What You Should Know About Life Insurance:
Policy Illustration Questions
Questions to Ask About Your Policy Illustration
Is the illustration up to date?
Is it based on current experience?
Is the classification shown in the illustration appropriate for me (for example, smoker/non-smoker, male/female)?
When are premiums due — annually, monthly or otherwise?
Which dollar figures are guaranteed and which are not?
Will I be notified if the non-guaranteed amounts change?
Does the policy have a guaranteed death benefit, or could the death benefit change depending on interest rates or other factors?
Does the policy pay dividends or provide for interest credits?
Are those figures incorporated into the illustration?
Will my premiums always be the same?
Is it possible that the premium will increase significantly if future interest rates are lower than the illustration assumes?
If the illustration shows that, after a certain period of time, I will not have to make premium payments, is there a chance I
could have to begin making payments again in the future?
Is the premium level illustrated enough to guarantee protection for my entire life?
What happens if I fail to make the required premium payments? If you miss a premium payment, you typically have a 30- or 31-day
grace period during which you can pay the premium with no interest charged. After that, the company can (with your
authorization) draw from a permanent policy's cash value to keep that policy in force. In some flexible premium policies, premiums
may be reduced or skipped as long as sufficient cash values remain in the policy. However, this will result in lower cash values.
What happens if I become disabled and can't pay the premiums on my policy? Provisions or
riders that provide additional benefits
can be added to a policy. One such rider is a waiver of premium for disability. With this rider, if you become totally disabled
for a specified period of time, you do not have to pay premiums for the duration of the disability.
Are other
riders available? Another rider, called an
accidental death benefit, provides for an additional benefit in case of
death as a result of an accident.
A relatively new
rider offered by some companies provides
accelerated benefits, also known as
living benefits. This
rider allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such
circumstances include terminal or catastrophic illness, the need for long-term care or confinement to a nursing home.
Ask your agent for information about these and other policy riders.
When will the policy be in effect? If you decide to purchase the policy, find out when the insurance becomes effective. This could
be different from the date the company issues the policy.
Is a "Buyer's Guide" available? Companies should provide consumers with a buyer's guide to help them understand life
insurance terms, benefits and costs. Ask your agent for a copy.
Next: Final Tips & Red Flags for Choosing Life Insurance
