Insurance FAQs

We have access to the same carriers, products, pricing and underwriting as the companies you may have seen advertised online.  Online pricing may be misleading; we use our underwriting and product expertise to determine the best insurer for you based on your health history and financial needs.  We also offer unmatched personal service before, during and after the initial sale.

No, customers do not pay any more when they buy through a broker or agent rather than directly from an insurance company.  Premiums are set at the state level so policy premiums are the same if you buy from us or directly from the carrier.  In fact, our expertise will likely save you money as we can find the best insurer based on your health history.  Again, the difference is our commitment to customer service before, during and after the initial sale.

Types of life insurance generally fall into two categories: term life insurance and permanent life insurance.

Term life insurance

Term life insurance provides protection for a specific period of time (the term).  Term coverage can last for anywhere from 10 to 40 years.  Term life insurance often makes sense when you need protection for a specific amount of time.  For example, you may only need coverage until your kids graduate from college or your mortgage is paid off. Term life insurance typically offers the most amount of coverage for the lowest initial premium.

 Permanent life insurance

Permanent life insurance can provide lifelong protection for as long as you pay the premiums. It can accumulate cash value on a tax-deferred basis, which you can tap into to help buy a home, supplement your retirement income, cover an emergency expense and more.  Because of these additional benefits, initial premiums are higher than what you would pay for a term life insurance policy with the same amount of coverage.  Different types of insurance include Universal Life, Index Universal Life, Variable Universal Life and Whole Life.  

With a participating policy, you have a chance to “participate” in the company’s profits and earn a dividend.  When a company collects more money in premiums than it needs to pay death claims and maintain the insurance pool for future claims, the company may pay a dividend at the end of that year.  Dividends can be paid in cash, used to offset premium or used to purchase additional insurance. 

A rider is an optional add-on to your policy. You can add a rider when you want some additional benefit on top of your standard policy, like an Accelerated Death Benefit, Waiver of Premium, or Long Term Care rider. Adding a rider to your life insurance policy will usually increase your premiums.  We can help you determine what riders may be appropriate for your situation.

Living benefits of a life insurance policy let you access your life insurance proceeds before you die. This is typically reserved for situations in which the insured faces a terminal illness or injury. Many people use cash from living benefits to get their family’s finances in order, pay medical expenses, or even to take a special trip.  Living benefits, which are also known as accelerated death benefits, are typically available as a rider (or endorsement) to your life insurance policy.

When you apply for life insurance, your life insurance application goes through a process called underwriting.  Underwriting is when your insurance risk is evaluated.  Approval and premiums are based on your health history.

Generally speaking, there are two types of underwriting — traditional and simplified.  In traditional underwriting, you fill out a formal application and typically undergo a short medical exam.  Medical records can also be requested from your primary care physician or other specialists.  The entire process can take up to 4 weeks or longer if medical records are ordered. 

In contrast, simplified underwriting is usually a quick online life insurance application that does not require a medical exam.  Underwriting decisions can be instantaneous or may take up to a couple weeks.  Just be aware that the coverage amount may be limited as well as more expensive with simplified underwriting.

A paramedical exam is a short health exam that is frequently required as part of an application for life insurance. It is performed at your home or place of work at your convenience. During the exam, a technician will measure your height, weight, blood pressure, and pulse. You will also be asked to provide a blood and urine sample.  

In most cases, the life insurance payout is a lump sum paid to beneficiaries when the insured dies. To receive the life insurance payout, the beneficiary will have to file a claim with the insurer. They will need a certified copy of the death certificate to process the claim. A life insurance payout works differently if there is an installment-payout option or an annuity option.

Generally speaking, when the beneficiary of a life insurance policy receives the death benefit, this money is not counted as taxable income, and the beneficiary does not have to pay taxes on it.

However, a few situations can exist in which the beneficiary is taxed on some or all of a policy’s proceeds. If the policyholder elects not to have the benefit paid out immediately upon his death but is instead held by the life insurance company for a given period of time, the beneficiary may have to pay taxes on the interest generated during that period.  When a death benefit is paid to an estate, the person or persons inheriting the estate may have to pay estate taxes on it.  There can be other situations in which the death benefit is taxed; please contact our office for more details.

The premiums you pay for your life insurance policy are not tax-deductible.

You can’t use a credit card to pay for your recurring premiums at most life insurance companies.  Some insurers will let you pay your initial premium with a credit card and then you will have to use a check or electronic funds transfer for future payments.

A modified endowment contract is a life insurance contract that was entered into or materially changed after June 21, 1988 in which the cumulative premiums paid during the first seven years of the contract exceed the amount needed to provide a paid-up policy based on seven statutorily defined level annual premiums (the 7-pay test). Essentially, the 7-pay test requires a minimum level of insurance per premium dollar for the contract’s first seven years. Unlike distributions and loans from non-MEC policies, lifetime distributions and loans from a MEC contract are treated as coming from gain first and cost basis last (last in, first out or LIFO treatment). In addition, a 10% federal tax penalty may be imposed. Therefore, where lifetime access to cash value on a tax-favored basis is important, care must be taken when funding a policy or making changes to policy benefits so that the MEC rules are not triggered.

A 1035 exchange is an exchange of a (nonqualified) life insurance policy, endowment contract, or annuity contract for another contract where the exchange meets the requirements of Internal Revenue Code (IRC) §1035. Normally, gain is immediately recognized on the surrender or exchange of a life insurance or annuity contract. However, Section 1035 provides that, in some instances, the policy or contract owner may make certain exchanges without the immediate recognition of gain. The income tax consequences are deferred or postponed.