Life Insurance FAQ

Your contract (insurance policy) may provide for guaranteed interest rates and/or dividends the insurance company will pay on your premiums. But your premiums must make very high earnings before they will "pay up" your policy. The company must stand behind items that are guaranteed in the contract. Promises of "paid up" life insurance are illegal when based on non-guaranteed values. If you have documentation of the agent promising this, your state insurance department may be able to help. Documentation would include any writing containing the promise -- even an informal, handwritten note or a similar notation by agent.

Only someone who has an "insurable interest" can purchase an insurance policy on your life. That means a stranger cannot buy a policy to insure your life. People with an insurable interest generally include members of your immediate family. In some circumstances your employer or business partner might also have an insurable interest. Insurable interest may also be proper for institutions or people who become your major creditors.
 

No. If you buy a policy on your own life, you become the owner of the policy. As the owner, you can name anyone as beneficiary... even a stranger!

The insurance may be more expensive than if the company required a physical. Although there is no physical, you will probably have to answer a few, broad health questions on your application.
 

Such ads are for "guaranteed issue" policies that ask no health history questions. The company knows it is taking a risk because people with bad health could buy their policies. The company balances the risk by charging higher premiums or by limiting the amount of insurance you can buy. The premiums can be almost as much as the insurance. After a few years you could pay more to the insurance company than it will have to pay to your beneficiary. Such policies may offer only the return of your premiums if you die within the first couple of years after you buy the policy.

Insurance agents sometimes refer to term insurance as "temporary" because the term policy lasts only for a specific period. It is probably no more "temporary" than your auto or homeowner insurance. Just like term, those types of policies provide coverage for a specific period of time, and must be renewed when that period ends.

An agent may believe term is risky, but only because you could have a hard time buying a policy in the future if your health deteriorates or you cannot afford the higher premiums. Commissions could also be a reason for an agent who discourages term. The agent often makes less money for selling term than for other forms of life insurance.

You have bought and received the company's guarantee that if you die during the term of the policy, it will pay a death benefit to your beneficiary.

No more than you have wasted money by buying car insurance but never having an accident. You've purchased peace of mind. With term life insurance, if you die during the term, you know the company will pay your beneficiaries.

Nothing wrong, but there is always a risk when you switch polices that you could be subject to a new contestability period. You start a new, 2-year contestability period anytime you switch . If you die during that 2-year period, the insurance company can (and probably will) investigate the statements you made on your application . If you've given inaccurate or incomplete answers, the company may (and probably will) refuse to pay the death benefit.
 

"Fully paid up" means just that. You have made enough premium payments to cover the cost of insurance for the rest of your life.

The company plans to use the cash value to pay premiums until you die. If you take cash value out, there may not be enough to pay premiums. The company could require you to resume paying premiums, or reduce the amount of the death benefit to an amount that the remaining cash value will support.
 

You may have signed papers that permitted the cash value of your paid up policy to be used to pay for another, larger policy. If you're not sure or can't remember, call the insurance company.
 

That is a policy that may pay you dividends. You have a chance to "participate" in the company's earnings. A life insurance dividend is actually a refund of part of your premium. 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 dividends at the end of that year.

"Buy term and invest the difference" has been a popular sales slogan for term life. The pitch compares term, the least expensive form of life insurance, with other kinds of life insurance.

Example:

• $100,000 death benefit at age 35
• Annual whole life premium: $1,800
• Annual renewable term premium: $250
• Difference: $1,550

What are your choices?

1. Buy whole life. The “difference” is used to keep your premiums lower than the actual cost of insurance as you get older.
2. Buy term. You keep the difference.

In addition, make sure you consider the following: 

• As you get older your term premiums will increase to keep up with the cost of insurance; 
• If you invested the difference, you could use your investment to pay the higher cost of insurance; 
• If you spent the difference you will have to dip into other savings to pay higher premiums; and 
• If your health deteriorates you may not be able to buy a new policy

The rest of the money paid for insurance. You were entitled to only the cash surrender value — that is, the amount you had paid to "pre-fund" insurance in your old age. The amount would have been even less if you had borrowed money that had not yet been repaid.

Read your policy. It has a table of cash values that should provide the answer. Call your agent if you are still not sure of the cash value amount.

When you die, the insurance company will pay the death benefit. No matter how much cash value you may have had in the policy the moment before you died, your beneficiaries can collect no more than the stated death benefit. Any loans you have not repaid (plus interest) will be subtracted from the death benefit.

The result: your beneficiary could wind up with less than the face amount of the policy.

The exception: some whole life policies pay both the death benefit and the cash value when you die.
 

No. Unfortunately, every insurance company that issues or has issued life insurance policies in Georgia would have to be contacted. Because there are hundreds of licensed life insurers in Georgia as well as many others that have either been sold or become insolvent, a search would be impractical and likely unproductive.

No.

Some of the things a person might do is contact independent and captive life insurance agents in the area where the person lived. Other steps would include: examine relative’s bank statements, check registers, contact the employee benefits office of your relative's former employer and income tax records which may list interest income on the cash value of a life policy. You might also contact the Unclaimed Property Section of the Georgia Department of Revenue at 855-329-9863 who receives life insurance proceeds from insurers who are unable to locate the owner/insured.