F A Q about Life Insurance

Q. How do I know if I even need life insurance?
A. The key question may be: does someone else depend on you for financial support? If so, life insurance may be one way to be certain your loved ones are protected if you die. If you are young, single and have no dependents, you may want to talk to your financial adviser about other options for your money. Some insurance experts, however, point out that insurance premiums increase as we age, so purchasing a policy when you are young and healthy - when one could argue that you don't need coverage - is actually the time to buy. Only you can make this decision.

Q. If I decide I need life insurance, how much should I buy?
A. Again, even the insurance experts differ on this question. You should consider a number of factors: how much money your dependents would need to live if you were to die prematurely; whether your death would create expenses your family doesn't have now, such as child care if the surviving parent had to enter the workforce; funeral costs; and any long-term goals your family has, such as education for children. Several insurance companies offer life insurance needs calculators or other worksheets to assist you with your estimates.

Q. What's the difference between term life and permanent/whole life policies?
A. Term insurance is the simplest. You purchase a policy with a fixed death benefit for a certain period of time (term). If you die before the term is up, your beneficiaries receive the death benefit. If you do not die, you get nothing. Term life is relatively inexpensive, but the price rises as you get older. Permanent policies include whole life, universal life and variable universal life. These policies carry a death benefit but also have a cash value element. These policies can vary widely, so it is important that you discuss the details with your agent and select the policy that best suits your needs.

Q. What are some health factors that a company considers determining my rate?
A. Underwriting practices vary from company to company. However, in general, you should qualify for the "preferred" (lowest premium) rate if you are in good health, have a good driving record, are a non-smoker and don't participate in risky sports. Health and lifestyle risk attitudes vary. For example, some companies will quote a higher rate if you are taking blood pressure medication, while others simply want to know if your blood pressure is "controlled." Many companies will require a physical. Do not withhold pertinent medical information. Such a misrepresentation may make it impossible for your beneficiaries to collect a death benefit.

Q. What is a living death benefit?
A. Also known as accelerated death benefits, this gives you the option ofusing part of your death benefits for health emergencies. In many cases, your doctor will be required to issue a statement saying that you are terminally ill and are expected to die within a certain period of time, often 12 months or less. Since the amount paid out often is considerably less than a death benefit, it is important that you discuss this with your agent now to determine what, if any, living death benefits would be available.

Q. What is a viatical settlement?
A. This is another option available to those who are seriously ill and need money to cover expenses. This is more expensive than the accelerated death benefit. In a viatical settlement, the company or an investor will pay you part of the value of your policy -usually 50 to 80 percent. In return,this company or investor owns your policy, continues to pay the premiums and will receive the full death benefit when you die. According to the National Association of Insurance Commissioners (NAIC), AIDS patients are the primary buyers of these policies, but the industry is beginning to market to other kinds of patients, such as those with cancer or cardiovascular disease. Since those needing a viatical settlement are in a vulnerable position, it is important that these patients receive a reasonable amount in exchange for their policies. You should get the advice of your agent, family members, trusted friends or others before making this important decision.

For more information or to discuss a life insurance issue, please contact us at Vaughn Insurance Agency Co.