Tag whole life

Tag whole life

How should I organize and store my life insurance records?

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The last thing you want to happen after you die is for your beneficiaries to be unable to locate and submit a claim on your life insurance. To prevent this, you should have copies of your life insurance records in at least two places. This is to make it less likely that you’ll lose them (to fire, flood, accidental discarding, etc.) and more likely that, after your death, your beneficiaries will find them.

What information should I keep?

For each individual life insurance policy on your life, you should record the following information:

  • The full name of the life insurance company that issued the policy
  • The city and state of the home office of the company that issued the policy
  • The name and U.S. headquarters of the group, if the issuing company belongs to a group of companies
  • The policy number
  • The date the policy was issued
  • The amount of the death benefit
  • The name and address of the agent/broker who sold you the policy
  • The type of policy (e.g., term, whole life, etc.)
  • The location of the original life insurance policy

You might have life insurance automatically from your employer. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from your union or trade association or other group you belong to (such as a college alumni association or an automobile club). For each of these life insurance benefits, you should record the following information:

  • The name of the employer or group that sponsors the insurance
  • The office or person to contact when it’s time to file a claim
  • The certificate number (comparable to the policy number under an individual policy)
  • The date the insurance was started
  • The amount of the death benefit

Sometimes financial programs that are mainly designed for income or other purposes have death benefits as additional features. This might include pensions, annuities, workers compensation programs, disability insurance, travel accident insurance, etc. For each such program, you should record the following information:

  • The type of policy that has a death benefit as part of its features
  • The full name of the life insurance company that issued the policy
  • The city and state of the home office of the company that issued the policy
  • The policy number
  • The date the policy was issued
  • The amount of the death benefit
  • The name and address of the agent/broker who sold you the policy
  • The location of the original insurance policy

Credit cards and lending institutions may offer life insurance to pay off your outstanding loans in the event of your death. For each life insurance benefit on your life dedicated to paying off a loan, you should record

  • The full name of the lending institution through which you obtained the life insurance
  • The loan number and issue date of the loan
  • The name of the person or office to contact when it’s time to file a claim
  • The policy number of the life insurance policy that pays off the loan

Where should I keep the information?

Keep one set of these records in your home, in a place where others who need this information are likely to find it (and after you put the information there, tell the people who’ll need it where it is). This might be with your other financial records (such as income tax, checking account, investment records), with your other legal papers (such as a copy of your will, living will, health care proxy, etc.), or anywhere your survivors are likely to look for them.

Keep another set of these records “off site”—that is, outside of your home, perhaps in a safe deposit box, or with a professional or a relative who can be counted on to produce them when they’re needed.

On each page, record the date on which the information was last updated. That way, if the copy in your home differs from the one in the safe deposit box, it’s easy to tell which is the more current.

What are the principal types of life insurance?

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There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.

Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.

Term

Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.

There are two basic types of term life insurance policies—level term and decreasing term.
Level term means that the death benefit stays the same throughout the duration of the policy.
Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy’s term.
In 2003, virtually all (97 percent) of the term life insurance bought was level term.

For more on the different types of term life insurance, click here.

Whole Life/Permanent

Whole life or permanent insurance pays a death benefit whenever you die—even if you live to 100! There are three major types of whole life or permanent life insurance—traditional whole life, universal life, and variable universal life, and there are variations within each type.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So the company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these “overpayments” reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product—universal life insurance and variable universal life insurance.

For more on the different types of whole life/permanent insurance, click here.