LIFE COURSE CONTENTS
Special Life Insurance Considerations for Young Singles
Life Insurance Considerations for All Life Situations

CONSUMER ALERT

Retained Asset Accounts and Life Insurance:
What Consumers Need to Know About Life Insurance Benefit Payment Options

Life insurance is intended to assist with the financial burdens brought on by the passing of a loved one. While life insurance policies provide for a single payment of the death benefit, policies may also offer other payout options that are intended to fit your needs and those of your family. The National Association of Insurance Commissioners (NAIC) suggests you consider the following information if a life insurance company offers you a Retained Asset Account as an option to a single payment. Read more . . .

Questions on Retained Asset Accounts (RAA) may also be directed to your state's insurance department. Use the NAIC State Web Map to locate your state's website or call 1.866.470.NAIC (6242).

Special Considerations for Young Singles

There are differing opinions about the importance of purchasing life insurance as a young single since you are unlikely to support individuals whose livelihood is dependent upon your income. While buying a policy early in your life will provide you with better deals and potentially guarantee your insurability, some experts doubt that individuals need life insurance at a young age when they typically don’t have dependents.

As a young single, you should consider your options and make a choice based on your finances, health and other circumstances. It always makes sense to start thinking about life insurance early-on so that you can make the most educated decision.

  • When choosing a life insurance product, permanent and term policies are the two major options. If you are a young professional, earning a good salary, able to afford higher premiums and looking for a savings component, you might want to invest in permanent insurance, such as a whole life policy, which builds cash value and also pays a death benefit.
  • On the other hand, a term life policy, which offers death benefit protection for a specified time period, is a less expensive option for young people who are still working out their finances and just want to leave something for their loved ones in the event of their death. Term life is typically less expensive in your younger years than permanent life insurance, which covers you for your entire life and typically has level premiums.
  • If you can’t afford whole life insurance right now, but think you may want it in the future, you may want to consider term life insurance with a conversion option that will let you change to a whole life policy for a fee when you are ready.
  • If you are in the military, consider Serviceman’s Group Life Insurance (SGLI) - a program of low-cost group term life insurance automatically available to all military members. This policy is automatically activated unless the service member opts out.
  • If you have decided to purchase additional life insurance outside of the SGLI, review the list of exclusions to the policies, and make sure that the benefits will be payable even if the death is a result of war, the action of a military force or traveling on a non-commercial aircraft.
  • Individuals who sell life insurance at military installations are required to obtain authorization from the Department of Defense, so ask to see the agent’s permit or license.

The cost of life insurance is affected by multiple factors that you should understand. However, some are not easily in your control, such as pre-existing or chronic health problems like diabetes, heart disease or cancer.

But others are more behavioral in nature and, therefore, within your power, such as…

  • Poor health habits such as smoking and excessive drinking.
  • Your driving record, in terms of accidents, Driving While Intoxicated citations, tickets and claims. The better your driving record, the better the rates you’ll receive for your life insurance.
  • Engaging in dangerous hobbies, such as skydiving or rock climbing

The insurance business is all about assessing risk. If you participate in high-risk activities or exhibit high-risk behaviors, insurers will treat you as a high-risk customer. They may charge you higher premiums or deny you coverage.

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Life Insurance Considerations for All Life Situations

There are two basic types of life insurance.

The first is term insurance, which 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, and it may not be renewable at the end of the term or may cost considerably more to continue.

The second type is permanent life insurance, which goes by several names, such as universal life, variable universal life and whole life. Permanent insurance may provide long-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher.

A number of factors affect life insurance premiums. These include:

  • The age you purchase your policy. The older you are, the more expensive the premiums.
  • Your overall health. Life insurance companies typically ask you about your medical history, request access to medical records and even obtain blood and urine samples for testing.
  • Pre-existing and/or chronic health problems, such as diabetes, heart disease, cancer or sexually transmitted diseases may prevent you from getting life insurance or place you in a high-risk pool at greater cost.
  • Poor health habits, such as smoking and excessive drinking. Be aware that insurance companies may look back and consider these behaviors for the past five years.
  • Engaging in dangerous hobbies, such as skydiving, skiing or rock climbing
  • Your driving record, in terms of accidents, DWI/DUI citations, claims and tickets. The better your driving record, the better rates you’ll receive for your life insurance.
  • Your geographic area. Life insurance companies have access to regional data that document mortality rates and life expectancy, and they use that data to calculate the rates they offer.

Some of these factors are in your control. Others are a function of your genetics, occupation or location. Either way, it’s important for you to be educated on these issues so that you can make the best insurance decisions to fit your life.

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