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LIFE INSURANCE: Basic Information
1) Why should I buy life insurance?
Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations:
i. Replace income for dependents
If people depend on your income, life insurance can replace that income for them if you die. The most commonly recognized case of this is parents with young children. However, it can also apply to couples in which the survivor would be financially stricken by the income lost through the death of a partner, and to dependent adults, such as parents, siblings or adult children who continue to rely on you financially. Insurance to replace your income can be especially useful if the government- or employer-sponsored benefits of your surviving spouse or domestic partner will be reduced after your death.
ii. Pay final expenses
Life insurance can pay your funeral and burial costs, probate and other estate administration costs, debts and medical expenses not covered by health insurance.
iii. Create an inheritance for your heirs
Even if you have no other assets to pass to your heirs, you can create an inheritance by buying a life insurance policy and naming them as beneficiaries.
iv. Pay federal "death" taxes and state "death" taxes
Life insurance benefits can pay estate taxes so that your heirs will not have to liquidate other assets or take a smaller inheritance. Changes in the federal "death" tax rules between now and January 1, 2011 will likely lessen the impact of this tax on some people, but some states are offsetting those federal decreases with increases in their state-level "death" taxes. v. Make significant charitable contributions
By making a charity the beneficiary of your life insurance, you can make a much larger contribution than if you donated the cash equivalent of the policy's premiums.
vi. Create a source of savings
Some types of life insurance create a cash value that, if not paid out as a death benefit, can be borrowed or withdrawn on the owner's request. Since most people make paying their life insurance policy premiums a high priority, buying a cash-value type policy can create a kind of "forced" savings plan. Furthermore, the interest credited is tax deferred (and tax exempt if the money is paid as a death claim).
2) What should be the amount of Life Insurance?
In most cases, if you have no dependents and have enough money to pay your final expenses, you don't need any life insurance.
However, if you want to create an inheritance or make a charitable contribution, you should buy enough life insurance to achieve those goals.
If you have dependents, you should buy enough life insurance so that, when combined with other sources of income, it will replace the income you now generate for them, plus enough to offset any additional expenses they will incur replacing services you currently provide (for example, if you do the taxes for your family, the survivors might have to hire a professional tax preparer). Also, your family might need extra money to make some changes after you die. For example, they may want to relocate, or your spouse may need to go back to school to be in a better position to help support the family.
A multiple of salary?Many pundits recommend buying life insurance equal to a multiple of your salary. For example, one advice columnist recommends buying insurance equal to 20 times your salary before taxes. She chose 20 because, if the benefit is invested in bonds that pay 5 percent interest, it would produce an amount equal to your salary at death, so the survivors could live off the interest and wouldn't have to "invade" the principal.
However, this simplistic formula implicitly assumes no inflation and that one could assemble a bond portfolio that, after expenses, would provide a 5 percent interest stream every year. But assuming inflation is 3 percent per year, the purchasing power of a gross income of $50,000 would drop to about $38,300 in the 10th year. To avoid this income drop-off, the survivors would have to tap into the principal each year. And if they did, they'd run out of money in the 16th year.
The "multiple of salary" approach also ignores other sources of income, such as Social Security survivors' benefits. These benefits can be substantial. For example, for a person who had been earning a $36,000 salary at death ($3000 a month), maximum Social Security survivors' monthly income benefits for a spouse and two children under age 18 could be about $2,300 per month, and this amount would increase each year to match inflation. (It drops when there is only a spouse and one child under 18, and stops completely when there are no children under 18 remaining in the household. Also, the surviving spouse's benefit would be reduced if the spouse earns income over a certain limit.)
In this example, the survivors would need life insurance to replace only $700 per month (adjusted for inflation) of lost income; Social Security would provide the rest. These survivors would need life insurance to replace about $1,150 per month (adjusted for inflation) once the nonworking surviving spouse has only one child under 18 in her care, and the surviving nonworking spouse would have to replace the entire $3,000 (adjusted for inflation) when the youngest child turns 18.
3) What are the principal types of life insurance?
There are two major types of life insurance-term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life.
Life insurance products for groups are different from life insurance sold to individuals. The information below focuses on life insurance sold to individuals.
a. Term: Term Insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions.
There are two basic types of term life insurance policies-level term and decreasing term.
* Level term means that the death benefit stays the same throughout the duration of the policy.
* Decreasing term means that the death benefit drops, usually in one-year increments, over the course of the policy's term.
b. Whole Life/Permanent
Whole life or permanent insurance pays a death benefit whenever you die-even if you live to 100! There are three major types of whole life or permanent life insurance-traditional whole life, universal life, and variable universal life, and there are variations within each type.
In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. So they keep the premium level by charging a premium that, in the early years, is higher than what's needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people.
By law, when these "overpayments" reach a certain amount, they must be available to the policy owner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.
4) How is life insurance sold? You can buy life insurance either as an "individual" or as part of a "group" plan.
a. Individual Policy:
When you buy an individual policy, you choose the company, the plan, and the benefits and features that are right for you and your family. You might be able to buy the policy from the same agent or company representative who sells you property and liability insurance for your home, car or business. And although you won't qualify for any discounts by buying your life insurance and other insurance from the same representative, working with a single advisor for all your insurance needs can make your financial life simpler.
Individual policies are typically sold through insurance agents or brokers. If you buy a policy through an agent or broker, you will pay a commission, also called a "load," that is built into the premium rate. The commission compensates the agent or broker for the time spent advising you on how much and what type of life insurance to buy, for facilitating the application process, and for any further service that's needed in future years to keep the policy up-to-date (such as changing beneficiary designations, arranging policy loans or coordinating your financial plans with your lawyer and accountant).
There are two other ways to buy individual life insurance. In Connecticut, Massachusetts and New York, you can buy it from a savings bank. Or you can buy a policy directly from an insurance company or from a fee-only financial advisor-what's known as a "no load" or "low load" policy. Although there is no sales commission on these policies, the company will still have charges built into the premium to cover its marketing expenses, application processing expenses and subsequent services. Finding an insurance company that will sell you a no-load policy isn't easy; typing in "no load life insurance" on Internet search engines will in many cases lead you to an agent or broker.
b. Group Policy:
You might have life insurance carmatically from your employer; many large companies do this. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from a union or trade association or other group you belong to (such as a college alumni association or an carmobile club).
Compared to buying an individual life insurance policy, there are several advantages to buying life insurance under a group policy:
* Group purchase can sometimes offer you a lower rate for a given death benefit either because the employer or other group sponsor subsidizes the premium or because the rates are averages weighted by people younger than you.
* There are virtually no health qualifications for getting the group coverage.
* Premium payment is usually by payroll deduction (for employer-based group coverage) or linked with other payments (e.g., credit card bills), lowering the chance of missing a payment.
Most employer group plans are term insurance, but if you leave that employer your state may require that you be allowed to convert the policy to a form of whole life insurance with the same insurance company that provides the group life insurance. You would then pay premiums directly to the company and keep the insurance in force. This can be an advantage if you are older, or have experienced deteriorating health, as it gives you the opportunity to qualify for whole life insurance without having a medical exam.
c. Credit Life Insurance: Credit cards and lending institutions may offer life insurance to pay off your outstanding loans in the event of your death. This is generally made available in two ways
* As part of the loan at no extra charge. In this case the cost of the life insurance is borne by the lender and is included in its interest rate or other finance charges. If you have this type of credit life insurance, you don't need separate life insurance to pay off that loan if you die.
* As an option at an extra charge. In this case, you should usually reject the optional coverage, provided that you have some other life insurance (group or individual) that can be designated to pay off the loan if you die. If you're under age 50 and you don't have other insurance that could pay off this loan, consider buying individual life insurance for this purpose as the rates will probably be better. At 50 or over (or younger with health issues), if you have no other life insurance for this purpose, the optional credit life insurance is likely to be cheaper than individual life insurance.
5) What is a beneficiary?
A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name:
* One person
* Two or more people
* The trustee of a trust you've set up
* A charity
* Your estate
If you don't name a beneficiary, the death benefit will be paid to your estate.
Two 7/6/2006levels" of beneficiaries: Your life insurance policy should have both "primary" and "contingent" beneficiaries. The primary beneficiary gets the death benefits if he or she can be found after your death. Contingent beneficiaries get the death benefits if the primary beneficiary can't be found. If no primary or contingent beneficiaries can be found, the death benefit will be paid to your estate.
As part of naming beneficiaries, you should identify them as clearly as possible and include their social security numbers. This will make it easier for the life insurance company to find them, and it will make it less likely that disputes will arise regarding the death benefits. For example, if you write "wife [or husband] of the insured" without using a specific name, an ex-spouse could claim the death benefit. On the other hand, if you have named specific children, any later-born or adopted children will not receive the death benefit-unless you change the beneficiary designation to include them.
Besides naming beneficiaries, you should specify how the benefits are to be handled if one or more beneficiaries can't be found. For example, suppose you have two children and you name each one to receive half of the death benefit. If one of the children dies before you do, do you want the other child to get the entire death benefit, or the deceased child's heirs to get his or her share?
If the death benefit goes to your estate, probate proceedings could delay distributing the money, and the cost of probate could diminish the amount available to your heirs.
Choosing beneficiaries, and keeping those choices up-to-date, is an important part of owning life insurance. The birth or adoption of a child, marriage or divorce can affect your initial choice. Review your beneficiary designation as new situations arise in order to make sure your choice is still appropriate.
LIFE INSURANCE: Types Of Life Insurance
1) What are the types of term insurance policies?
Term insurance comes in two basic varieties-level term and decreasing term. These days, almost everyone buys level term insurance. The terms "level" and "decreasing" refer to the death benefit amount during the term of the policy. A level term policy pays the same benefit amount if death occurs at any point during the term.
Common types of level term are:
* yearly- (or annually-) renewable term
* 5-year renewable term
* 10-year term
* 15-year term
* 20-year term
* 25-year term
* 30-year term
* term to a specified age (usually 65)
Yearly renewable term, once popular, is no longer a top seller. The most popular type is now 20-year term. Most companies will not sell term insurance to an applicant for a term that ends past his or her 80th birthday.
If a policy is "renewable," that means it continues in force for an additional term or terms, up to a specified age, even if the health of the insured (or other factors) would cause him or her to be rejected if he or she applied for a new life insurance policy.
Generally, the premium for the policy is based on the insured person's age and health at the policy's start, and the premium remains the same (level) for the length of the term. So, premiums for 5-year renewable term can be level for 5 years, then to a new rate reflecting the new age of the insured, and so on every five years. Some longer term policies will guarantee that the premium will not increase during the term; others don't make that guarantee, enabling the insurance company to raise the rate during the policy's term.
Some term policies are convertible. This means that the policy's owner has the right to change it into a permanent type of life insurance without additional evidence of insurability.
"Return of Premium"
In most types of term insurance, including homeowners and car insurance, if you haven't had a claim under the policy by the time it expires, you get no refund of the premium. Your premium bought the protection that you had but didn't need, and you've received fair value. Some term life insurance consumers have been unhappy at this outcome, so some insurers have created term life with a "return of premium" feature. The premiums for the insurance with this feature are often significantly higher than for policies without it, and they generally require that you keep the policy in force to its term or else you forfeit the return of premium benefit. Some policies will return the base premium but not the extra premium (for the return benefit), and others will return both.
2) What are the different types of permanent policies? Whole or ordinary life This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
a. Universal or adjustable life
This type of policy offers you more flexibility than whole life insurance. You may be able to increase the death benefit, if you pass a medical examination. The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments - providing there is enough money in your account to cover the costs. This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end. You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
b. Variable life
This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
c. Variable-universal life
If you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.
3) Why should I purchase permanent insurance?
A permanent life policy provides lifelong insurance protection. The policy pays a death benefit if you die tomorrow or if you live to be a hundred. There is also a savings element that will grow on a tax-deferred basis and may become substantial over time. Because of the savings element, premiums are generally higher for permanent than for term insurance. However, the premium in a permanent policy remains the same, while term can go up substantially every time you renew it.
There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life. In a permanent policy, the cash value is different from its face value amount. The face amount is the money that will be paid at death. Cash value is the amount of money available to you. There are a number of ways that you can use this cash savings. For instance, you can take a loan against it or you can surrender the policy before you die to collect the accumulated savings.
There are unique features to a permanent policy such as:
* You can lock in premiums when you purchase the policy. By purchasing a permanent policy, the premium will not increase as you age or if your health status changes.
* The policy will accumulate cash savings.
Depending on the policy, you may be able to withdraw some of the money. You also may have these options: * Use the cash value to pay premiums. If unexpected expenses occur, you can stop or reduce your premiums. The cash value in the policy can be used toward the premium payment to continue your current insurance protection - providing there is enough money accumulated.
* Borrow from the insurance company using the cash value in your life insurance as collateral. Like all loans, you will ultimately need to repay the insurer with interest. Otherwise, the policy may lapse or your beneficiaries will receive a reduced death benefit. However, unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions.
4) How should I choose what type of life insurance to buy?
You should consider term life insurance if:
* You need life insurance for a specific period of time. Term life insurance enables you to match the length of the term policy to the length of the need. For example, if you have young children and want to ensure that there will be funds to pay for their college education, you might buy 20-year term life insurance. Or if you want the insurance to repay a debt that will be paid off in a specified time period, buy a term policy for that period.
* You need a large amount of life insurance, but have a limited budget. In general, this type of insurance pays only if you die during the term of the policy, so the rate per thousand of death benefit is lower than for permanent forms of life insurance. If you are still alive at the end of the term, coverage stops unless the policy is renewed. Unlike permanent insurance, you will not build equity in the form of cash savings.
If you think your financial needs may change, you may also want to look into "convertible" term policies. These allow you to convert to permanent insurance without a medical examination in exchange for higher premiums.
Keep in mind that premiums are lowest when you are young and increase upon renewal as you age. Some term insurance policies can be renewed when the policy ends, but the premium will generally increase. Some policies require a medical examination at renewal to qualify for the lowest rates.
You should consider permanent life insurance if:
* You need life insurance for as long as you live. A permanent policy pays a death benefit whether you die tomorrow or live to be 100.
* You want to accumulate a savings element that will grow on a tax-deferred basis and could be a source of borrowed funds for a variety of purposes. The savings element can be used to pay premiums to keep the life insurance in force if you can't pay them otherwise, or it can be used for any other purpose you choose. You can borrow these funds even if your credit is shaky. The death benefit is collateral for the loan, and if you die before it's repaid, the insurance company collects what is due the company before determining what's goes to your beneficiary.
Keep in mind that premiums for permanent policies are generally higher than for term insurance. However, the premium in a permanent policy remains the same no matter how old you are, while term can go up substantially every time you renew it.
There are a number of different types of permanent insurance policies, such as whole (ordinary) life, universal life, variable life, and variable/universal life.
5) How can I save money on life insurance?
There are ways to save money when buying life insurance, but they don't always entail paying a lower premium immediately. As your top priority, look for a policy that meets your needs. Buying the wrong benefits for a low premium is a waste, not a saving. Beyond that, here are some ways to maximize your life insurance dollars.
a. Before you buy:
Once you've determined what type of life insurance product to buy:
i. Focus on financially sound companies: Dozens of companies sell life insurance. Limit yourself to companies with high ratings from two or more independent rating agencies. A low premium from a shaky company isn't a good buy.
ii. Shop around to get a sense of the premium you're likely to pay: Quote services on the Internet may serve this purpose, or you can ask an agent or broker to get you a premium estimate.
As part of this research, determine which rate class you'll fit into. Most companies that sell individual life insurance have several different price classes-usually called "preferred (non-tobacco)," "standard (non-tobacco)," "preferred (tobacco)," and "standard (tobacco)." A small percentage of people have health conditions or histories that disqualify them for even "standard" rates. Many in this group will be offered insurance at "impaired risk" or "nonstandard" rates.
iii. Look into group insurance: Consider participating in your employer-sponsored life insurance program, even if you have to contribute to it financially. Employers often subsidize their group insurance costs, so it can be less expensive than individual life insurance. You might obtain coverage up to a certain level without providing evidence of good health, an advantage for some people. You'll probably pay premiums through payroll deduction, which can be a nice convenience. However, make sure to compare group and individual rates, as depending on your age and health status, group insurance may or may not provide a savings. In comparing group to individual life insurance, remember that if you have over $50,000 of group life insurance, IRS tables determine how much it costs to provide the amount over $50,000 and charges you taxable income for that cost.
iv. Take care of yourself. Find out into which rate class you'll be grouped and, if necessary, consider making some lifestyle changes-don't smoke, maintain a healthy weight and exercise regularly-to qualify for a more favorable rate class.
b. When you're ready to buy
i. Shop around to get a good rate: Life insurance is a very competitive business, and you'll find differences of hundreds of dollars (for annual premiums) even among financially strong companies for essentially the same policy.
ii. Consider the net cost index: How can you compare two policies, one with premiums that start lower than the other but later are higher than the other? Or one with low premiums and a low cash value, the other with higher premiums and a higher cash value? Use a net cost index-a standard method for collapsing these variables into one number. The lower the number, the better, but ignore small differences (since the indexes are approximations based on assumptions, small differences might not signal true differences in values). The agent or broker with whom you're dealing, or the company from which you're considering buying a policy, will provide these index numbers.
iii. Be aware of premium discounts for particular amounts of insurance: Most companies offer rate discounts for specified insurance amounts. For example, you might actually pay a smaller premium for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000, because a discount "kicks in" at the higher insurance amount.
iv. Beware of "fractional premiums": Typically, you can pay your life insurance premium once a year, once every half-year, once a quarter, or once a month. Although paying quarterly or monthly might seem to be easier to fit into your budget, some companies levy high charges for paying premiums frequently. Others levy quite small charges to do this. If a company levies high charges for paying more frequently, try budgeting so that you can pay your premium only once or twice a year.
v. If you're buying a term policy, look for renewal guarantees: A renewal guarantee gives you the right to start a new term after the current one ends, paying a higher premium based on your current age, but without requiring you to undergo a new health exam or submit any other "evidence of insurability." Without the guarantee, you'd have to shop for life insurance all over again, and if your health has deteriorated, you might have to pay much more or not get it at all.
LIFE INSURANCE: Keeping Your Life Insurance Current
1) How should I organize and store my life insurance records?
The last thing you want to happen after you die is for your beneficiaries to be unable to locate and submit a claim on your life insurance. To prevent this, you should have copies of your life insurance records in at least two places. This is to make it less likely that you'll lose them (to fire, flood, accidental discarding, etc.) and more likely that, after your death, your beneficiaries will find them.
a. What information should I keep?
For each individual life insurance policy on your life, you should record the following information:
* The full name of the life insurance company that issued the policy
* The city and state of the home office of the company that issued the policy
* The policy number
* The date the policy was issued
* The amount of the death benefit
* The name and address of the agent/broker who sold you the policy
* The type of policy (e.g., term, whole life, etc.)
* The location of the original life insurance policy
You might have life insurance carmatically from your employer. Your employer also might offer you the chance to buy additional life insurance under a group policy. And you might be eligible to buy life insurance under a group policy from your union or trade association or other group you belong to (such as a college alumni association or an carmobile club). For each of these life insurance benefits, you should record the following information:
* The name of the employer or group that sponsors the insurance
* The office or person to contact when it's time to file a claim
* The certificate number (comparable to the policy number under an individual policy)
* The date the insurance was started
* The amount of the death benefit
Sometimes financial programs that are mainly designed for income or other purposes have death benefits as additional features. This might include pensions, annuities, workers compensation programs, disability insurance, travel accident insurance, etc. For each such program, you should record the following information:
* The type of policy that has a death benefit as part of its features
* The full name of the life insurance company that issued the policy
* The city and state of the home office of the company that issued the policy
* The policy number
* The date the policy was issued
* The amount of the death benefit
* The name and address of the agent/broker who sold you the policy
* The location of the original insurance policy
Credit cards and lending institutions may offer life insurance to pay off your outstanding loans in the event of your death. For each life insurance benefit on your life dedicated to paying off a loan, you should record
* The full name of the lending institution through which you obtained the life insurance
* The loan number and issue date of the loan
* The name of the person or office to contact when it's time to file a claim
* The policy number of the life insurance policy that pays off the loan
b. Where should I keep the information?
Keep one set of these records in your home, in a place where others who need this information are likely to find it (and after you put the information there, tell the people who'll need it where it is). This might be with your other financial records (such as income tax, checking account, investment records), with your other legal papers (such as a copy of your will, living will, health care proxy, etc.), or anywhere your survivors are likely to look for them.
Keep another set of these records "off site"-that is, outside of your home, perhaps in a safe deposit box, or with a professional or a relative who can be counted on to produce them when they're needed.
On each page, record the date on which the information was last updated. That way, if the copy in your home differs from the one in the safe deposit box, it's easy to tell which is the more current.
2) How often should I review my policy?
You should review all of your insurance needs at least once a year. If you have a major life change, you should contact your insurance agent or company representative. The change in your life may have a significant impact on your insurance needs. Life changes may include:
* Marriage or divorce
* A child or grandchild who is born or adopted
* Significant changes in your health or that of your spouse/domestic partner
* Taking on the financial responsibility of an aging parent
* Purchasing a new home
* A loved one who requires long-term care
* Refinancing your home
* Coming into an inheritance
3) Help:
a. If I can't pay my premium, what should I do?
If unexpected expenses come up and you can't pay your life insurance premium, you should know the possible consequences. The effect depends on the type of policy and coverage you have and the policy terms and conditions.
i. Term: If you stop paying premiums, your coverage lapses.
ii. Permanent: If you have this type of policy, you will have the following choices:
* Cash out the policy.
This means that you can stop paying the premium and collect the available cash savings. You will no longer be covered by life insurance, but you will at least save some of the proceeds of the policy. You may, however, have to pay taxes on some of the cash value if the sum exceeds what you have paid in premiums.
* Non-forfeiture options
There may be a "reduced paid-up" option. This means that you can stop paying premiums completely in return for a reduced death benefit and no cash saving. You may also be able to convert the permanent policy to an extended term policy for a time period based on the accumulated cash savings in the policy.
* Policy will lapse
If this happens, see if the policy can be reinstated. Some insurers may allow this if you do it within five years of lapsing. You will most likely have to pass a physical examination for the reinstated policy and pay back the premiums you would have paid plus interest. Annual premiums for the reinstated policy may be lower than those for a new, comparable policy.
b. How can I locate a lost life insurance policy?
If a family member dies and you are unable to locate his or her life insurance policies, there is, unfortunately, no national or statewide database of all life insurance policies that you can consult. However, you can try to determine:
* which insurance company might have issued the policy
* which agent or broker might have sold or serviced the policy
* whether the deceased might have had insurance through an employer, union or trade association, or other group to which he/she belonged.
Here are some strategies that might turn up useful information:
i. Look for insurance-related documents: Search through files, bank safe deposit boxes, and other storage places to see if there are any insurance-related documents. Also, look through address books to see if the names of any insurance agents or companies are listed. An agent or company who sold the deceased their car or home insurance may know about the existence of a life insurance policy.
ii. Contact current and prior financial advisors: Contact current or prior attorneys, accountants, investment advisors, bankers, business insurance agents/brokers and others who might have known about the deceased's life insurance.
iii. Review life insurance applications: The application for each policy is attached to that policy. So if you can find any of the deceased's life insurance policies, look at the applications for them. The application will have a list of all other life insurance policies owned at the time of the application.
iv. Contact previous employers: Former employers may have a record of a past group policy or policies.
v. Check bank books and canceled checks: See if any checks have been made out to life insurance companies over the years.
vi. Check the mail for a year following the death of the policyholder: Look for premium notices or dividend notices. If a policy has been paid up, there will no notice of premium payments due. However, the company may still send an annual notice regarding the status of the policy or it may pay or send notice of a dividend.
vii. Review the deceased's income tax returns for the past two years: Look for interest income from and interest expenses paid to life insurance companies. Life insurance companies pay interest on accumulations on permanent policies and charge interest on policy loans.
viii. Contact all relevant state insurance departments: The National Association of Insurance Commissioners has a "Life Insurance Company Location System" to help you find state insurance department personnel who might help identify companies that might have written life insurance on the deceased.
ix. Check with the state's unclaimed property office: If a life insurance company knows that an insured client has died but can't find the beneficiary, it must turn the death benefit over to the state in which the policy was bought as "unclaimed property." If you know (or can guess) where the policy was bought, you can contact the state comptroller's department to see if it has any unclaimed money from life insurance policies belonging to the deceased.
x. Contact a private service that will search for "lost life insurance": Several private companies will, for a fee, contact insurance companies for you to find out if the deceased was insured. This service is often provided through their Web sites. xi. Do you think the life insurance might have been bought in Canada?: If so, you might contact the Canadian Life and Health Insurance Association (phone: 1-800-268-8099; Web site: www.clhia.ca).
xii. Try the MIB database: There is a database of all applications for individual life insurance that were processed during the last nine years. There is a $75 charge per search. Most searches are not successful: a random sample of searches found only 1 match in every 5 tries..
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