Finance Tips

This article draws on a big court case in Indianapolis with AIG disputing a life policy worth $15 million. Under normal circumstances, insurers pay out whenever they receive the death certificate. They may privately grumble the claim has come earlier than expected, but their public face will offer sympathies for the loss and pay. Indeed, if any company gets a reputation as a bad payer, their business is likely to dry up fast. With PR and marketing being everything in persuading people to part with their money, insurers usually pay out without comment. Why so different in this case? Well, the first issue is the circumstances of the death. This was a confident older woman aged 74 and she was found fully-clothed, drowned in her bath. The homicide unit has investigated and, despite the fact her family said she always preferred to take a shower, it has ruled her death accidental. No matter that the world might find the circumstances “suspicious”, particularly because the holder of the life policy admitted to being the last one to see her alive, there is no ongoing investigation. This has left the insurance company to dispute the payment.

Four years ago, this active lady was a director responsible for marketing. The company and fellow director insured her life for $15 million. This is perfectly proper as a part of succession planning. It gives the company the cash to buy out the shares and cover losses while a replacement key person is found. Except there is some suspicion the appointment of this lady as a director was only done to justify getting the insurance coverage. The rules are reasonably straightforward.

If you go to a race track, you can bet which horses will win and place. You pay and if your luck (and skill) give you the right result, the bookmaker pays. You could ask the bookmaker whether it is possible to bet on the day, week, month or year someone will die. If such a bet was accepted, you would have a direct financial incentive to arrange for this stranger’s death at the appropriate time. To insure someone’s life requires you have some direct interest in the individual, usually as a relative or someone upon whom you depend. That is why this company insured a marketing director and not an office cleaner. That position fits into the expectation of the insurer and justifies the big pay out.

There are about one hundred cases pending before the courts around the US alleging that investors have been insuring the lives of strangers. Because this is the equivalent of wagering or betting, the insurers are refusing to pay. In many of these cases, there are paper justifications for the policies, e.g. to insure a borrower. It will be very interesting to see how these cases are resolved. As for the ordinary case, you can confidently get life insurance quotes for any member of your family or other relatives. If someone acts as a carer, this will justify a higher pay-out to cover the cost of a replacement. But, if you are potentially insuring someone not related to you and not acting in some protective role towards you, disclose this fact to the life insurance company before confirming the policy. Only by complete honesty at the outset can you protect everyone’s interests in the long run.

When you want your insurance policy to give you more coverage options than intended initially, you go for extras. Because life coverage policy is like a suit – you have to make it fit you, otherwise there’s no point in wearing something that’s uncomfortable. And like when you go to the tailor, to make your suit fit, you buy extras and raiders to make the policy fit your insurance needs perfectly.

But what is a rider in the first place?

Legally speaking, a rider is a document containing certain provisions that are not included in the initial policy, and which are to be enclosed to the present policy when signed. But don’t think that it will cost you much, because the majority of riders are inexpensive compared to the initial prices of the policy. They require less underwriting and thus come with a reasonable pricing while providing coverage in cases you think are important for you.

Insurance companies offer a wide range of raiders designed to cover a variety of situations and circumstances. Some of these riders are best suited for term policies, while others are designed specifically to be included into continuous policies. Here are some of the most popular riders you might think about getting from your company.

Guaranteed insurability

Also referred to as “future purchase option,” this type of rider is only available for purchase with your continuous life coverage policy. It provides you with a possibility to get additional coverage when reaching a specific age without the need to prove your insurability. This often comes in handy when there are changes in your life like marriage, child birth, change of job, etc.

Waiver of premium

In case you are unable to work due to serious injury or disease, paying for life insurance can become quite problematic. This rider will pay your insurance premium if you become disabled or seriously sick without a steady source of income.

Additional family member

This is a great way to get cheap life insurance for your family while still having everybody covered adequately. Instead of buying stand-alone policies or including your family members to your permanent insurance policy, which will be quite costly, you can purchase this rider, which is a form of term coverage, and get the coverage you need for a far lower price.

Accidental death

Also referred to as “double indemnity,” this rider will pay out double the coverage amount of your policy if you die because of an accident. It is especially important if you have a high risk of having an accident at your work.

Living benefits

This rider will pay out a part of your benefit when you are still alive should you develop a serious illness or injury that will require long time care or nursing. The benefits will of course be adjusted accordingly, but the rider gives you and your family the necessary financial support during the tough period.

Conversion term insurance

This is a great option for those who don’t have the money for a continuous policy right now but would like to use its benefits in the future. When you purchase this rider with your much cheaper term insurance policy you reserve the right to convert it into a continuous one when you have the money for it, without having to buy a new policy.

When looking for riders, shopping around also works great. Remember to get life insurance quotes on the riders you would like to purchase and go with the most competitive offers.

When a person decides to get married it is definitely one of the happiest and most memorable moments in his or her life. It is the feeling of everything getting exactly to where it belongs, and it’s truly a wonderful time to enjoy. Of course, there will be substantial changes in many spheres of your life and when in comes to insuring it there will be some important thinks you will have to think over.

First, you have to keep in mind that when you insure your life you protect your spouse and your children against hardship in case you are no longer able to support them. Still, if you choose to insure your life before changing your marital status in most cases your new family members won’t be covered in an insurance situation. That is why it is very important to contact your insurance company after you change your marital status and give birth to kids in order to make sure that your whole family gets the necessary financial benefits in case something happens to you. It’s a very effective way to make sure your family is getting what it deserves if something goes wrong, and it really pays to make sure that your insurance policy has all your needs covered.

Another aspect of life insurance you might want to consider is adding your spouse to your policy if you already have bought one. Most insurance companies have no problems with that. This option is good from the family perspective, because if something happens to either of you, you can rest assured that the other one will get the necessary financial support. And if both of you end up in an insurance situation, your children will receive all the benefits to insure their life and education even if you aren’t around.

In case you don’t have your life covered before getting married, your marital status change can be a good boost to finding a cheap life insurance deal for you and your spouse. You can use the policy benefits to assure your mortgage payout or your children’s college education when time comes, and these are definitely the things you will have to think about well into your marriage. You are not alone anymore and have greater responsibility towards your family, so having a financial tool for assessing certain risks will sure give you a piece of mind. Besides, young families can get better life insurance quotes if compared to singles or older couples, so think about that when you are starting out as a family.

When getting your life insured, make sure you have full understanding of your policy and have some space to adjust it to your current insurance needs. It’s very hard to predict what your needs will be in five or ten years and being constrained by a policy that doesn’t allow you to change certain conditions can turn out being a heavy burden for your family budget. That’s why you have to consult with your insurance agent or broker about any possibilities before actually signing the policy.

Deciding on which form of insurance to go with is also another important topic. Both term and continuous insurance policies have their pros and cons and it really depends on what you want from your insurance policy. Define your needs and take the policy you think best fits your family.

Having your life insured, you are most likely to realize that your insurance coverage will be modified with the passing of time as you get older. When you are younger, most types of life coverage will be cheaper and won’t take much of your thoughts as the real need in such coverage comes later on in life. Still, no matter what age you are when you get your policy, at the first stage you might find that you are paying more than you have expected. Why is that so? Simply because it’s much smarter to pay more for the insurance at the initial stage and leave much less to be paid out as you move on.

And as you get older and your needs change, so will the policy covering your life. Insurance policies mature just like people, being paid off entirely and ready to be used when the moment comes. During this period some people may wish to sell their policies, as they are already paid for, and get the benefits without meeting insurance conditions. This is what insurance experts call “cashing in the policy”. Such a possibility is a great investment option as it allows you to finance things like your kid’s college education or your individual retirement fund when the need for such things becomes evident.

Fact is that a large part of life insurance policies available on the market today come with such adjustment possibilities. Insurance companies have become more flexible in terms of what you can do with your policy when you have paid it out in full. You can easily convert it to stocks, bonds or other financial tools you may find useful. Of course, when you choose to buy cheap life insurance solution the odds are that you won’t have many of such possibilities carried with it. You get what you pay for, and sometimes it really pays off to spend a bit more money.

The only thing that isn’t likely to change over the years is the amount of benefits your family will receive in case something happens to you. And the amount to be received will be the same with most policies, no matter for how long you have the current policy: several months or twenty years. This fact gives you a piece of mind in terms of coverage and return on investment, because you will be able to receive your benefits regardless of when you need them.

There are also certain types of policies that allow you to use the money from your policy in certain circumstances before you have paid out the policy in full or your insurance terms has passed. Such circumstances include serious illnesses, diseases or injuries that require long-term care or nursery, and leave you without a source of income for a prolonged period of time. These types of policies will certainly appeal to those who actually have increased risk of having such diseases or injuries due to their everyday activities.

But no matter what type of policy you choose to have for insuring your life, you have to remember that shopping around is really important in this market. There are many places you can get life insurance quotes and you should definitely do so, because sometimes the same policy with the same options and coverage amounts can cost quite differently between two companies. And why would you want to pay more?