurance benefits can provide payment in order to settle such obligations. Another, life insurance policies can cover the medical and funeral expenses incurred by the family for the policyholder. Also, it can fund particular financial goals of the family or loved ones left behind. These goals may include funds for college education of one’s child or children, home purchase, or even for a business capital. Lastly, it provides income for the family while it is at an adjustment stage of a loss. When the breadwinner of the family dies, it creates a huge impact on the finances of the family left behind. It is very likely that family income will diminish, and even experience a standard of living which is lower. As such, life insurance policies make it sure that the family has enough money coming in at regular intervals of the year in order to survive and address their financial needs.

Presently, there is a diverse number of life insurance companies which help individuals and family come up with income after an individual or client’s death, or illness. With their help, they are able to ensure that the family left behind will be able to survive, and at the very least, aide them in their adjustment after a loss.

An individual can choose from these varied life insurance companies. These can offer unique and staple benefits for the family and policyholder. However, what if a certain life insurance company goes bankrupt? What will happen to those insured? Will they be able to reap the benefits of the insurance policy which they availed?

If a leading insurance company declares bankruptcy, the policyholder will be protected by the state’s guaranty funds. All stated have at the very least two or three guaranty funds. One fund takes care of both life insurance and health claims, the other on claims for property and casualty. These kinds of fund function just like the FDIC or the Federal Deposit Insurance Corporation, which was established after the failure of banks after the Great Depression. These kinds of regulations protect consumers in an untimely failure of financial institutions.

It is also very unlikely that an insurance company’s failure would also mean failure to pay the claims of its policyholders. First and foremost, the states require that companies which focus on giving out insurance policies to be solvent. This means that insurance companies must have enough cash to pay out the claims of its policyholders. Another thing, if insolvency happens, the guaranty association takes over. This means that claims may be delayed or limited, but not entirely abandoned. Also, it is a common thing that if the failed insurer’s business is given out or transferred to another insurer or life insurance company which is more stable. Lastly, if a policyholder does not have any pending claims, the best thing to do is to look for coverage in other insurance company, in the event that one’s current insurer gets bankrupt. One does not have any obligation to continue making payments for the insurance of a certain insurance company. And one is in a good position to leave if one does not have any outstanding claims.

What Happens to the Cash Value When You Die?

What Happens to the Cash Value When You Die?

In all life insurance plans, the actual cash value of the policy is not owned by the policy holder. These insurance carriers own and consider the cash value of its policy holders as their own corporate asset. This amount will then be used to pay death benefits to be forwarded to the family of the insured individual. Under the “non-forfeiture” clause, it is stated that upon the cancellation of an insurance policy or plan by the insured person, the insurance company will be obliged to return the cash value to the owner of the policy. Hence, the insurance carriers no longer have an obligation to forward payouts to the beneficiaries of the former policy holder.

In layman’s terms, the cash value of the insurance policy dies together with the insured. It will cease to exist as soon as the owner of the plan expires. The main role of an insurance policy is to be able to give a lump sum to the beneficiaries when the insured person dies. This is the nature of an insurance payout or death benefit. It is the primary function an insurance policy.

On the other hand, the cash value has a completely different nature. It is the policy’s monetary worth to the owner at any point in time. Cash value is also referred to as “cash surrender value”. The reason being is that, this will be the exact amount that the policy holder will receive if, for some reason, the plan lapses or gets canceled.

Note that for term life policies; there isn’t any cash value involved. Should term life insurance plans become canceled, the former policy holder shall not get any proceeds in the form of death benefits or cash value. The individual gets nothing. For people with canceled universal or whole life plans, they might be able to receive a portion of the cash that they paid for in premiums. This sum, typically, increases in value over time.

The explanation for why the cash value expires upon death of the insured party is due to the fact that only cash value or a death benefit may be claimed. There is no option, whether in a universal or whole life policy, to receive both types of amounts. To make it simpler, when the insured dies, a death benefit will be received by that individual’s beneficiaries. When the insured person or policy holder decides to end the insurance coverage while he or she is still alive, a check will be handed to that person. In this scenario, the beneficiaries will no longer have a share of the proceeds upon death of the insured person.

Premiums for whole life policies are expensive because of the cash value. Later on, this amount will help in the premium payments, so for the policy holder, the rate stays constant. There will be no increase no matter how long the coverage will last. Think of it as investing in advance payment for premiums so when you retire, and can no longer afford to earn as much, insurance coverage can still be maintained.

Does a Drug Overdose Break a Life Insurance Policy?

Does a Drug Overdose Break a Life Insurance Policy?

A drug overdose doesn’t necessarily warrant the cancellation of an insurance policy. It all depends on the reason behind the drug overdose. There is a possibility for the insurance policy to be canceled, if the cause of death was a suicide by means of a drug overdose. On the other hand, if it were an accidental overdose and death occurred two years after the application of the insurance policy, then; the beneficiaries will still be able to receive the proceeds.

Other important factors will determine whether or not the family will be able to claim the benefits of the insurance plan. For instance, if the policy is updated and has been regularly paid on time, then there shouldn’t be a problem with insurance carrier. The means of payment, as well as when they were made are also part of establishing the release of cash proceeds.

Most, if not all, insurance policies have a clause for suicide. It’s a clause that states that if a suicide occurs within two years upon signing the policy, then the cash benefits will not be given to the family. Sometimes, insurance carriers pay a portion of the paid premiums when the suicide happens before the end of the waiting period. A few carriers will even pay the full amount. Proof of treatment for a mental illness, or existing mental illness may be required by insurers. At times, it could be complicated to prove that the overdose was not intentional. Evidences like a suicide note, or as previously mentioned, treatment for people at risk for committing suicide are helpful. Otherwise, these deaths might be categorized as inconclusive. It is the insurance company that has to carry the burden of proof. Chances are, when a coroner doesn’t establish suicide as the cause of death, the insurance company won’t deny the claim unless it has proven that suicide was truly responsible for the loss of life.

An accidental overdose won’t affect the cash proceeds to be handed to the beneficiaries. Though, some exemptions to this rule exist. The waiting period that lasts for at least two years, is on the top list that needs to be completed. This condition needs to be met, if death happens before its completion, then no cash proceeds will be given to the beneficiaries. Usually, premium payments are returned to the families so they can still avail of a portion of the amount.

Most group life insurance policies indicate an accidental death clause. This means that the policy will be canceled in the event of an accident, in this case, an overdose. It has the same logic as the suicide clause, where payouts can be affected. Accidental death clauses are not common in individual life insurance plans. If your insurance is provided by an organization or your employer, there’s a good chance that this clause is included.

A term that policy holders need to be familiar with is “material misrepresentation”. Insurance carriers will do a thorough job of reviewing the policy and even the application documents of the plan holder. If there was information that was missed out or incorrectly stated, for example, history of drug abuse, companies can use this in order to deny a claim.

Can You Change a Life Insurance Policy?

Can You Change a Life Insurance Policy?

Policy holders need not fear because they can make modifications to their insurance plans. Insurance carriers understand the importance of making policies flexible enough to accommodate changes in people’s lifestyles. In general, there is little maintenance to be done for insurance policies except for on time payments to premiums, on top of keeping the insurance agent informed about all the details to keep the policy holder’s file updated. Personal information should be kept up to date. For example, an additional child or change in status like getting divorced or married should be conveyed to the insurance carrier. Probably the most important detail that should be updated is the choice of beneficiary.

Other modifications can include a conversion of a term life plan into a whole life plan. Basic changes can be done to almost any type of life insurance policy but when it comes to conversions, only some policies can qualify for such. The type and frequency of changes that can be done to your policy depends on the insurance company. Most of the time, the insured is given enough room for adjustments to fit their changing lifestyle needs.

Basic information should be kept updated constantly. With so many things taking place when one moves to a new home and changes to a phone number or name, notifying your insurance provider might be last on the list of things to do. Try to make a habit of reviewing your insurance policy at least once a year. This will keep your file valid. Also, if there is current data to be added or used to replace the old file, you will remember to make the correction upon seeing the errors. This practice isn’t limited to just your basic information, all aspects of the insurance plan must be reviewed and corrected accordingly in an annual basis.

It is not uncommon to find policy holders who make changes in the beneficiary section of their insurance plan. Most often, this is true when the policy was established early on the insured person’s life. It is certainly possible for some beneficiaries to become deceased over the course of time. Other people might also be included, for instance, when a parent has additional children. More important than the reason for changing, is the act of making the correction itself. Bear in mind that whoever’s name appears in the policy will be the one to receive the proceeds from the death benefit. Under the law, no other recipient will be accepted except for whose names are stated in the insurance policy. If revisions have been made, request a copy of the original and revised policies. These are legal documents. That is why it is pertinent to keep them valid and current constantly.

Most term life policies are convertible to whole or partial life insurance. If you have purchased a term life policy, it is possible to have all or only a portion of it converted to a whole life insurance plan. This usually occurs when the insured party, initially, bought a term life plan but later on decided to upgrade. The process is not complicated and insurance providers are happy to accommodate these requests.

Can Insurance be Paid to Beneficiaries in the Case of Suicide?

Can Insurance be Paid to Beneficiaries in the Case of Suicide?

It’s a popular climax for movies and soap operas. A family member decides to take his or her own life as a final desperate act in order to save the clan from financial troubles. The main goal is for the ones left behind to receive the proceeds of an insurance claim from their martyred relative. However, in real life, is this strategy to save others by taking one’s own life, truly rewarded by insurance companies?

In truth, many insurance companies have a suicide clause. There is no absolute yes or no answer to this question because each case is different. Insurance carriers will look at the reasons behind the suicide attempt before arriving at the decision whether to release the death benefits or not. A person will play an essential role in establishing an acceptable suicide scenario or not. The reality is, if the policy holder has full intent and knowledge of the consequences of an attempted suicide, most likely, the beneficiaries will get nothing. If there is no proof of a pre-existing medical condition or accidental death, a suicide would only result to more despair and financial woes for the entire family.

If an insured person is fortunate enough to survive the suicide attempt, psychological assessment and treatment must be done. Most life insurance carriers encourage this by offering to shoulder the expenses for treatment. Although this is another form of benefit, some families are hesitant to use it because of the stigma involved when it comes to a relative needing psychological help. They need not worry because these are treated as delicate cases by the insurance providers. There are directives to treat situations like this with the highest sense of privacy, in order to protect the individual and family members. Then again, if the person has already suffered permanent damage from the attempt; expenses for treatment and healthcare won’t be covered by any policy. Therefore, the rest of the family will have the burden of providing for the disabled relative. Generally, injuries that are suspected of being self-inflicted in nature are not covered by insurance providers.

Every so often, there are people who desire to purchase life insurance policies with the intent of taking their own lives immediately after. In truth, no payout will be made to beneficiaries in this situation.

If you read the insurance policy, chances are you were able to come across the suicide clause. In most plans, it states that death incidents resulting from suicide shall not be covered by the insurer if it is within two years of the policy purchase. It could also state that absolutely no coverage is provided for deaths due to suicide. These definition variations are dependent on the insurance companies. The clause is a move to dissuade people from considering taking their own lives so that their families can cash out on the claim. There is no immediate gratification, so to speak. Although, there are insurance plans that do not have the suicide clause, these are considered extremely expensive for the average citizen.

Are the benefits of Life Insurance Taxable in the State of North Carolina?

Are the benefits of Life Insurance Taxable in the State of North Carolina?

Life insurance is necessary since it brings benefits to a policyholder’s family in the event of a timely or untimely death or illness. Life insurance coverage can address the basic needs of one’s surviving family or loved one. In a nutshell, there are four main reasons for why individuals should obtain a life insurance.

One should know that life insurances provide income while the family is at an adjustment stage of a loss. When somebody who provides an income dies, there is no doubt, that it will create a big impact for the family, or left loved ones. The income of a family will certainly be diminished. As such, the death benefits of a policy on life insurance can prevent this from happening.

It also creates particular goals on finances. Aside from providing the loved ones with income, the proceeds from a life insurance can as well bring funds in order to achieve the particular goals which the policy holder have planned for his family. Some of these goals might be funds for college education of his or her child or children, home purchase, or business capital.

Aside from that, life insurance can cover the medical or funeral expenses of a loved one who was deceased. Obviously, the policyholder will have much medical expenses before his death.. Aside from that, there is also the necessary expense for funeral service. Proper proceeds of life insurance ensure that these kinds of expenses are taken care of.

Lastly, life insurances pay for taxes and debt. The policyholder may leave behind debts which need to be settled. Thus benefit for life insurance includes providing cash in order to settle such obligations.

In the state of North Carolina, as well as in other states, the money obtained through life insurance is not classified as a form of income tax. Also, the dividends paid on a policy for life insurance are known as returns on the premium, and it is not taxed. With these two points in mind, there are some instances wherein the policy may be taxed, thus, one’s insurance representative should be sought or consulted in times of doubt. If one’s policy is taxable, the representative or insurance company should be able to explain the details of the insurance plan.

In the event that the policy on life insurance is said to be an investment, it may be taxed as an investment income. Without knowing the beneficiaries’ exact situations, as well as the details about the policy, it may be difficult to offer any specific answer to the question if life insurance benefits are said to be taxable, especially in the state of North Carolina. In a larger view, it is best to raise this query when haunting for a proper policy on life insurance, and you may find that you get different answers, depending on the insurance company a policyholder has selected, as well as the type if life insurance policy chosen.

Although a policyholder’s policy does not need to have an income tax, it should be taken note that the claim will be added to the value of the estate of a deceased. In this event, it may happen that an estate tax may also be applied. In terms of investment concerns, this is a topic that a client needs to discuss with his or her agent or insurance company. One may find out that the insurance policy can established or written in such a way that it avoids taxes on the estate, This will depend on the insurance laws of the state, as well as the type of policy one is getting.

What is GAP Insurance?

What is GAP Insurance?

Literally speaking, a GAP insurance is a policy which covers the possible gap between the car’s worth and what you will owe on it if in case it encounters a loss like theft or accidents. Most auto insurance companies and lenders offer these to their customers as a security measure against unforeseen financial losses.

Car owners who are incapable of paying large amount of down payment on their purchased vehicle are highly recommended to purchase GAP insurance. It gives you the assurance that even if you do not have enough money to pay the amount difference of the vehicle and what you owe of it, it may still be paid accordingly. Nevertheless, it is always best to review any document that you need to sign and consent with to avoid future worries associated with GAP insurance.

Typical Scenario Which Shows the Advantage of Owning a GAP insurance

GAP insurance is very handy especially in cases where in the damage repair expense is higher than your vehicle’s actual cash value (ACV). Let’s say for example you bought a vehicle for $30,000 but have not paid the initial payment. Unfortunately, you encountered a car accident damaging the entire car. You have an auto insurance policy but the valuation of the repair is higher than the ACV. Nevertheless you got lucky since the surety company decided to pay a few of the expenses but you are still left with $3,000 to pay. Who will pay for it? Gap insurance companies will pay the remaining expense especially if you have chosen a collision or comprehensive type of GAP insurance.

GAP Insurance Requirements
Normally, all lease agreement requires gap insurance. This is essential especially in the part of the buyer since it guarantees him protection from unforeseen vehicle damages and disasters. But in other cases outside that of lease agreements, GAP insurance becomes a wise option.

GAP Insurance Coverage
More or less, GAP insurance covers different types of losses caused by theft, vandalism, fire, accident and natural calamities like flood, hurricane, and tornado. At times, some surety company which offers GAP insurance even covers insurance deductible to ease you from car accident financial worries nevertheless it will not cover unpaid lease or overdue loan payments, car equipment that are not factory installed, vehicles which are not covered by both collision and comprehensive insurance, financial penalties due on leased vehicles and extended warranty expenses. Always secure and read these exemptions as specified in the policy before you start agreeing with any of the terms that surety companies will present to you. This is so you can properly evaluate if you do need GAP insurance.

GAP Insurance Tips and Reminder
Before purchasing GAP insurance for you vehicle, it would be wise to check with your current car insurance provided if it not yet incorporated in your premium. Moreover, be cautious of some companies which hide GAP insurance in other names like automotive loss protection and new car replacement policies. Do not be afraid to ask because you have every right to know how a particular policy works.

What is Universal Life Insurance?

What is Universal Life Insurance?

Universal life insurance was introduced in the years 1981-1982 as a permanent life insurance which rests on cash value. It has the features of both a term and whole life insurance which allows policy holders to choose varying payment methods and coverage every year while adjusting its interest on a monthly basis.

Basic Characteristics of a Universal Life Insurance
1. Account Value: This is the accumulated gross value of all the investments contributed to the policy which include the income after deducting all the current monthly expenses.
2. Cash Surrender Value: This is the current account value of the policy with all the surrender charges and outstanding loans already deducted. This is based on a multiple of the policy’s required minimum premium back end charges which are normally larger than front-end charges.
3. Premiums: This is the amount required by the insurance company that the policy holder pay which is equivalent to the cost of the insurance charges as well as other expenses related with the policy.
4. Death Benefit Options: There are four classifications for death benefit options under universal life insurance policies and these are as follow:
a. Level death benefit: This only covers the amount accumulated during the length of the policy.
b. Level death benefit, indexed: This option features yearly increase in the amount of death benefit as predetermined by percentage rule.
c. Level death benefit with account value: The amount given is equivalent to the initial face value amount plus its gross account value. This is by far the most popular because the gross account value is never taxed.
d. Level death benefit with cumulative gross premiums: The amount received is increased as the amount of the gross deposit added to the policy increases.
5. Premium Flexibility

Advantages of Universal Life Insurance
Universal Life Insurance has several advantages, one of which is its flexibility. It can easily be adjusted to fit your changing needs. You are given the freedom to change the timing and even the amount of your premium payments as the need arises. You are also given the luxury to vary the amount of death benefit which you wish to leave behind according to your set of preferences.

Aside from this, universal life insurance is also considered cheaper compared to other types of insurance. The cash value of your policy remains intact as long as your payment sufficiently covers the monthly insurance charges. Moreover, it keeps your investments safe and intact because it does not venture into using your investments in the stock market which other types of insurance policies do. It is very transparent so you can conveniently monitor the movement of your policy’s account value.

Benefits of Universal Life Insurance
Universal life insurance can be used in several ways. It will not only cover future funeral, medical and burial expenses but it can also be used as an income replacement for the surviving children and spouses. It can also be considered as an additional tax shelter for those who have maxed out in their IRA. Most importantly, it is one of the best options to secure any economic loss which the family of the decedent may experience after the policy holder’s demise.

What is an SR-22 Form?

What is an SR-22 Form?

An SR-22 Form is the official document provided by an insurance company which certifies that a driver is insured. It is particularly requested for problem drivers who have been charged of Driving While Intoxicated or Driving Under Intoxication.

Purpose and Function of SR-22 Form
As indicated in the law, any driver is required to submit an SR-22 Form as proof of insurance to the Secretary of State through the insurer. This is to be done in order to prevent possible suspension of a person’s driver’s license or if any driver wishes that his be reinstated.

Another reason for the submission of an SR-22 form is for the protection of other drivers. It would be very difficult for victims of car accidents to receive their compensation especially for serious injuries that may lead to disfigurement or death if the driver is uninsured. An SR-22 form is a security measure mandated by the state to help future victims of car accidents in receiving their compensation accordingly.

Specific Features of an SR-22 Form
An SR-22 Form requirement may vary from one state to another. Nevertheless, it is a must that a driver purchases an insurance policy that meets the minimum requirement of the state. Otherwise, a driver may opt to purchase an SR-22 bond wherein the surety company guarantees maximum payment of the SR-22 pay-out for the medical expenses incurred by the driver. The difference will then simply be collected from the future pay-out of the driver.

Common SR-22 Misconceptions
An SR-22 form is never to be used as evidence for any comprehensive, collision or even theft protection. It does not involve protection coverage for you vehicle nor does it provide complete proof of physical damage protection. An SR-22 form is simply a document which shows that a driver is financially capable of satisfying a liability claim.

Process of Obtaining an SR-22 Form
If you are required by the state to submit an SR-22 form then you should immediately call your insurance agent to inform them about this matter. Seek for the necessary assistance so your request may be quickly processed. Soon, you will be required to undergo a driving re-assessment. The surety company will reassess you risk rating and will provide you with a revised quote in accordance with your assessment result. Specify the type of insurance coverage you wish to purchase. Most often than not, collision and comprehensive type of insurance coverage is the minimum requirement assigned by most states. You need to purchase an insurance policy before you can be issued as SR-22 form especially if you are not yet insured. The premium will be extremely higher than normal premiums for drivers who need to purchase a policy for the sake of obtaining an SR-22 Form but you need to pay this before the surety company mails your SR-22 Form. After receipt of the form, fill it out then submit it your local DMV so you can have your licensed restored immediately.

If in case surety companies will deny your request to purchase a policy, then you may contact your local DMV and consider dealing with assigned risk program companies available in your state for you to obtain an SR-22 Form.