OTHER COVERAGES

Credit Life Insurance Although you can obtain credit life insurance (term) as an individual, it is usually sold on a group basis to a creditor, such as a bank, finance company or a company selling high priced items on the installment plan. The policy generally pays the outstanding balance of the debt at the time of the borrower’s death, subject to policy maximums. Debts covered in this way include: personal loans; loans to cover the purchase of appliances, motor vehicles, mobile homes, farm equipment; educational loans; bank credit and revolving check loans; mortgages loans; etc.

When you borrow from an organization that has a group credit life policy, the organization may require you to purchase credit life insurance or it may simply offer the protection as an additional service. In either case you must receive a certificate of insurance describing the provisions of the group policy and any insurance charge. Generally the maximum amount of coverage is $220,000 for a mortgage loan and $55,000 for all other debts. Credit life insurance need not be purchased from the organization granting the loan.

If you are covered under a group credit life policy and you terminate coverage by prepaying or defaulting on the loan, or if the group policy itself is terminated, you may be entitled to a partial refund of the premium you paid – check your certificate. If life insurance is required by a creditor as a condition for making a loan, you may be able to assign an existing life insurance policy, if you have one. However, you may wish to buy group credit life insurance in spite of its higher cost because of its convenience and its availability, generally without detailed evidence of insurability.

Monthly Debit Ordinary Insurance Debit insurance is insurance with premiums payable monthly which are meant to be collected by the agent at your home. In most cases, however, home collections are not made and premiums are mailed by you to the agent or to the company.

There are certain factors that tend to increase the costs of debit insurance more than regular life insurance plans:

• Certain expenses are the same no matter what the size of the policy, so that smaller policies issued as debit insurance will have higher premiums per $1,000 of insurance than larger size regular insurance policies.
• In some companies, more debit policyholders allow their policies to lapse than is generally the case with policyholders of regular life insurance. Since early lapses are expensive to a company, the costs must be passed on to all debit policyholders.
• Since debit insurance is designed to include home collections, higher commissions and fees are paid on debit insurance than on regular insurance. In many cases these higher expenses are passed on to the policyholder.
• As a general rule the combination of smaller amounts, higher lapse rates and higher commissions and fees on debit insurance tends to make it more expensive than comparable regular life insurance plans.

Where a company has different premiums for debit and regular insurance it may be possible for you to purchase a larger amount of regular insurance than debit at no extra cost. Therefore, if you are thinking of debit insurance, you should certainly investigate regular life insurance as a cost-saving alternative.

Modified Life Plan A modified life plan is similar to whole life except that you pay a lower premium for the first few years and a higher than regular whole life premium in later years. This plan is designed for those who cannot initially afford the regular whole life premium but who want the higher premium coverage and feel they will eventually be able to pay the higher premium.

The Family Policy The family policy is a combination plan that provides insurance protection under one contract to all members of your immediate family – husband, wife and children. Usually family policies are sold in units (packages) of protection, such as $5,000 on the main wage earner, $1,500 on the spouse and $1,000 on each child.

Joint Life and Survivor Insurance Joint Life and Survivor Insurance provides coverage for two or more persons with the death benefit payable at the death of the last of the insureds. Premiums are significantly lower under joint life and survivor insurance than for policies that insure only one person, since the probability of having to pay a death claim is lower.

Joint Life Insurance Joint Life Insurance provides coverage for two or more persons with the death benefit payable at the first death. Premiums are significantly higher than for policies that insure one person, since the probability of having to pay a death claim is higher.

Endowment Insurance Endowment insurance provides for the payment of the face amount to your beneficiary if death occurs within a specific period of time such as twenty years; or, if at the end of the specific period you are still alive, for the payment of the face amount to you. Due to recent tax law changes many endowment plans no longer qualify as life insurance for tax purposes and are generally not being offered by insurers.

Juvenile insurance Juvenile insurance provides a minimum of protection and could provide coverage, which might not be available at a later date. Amounts provided under such coverage are generally limited based on the age of the child. The current limitations for minors under the age of 14½ would be the greater of $10,000 or 50% of the amount of life insurance in force upon the life of the applicant. The limitations on a minor under the age of 4 and one half would be the greater of $5,000 or 25% of the amount of life insurance in force upon the life of the applicant. Juvenile insurance may be sold with a payor benefit rider, which provides for waiving future premiums on the child’s policy in the event of the death of the person who pays the premium.

Senior Life Plans Senior life insurance, sometimes referred to as graded death benefit plans, provides eligible older applicants with minimal whole life coverage without a medical examination. Since such policies are issued with little or no underwriting they will provide only for a return of premium or minimum graded benefits if death occurs during a specified period which is generally the first two or three policy years. The permissible issue ages for this type of coverage range from ages 50 – 75. The maximum issue amount of coverage is $25,000. These policies are usually more expensive than a fully underwritten policy if the person qualifies as a standard risk.

Pre-need Insurance This type of coverage is for a small face amount, typically purchased to pay the burial expenses of the insured. As previously mentioned within the discussion of monthly debit ordinary insurance, this coverage often carries a higher premium per $1,000 of coverage than larger size policies.