When was the last time you reviewed your life policy? Do you have outdated life insurance or the modern one? In our practice, we talked to countless people not sure what type they have and how it would protect them and their families. So we put together this guide.
We will get straight to the point: how much would your life insurance pay you if you suffered a heart attack and survived? The chances are that the answer to that question is “zero”. In this guide, we wanted to touch on that and how a “modern” type of policy could help you and your family financially.
Why do I need to worry about that?
It is a valid question and quite frankly, one we completely understand. People often want to forget about their policies, not think if they have outdated life insurance. However, this could hurt them. Here’s why: companies evolve and want to attract more clients. Therefore, they will try to offer more benefits to their clients to ensure that they keep them. There is competition in every line of business, even in life insurance. This is all good news to us consumers, as we are able to shop not only for a better price but for the best value life insurance.
Think about it, you wouldn’t want to hold on to your cell phone from 5 years ago if you could upgrade, right? Same stands true about your life insurance.
Of course, there are instances where keeping your existing policy is in your best interest. If this is the case, rest assured our experienced agent will advise of it.
So, what exactly is outdated life insurance
We consider outdated life insurance the one that pays only if you die. We’d like to think of these types of policies as death insurance. The concept is simple: you buy a policy, pay your premium and if you pass away, the policy pays your beneficiary. This is the basics of life insurance. However, this type of policy will serve you no good, should you have a heart attack, but you don’t die. It will not give you the option to use it while you are still alive.
How to find out what kind I have
To know what kind of life insurance you have, you can look through your policy. See if there are pages referring to additional riders in your policy. Another thing you can do is simply call the company directly and ask them. Does my policy offer any living benefits or accelerated benefits riders? However, if you were working with an experienced and knowledgeable agent, chances are that you would know if your policy already has these features built-in.
Ok, so what is this modern life insurance
The short answer: We believe modern life insurance allows you to use your policy, while you are still alive. You don’t have to die for the policy to payout. It is as simple as that. And no, we don’t mean whole life insurance policies or any form of universal life insurance, the ones that build cash value, even though those could be modern as well. You can check out cash value vs living benefits for a full comparison. We mean term life insurance with living benefits.
Let’s dive in a little deeper and explain how these types of policy work:
Several companies offer living benefits built into their products. The official name of living benefits is Accelerated Benefit Riders or ABR. You can accelerate (use early) your death benefit, should you suffer any qualifying event. Every company will have a different definition of what is a qualifying event, but the most common ones are a heart attack, stroke, invasive cancer just to name a few.
The riders are classified into 3 major groups
Terminal illness – if the doctor tells you have less than 12 to 24 months to live (the different states and companies have different guidelines)
Chronic illness – this rider would apply if you are not able to perform without substantial assistance at least 2 of the 6 activities of daily living (bathing, continence, dressing, eating, toileting, transferring) or have a severe cognitive impairment
Critical illness – this is where most of the companies will differ. Some would offer different triggers than others. In a nutshell, critical illness could be a heart attack, stroke, cancer, kidney failure, major organ transplant, ALS.
Another thing to consider is payment:
Many of the companies we work with, will pay a LUMP SUM payable to YOU. This is huge. You could then turn around and use the money to pay your medical bills (yes, that’s right, your life insurance could pay for your medical bills), hire extra help, pay the household expenses or even take your family on a last vacation. For more detailed information you can see if living benefits are worth it.
How to upgrade my outdated life insurance and how much are living benefits
There are several things you NEED to do prior to switching out your existing life insurance. It comes down to is the replacement in your best interest. Please, please be very careful when replacing existing life insurance. Unfortunately, there are some agents, who will sell you a policy even if it puts you at a disadvantage.
Your first step should be contacting an experienced and knowledgeable agency. The key is to see how they conduct themselves. Is the agent thorough, did she asked you questions about your existing life insurance policy and your objectives. Why are you looking for coverage, who do you want to protect? You kinda have to read between the lines and see if they are looking out for you or themselves.
We don’t say this to scare you off, but just to ask you to be a bit more vigilant.
The second step, after you discuss needs, companies, and prices, is to apply. The key is to NEVER cancel your existing policy until you have a new one in place. You don’t want to find yourself not even a day in between coverage or to find out you don’t qualify for new insurance and you lost your existing policy.
The last step is to cancel your existing policy after the new one is placed in force. In many instances, the new company will notify your existing one that you are replacing. We always advise clients to do the extra step and call themselves.
Here is a little bonus,
There are many companies that offer living policies and do not require you to take a medical exam. That’s right, you could get life insurance without even getting poked in the arm. Now, please keep in mind they will still ask you health questions, check your prescription report, possibly get your medical records and etc. In other words, you still need to qualify to secure a life insurance policy.
We understand that shopping life insurance policies are not the most fun thing to do, but it could be a financial lifesaver. See if you have outdated life insurance and reach out to us with your options to upgrade it. It literally takes 15 minutes on the phone with one of our agents to know what are the options and if replacement makes sense for you.