West Virginia Code of State Rules › Agency 114 - Insurance Commission › Title 114 - LEGISLATIVE RULE INSURANCE COMMISSIONER › Series 114-11A - Life Insurance Disclosures › Appendix A

Current through Register Vol. XLI, No. 28, July 12, 2024
LIFE INSURANCE BUYER'S GUIDE
The face page of the Buyer's Guide shall read as follows:
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.
Reprinted by . . .
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
				  needs, 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 your
				  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?
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 on 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.