|
|
INSURANCE FREQUENTLY ASKED QUESTIONS
|
 Questions Regarding Life Insurance
FAQ for Term Life FAQ for Disability FAQ for Medical FAQ Travel Medical
How much life insurance should you own?
Rough rules of thumb suggest an amount equal to 6 to 8 times your annual earnings. However, there are other things to consider when determining how much life insurance you need. Important factors include: income sources (and amounts) other than salary/earnings; whether or not you're married and, if so, your spouse's earning capacity; the number of people who are financially dependent on you; the amount of death benefits payable from Social Security and
from an employer-sponsored life insurance plan, whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc. Talk to an insurance adviser for a precise calculation of how much life insurance you need.
What about buying life insurance for a spouse or children?
Generally, that should not be done in lieu of buying appropriate amounts of life insurance on the family breadwinner(s). It is extremely important that you protect the earning capacity of the primary breadwinner, if possible, with the right amount of life insurance before considering life insurance on children or spouse. In a dual-income household, it is important to protect the earning capacity of
both spouses. Life insurance for a non-wage earning spouse is often recommended for help in paying for household services lost if that spouse dies.
Should I buy term insurance or cash value life insurance?
Term life insurance pays out in the event of death. Cash value, which is more costly, has a cash amount you can withdraw before death. Which one is for you will depend on your circumstances. First answer an insurance question - how much life insurance should you buy? Then look at the financial aspect - what type of policy should you buy? The amount of life insurance you need may be so large that the
only way you can afford it is by buying term insurance, which carries a lower premium than cash value policies. If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, you can consider the financial decision - which type of policy to buy. Important factors affecting the financial decision include your
income tax bracket, whether the need for life insurance is short-term or long-term (20 years or longer is long-term), and the rate of return on alternative investments. If you view life insurance as an investment, you'll want to study rates of returns. If it's protection, then your purchase is a matter of what you can afford and want to spend.
Top of Page
How does mortgage protection term insurance differ from other types of term life insurance?
The face amount under mortgage protection term insurance decreases over time, consistent with the projected annual decreases in the outstanding balance of a mortgage loan. Mortgage protection policies generally cover a range of mortgage repayment periods, e.g., 15, 20, 25 or 30 years. Although the death benefit decreases, the premium is usually level in amount. Further, the premium payment period often
is shorter than the maximum period of insurance coverage--for example, a 20-year mortgage protection policy might require that premiums be paid over the first 17 years.
Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?
Yes. Lenders don't usually require that you buy a new mortgage protection term insurance policy. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of your death.
Credit life insurance is frequently recommended in conjunction with taking out an installment loan when buying expensive appliances or a new car, or for debt consolidation. Is credit life insurance a good buy?
Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, buying credit life insurance is normally not advisable due to its relatively high cost.
What are the tax issues with life insurance cash values, dividends, and death benefits?
The "interest build-up" portion of the annual increase in the policy's cash value is not taxed. Dividends generally are considered to be a "return of premium" and are not taxable. Although life insurance death proceeds will not typically be subject to income taxation, they may be subject to federal estate taxation. If you own part or all of the policy when you die, those can be included in your gross
estate for federal estate tax purposes. State inheritance taxes and federal gift taxes may also apply to life insurance policies/proceeds under specific circumstances. Contact your tax adviser regarding questions about possible income, estate and gift tax consequences surrounding any life insurance you own or are contemplating buying.
What is participating whole life insurance?
Participating (par) whole life insurance has been marketed for many years in the U.S. The participating feature means you can receive dividends if the underlying investments perform successfully. The investments are generally long-term, fixed-rate contracts, so experience doesn't vary tremendously. Substantial amounts of participating whole life insurance are still sold today, principally by the large mutual companies.
How is universal life insurance different from traditional whole life insurance?
Both traditional whole life (WL) and universal life (UL) products are examples of cash-value life insurance. But there are several important differences between them. One relates to product transparency. In UL policies, it's easy to look at the internal operations of the policy and to examine the relationships among various policy elements (premiums, cash values, interest credits, mortality charges, and expenses) and how they interact with each other. Another difference is that unlike whole life policies, universal life policy returns were freed from long-term, fixed-rate
contracts and replaced with policies whose returns were tied to short-term interest rates and periodically adjusted. After the initial payment, universal life allows you to pay premiums anytime, in virtually any amount, subject to certain minimums and maximums. You can also reduce or increase the amount of the death benefit more easily than under a traditional whole life policy.
Which type of cash value life insurance policy, universal life (UL) or participating whole life (WL), is a "better buy" financially?
There's no simple answer to this. The best performing product (from a financial perspective), whether UL, WL or some other type of cash value life insurance, will likely be the one that reveals the most favorable interest earnings, actual expenses and mortality costs. Insurers earning the highest investment income, and who also incur the lowest expenses and the lowest mortality costs, are in the best
position to offer life insurance at the lowest cost. This is true whether the cash value product being offered is UL or WL. You and your adviser should carefully examine the financial aspects of each product under consideration.
What is variable life (VL) insurance, and how is it different from universal life (UL) and participating whole life (WL)?
Variable life insurance is a type of fixed-premium whole life insurance policy where changes in the policy's cash values and death benefits are directly related to the investment performance of its underlying assets. Policyowners typically can choose among several investment options for the assets backing the policy's cash values. The various investment options offered in the contract generally possess
different risk/return relationships and frequently include a money market fund, a bond fund, and one or more common stock funds. The policy prescribes that the death benefit will not fall below a minimum amount (usually the initial face amount) even if the invested assets depreciate in value by a substantial amount. Because the policyowner assumes all of the investment risk, there is no similar "floor" to
protect the cash values. Variable universal life (VUL) insurance has recently become a more popular product than VL. VUL combines features of both UL and VL and, in essence, is the flexible premium version of VL
Authors: Robert Klein and Bruce Palmer
Content provided by the Insurance Information Institute (I.I.I.) Top of Page |
Questions Regarding Disability Insurance
|
If you were disabled and unable to work as a result of an accident or illness, what would you and your family do for income?
Disability income insurance, which complements health insurance, can replace lost income. At age 40, the average worker faces only a 14 percent chance of dying before age 65 but a 21 percent chance of being disabled for 90 days or more.
|
|
Options for replacing income
- Employer-paid disability insurance
This is required in most states. Most employers provide some short-term sick leave. Many larger employers provide long-term disability coverage as well, typically with benefits of up to 60 percent of salary lasting from five years to age 65, and in some cases extended for life.
- Social Security disability benefits
This can be paid to workers whose disability is expected to last at least 12 months and is so severe that no gainful employment can be performed.
- Individual disability income insurance policies
Other limited replacement income is available for workers under some circumstances from workers compensation (if the injury or illness is job-related), auto insurance (if disability results from an auto accident) and the Department of Veterans Affairs.
For most workers, even those with some employer-paid coverage, an individual disability income policy is the best way to ensure adequate income in the event of disability. When you buy a private disability income policy, you can expect to replace from 50% to 70% of income. Insurers won’t replace all your income because they want you to have an incentive to return to work. However, when you pay the
premiums yourself, disability benefits are not taxed. (Benefits from employer-paid policies are subject to income tax.)
|
|
Key things to look for when you are considering disability insurance
- The definition of disability
Some policies pay benefits if you are unable to perform the customary duties of your own occupation. Others pay only if you are unable to perform any job suitable for your education and experience. Some policies define disability in terms of your own occupation for an initial period of two or three years and then continue to pay benefits only if you are unable to perform any occupation. "Own occupation"
policies are more desirable, but more expensive.
- Benefit period
The benefit period is the amount of time you will receive monthly benefits during your life. Experts usually recommend that the policy you buy pay you benefits until at least age 65, at which point Social Security disability will take over. If you are young, you may consider buying a policy offering lifetime benefits because it will still be relatively inexpensive.
- A policy that will replace from 60% to 70 % of your total taxable earnings
A higher replacement percentage, if available, is more expensive. Evaluate your other sources of income before deciding how much disability coverage you need.
- Coverage for disability resulting from either accidental injury or illness
An accident-only policy is less expensive but does not provide adequate protection. Ideally, both accident and illness coverage should be purchased.
- A cost-of-living increase in benefits
You are buying a policy today that may not pay benefits for a decade or more. Should you need those benefits, you will want them to have kept pace with increases in the cost of living. (Some companies also offer "indexed" benefits, keeping pace with inflation after benefit payments begin.)
- A policy paying "residual" or partial benefits
This type of policy is available so that you can work part-time and still receive a benefit making up for lost income. A standard feature in some policies, and added by a rider to others, a residual benefits policy pays partial benefits based on loss of income without an initial period of total disability.
- Transition benefits
Offered by some companies, it can offset financial loss during a post-disability period of rebuilding a business or professional practice.
- Ongoing coverage
A non-cancelable policy which will continue in force as long as the premiums are paid; neither the benefit nor the premium can change. A guaranteed renewable policy keeps the same benefits but may cost more over time since the insurer can increase the premium if it is increased for an entire class of policyholders.
- Financial stability
Check the financial ratings of an insurer. Your insurance agent or company representative will provide this information or you can obtain it from rating agencies such as A.M. Best Company, Standard and Poor's, Duff and Phelps Credit Rating Company and Moody’s Investors Service.
- Waiting period
Every disability policy imposes a waiting period, also known as the elimination period. This is the number of days you must be disabled before receiving benefits. If you are disabled during the elimination period, you will not receive any benefits, even though you are not able to work. If the elimination period is short, such as 30 or 60 days, the premium will be higher. A longer elimination period may
strain your finances more when you need it, but you will be charged a lower premium. Most experts recommend that you select an elimination period of 60 to 90 days. The first check is usually paid 30 days after the waiting period.
Top of Page |
|
Questions Regarding Medical Insurance
Health insurance is generally available through groups and to individuals. When you receive group insurance at work, the premium usually is paid through your employer. For individual insurance, it is best to contact a professional health insurance agent to review your options.
What are the types of Health Insurance Plans?
Health insurance plans are usually described as either indemnity (fee-for-service) or managed care.
Indemnity and managed care plans differ in their basic approach. Put broadly, the major differences concern choice of providers, out-of-pocket costs for covered services, and how bills are paid. Usually, indemnity plans offer more choices of doctors (including specialists, such as cardiologists and surgeons), hospitals, and other health care providers than managed care plans. Indemnity plans pay
their share of the costs of a service only after they receive a bill.
Besides indemnity plans, there are basically three types of managed care plans: PPOs, HMOs, and POS plans.
What is an Indemnity Plan?
Also known as traditional or fee-for-service plans, indemity plans allow you to choose any doctor or hospital you want. In return, you pay an annual deductible, then a percentage of your medical bill. Although these plans offer the greatest freedom to select any doctor, they are
usually the most expensive option available.
What are the kinds of Managed Care?
Preferred Provider Organization (PPO).
Each time you need care, you choose among doctors who belong to the PPO network or any non-network doctor. If you go to a doctor within the PPO network, you will pay a copayment. Your coinsurance will be based on lower charges for PPO members.
Health Maintenance Organization (HMO).
HMOs require that you pay a small, set copayment when you use the plan's HMO doctors. You generally don't have to pay a deductible in an HMO. You usually select a primary care physician who manages all of your health care and serves as a gatekeeper for specialty care.
Point-of-Service (POS) Plan.
Many HMOs offer an indemnity-type option known as a POS plan. POS plans or Open Access HMOs add an out-of-network benefit to HMOs. Like HMOs, you select a primary care physician who manages all of your care and is responsible for referring you to plan specialists. In a POS plan however, you have the option of going
outside the HMO network.
What should I look for when choosing a Health Plan?
Whether you end up choosing an indemnity plan, PPO, POS, or HMO plan, there are a number of important things to consider in choosing the right one. These include: services offered, choice of providers, location, costs, and quality of care.
What should I look for when choosing a doctor?
In some managed care plans, you will generally be limited to choosing from only certain doctors; in other plans, some doctors may be "preferred," which means they are part of a network and you will pay less if you use them. Ask your plan for a list or directory of providers. The plan
may also offer other help in choosing.
You can ask doctors you know, medical societies, friends, family, and coworkers to recommend doctors. You may also contact hospitals and referral services about doctors in your are
Top of Page |
|
Yes, the travel plans we offer are available to anyone in the world, including citizens of the USA. Long term International health plans are not available to US citizens living in the USA, unless they are planning to become expatriates (leave the country). However, Vacation Insurance plans are only available to citizens of the USA or to people who have purchased their
trip in the USA. If you are a Canadian resident, contact us directly and we can arrange a travel insurance plan via phone.
Why do I need travel insurance?
Traveling anywhere can be risky. You purchase travel protection because your domestic medical plan probably doesn't cover you abroad. Travel insurance is there to help pay out-of-pocket expenses due to unexpected incidents such as baggage loss and medical emergencies.
What is a deductible?
A deductible is a way for the insurance company to reduce claims and your premium. If your plan has a $200 deductible, you pay the first $200 of expenses and then the insurance company picks up the rest/ The higher the deductible, the lower the cost and vice versa.
When is coverage in-force?
For most of the plans we offer, coverage is in-force once you have been approved by the insurance carrier, premium payment has been received and they have sent you written approval. For single trip plans, you can purchase and pay for coverage right on-line.
Should I pre-certify health expenses?
It is recommended that you, your spouse and/or the hospital pre-certify claims (especially large ones) before treatment if possible. But, don't put off any treatment that is medically necessary and urgent. The key is you want to know that the expense is covered if possible before you get it done. Most of the time it is just common sense. Many of the plans offer a toll free
or collect call number on a card or certificate that you or your medical facility can call to pre-certify claims and coverage, so make sure you have it with you at all time.
I am already living or traveling abroad, can I still get coverage?
Yes, it is not too late to get coverage if you have already traveled or are already living outside your country of citizenship. Of course, if you already have a claim before being covered or a pre-existing condition, it won't be covered. However, some long-term medical plans will cover or exclude pre-existing conditions. Check the policy for details.
Can I purchase travel insurance for my friend, relative or employee online?
Yes, you can do this as long as you complete the application online.
I am leaving today or tomorrow, can I still buy travel insurance coverage?
Yes, if you are buying the Patriot travel medical insurance plan, you can purchase online now. You then receive confirmation of coverage, a policy number and claims numbers on your web browser once payment has been accepted. You also get this information via email a few minutes later and then also by post or courier.
Is it safe to purchase insurance on-line?
YES, buying online is the safest use of your credit card - much safer than using it in a restaurant or store. All personally identifiable information, such as credit card information, is securely protected using Secure Layer 128-bit encryption technology, the strongest encryption technology available. Our quote pages are primarily frames pages, meaning the top
frame which shows the web site logo and navigation structure, is not a secure page and the little lock symbol will not appear on your browser, BUT, the frame below where you are getting your quote and entering information IS SECURE & encrypted. If you right click & choose, properties, you will see that the page is a https secure page. Also, the Patriot Quote pages have the VERISIGN trust services logo,
which denotes the digital certificate that IMG, the insurance carrier, provides. We also strictly adhere to our privacy guidelines!
|
|
