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Life Insurance in your State

There is no federal agency that regulates the sale of life insurance. The licensing of agents, and what regulations there are regarding policies are handled on the state level.

No matter what state you live in, there are basically two types of life insurance available for purchase: Term and Permanent.

You may wonder why you even need it, people seem to live a long time here. The truth is: no matter where you live, most likely the number one killers are as prevalent in your community as they are nationwide. These include heart disease, cancer and accidents. Even in Hawaii, the state with the highest life expectancy in the nation, almost 750 in every 100,000 residents between the ages of 55 and 64 pass away every year.

A state’s Department of Insurance oversees the sale of policies within that state, but the Department does not regulate it on the policy level the way that it will regulate other insurance plans such as health or auto. In other words, there are few, if any, state regulations that mandate specific coverages, or how a policy has to be worded or priced. State regulations usually come into play when a claim is filed, and most often have to do with payment terms and other issues surrounding the disbursement of death benefits.

However, there are certain provisions that do vary from state to state regarding regulations pertaining to free-look time frames, illustration requirements, underwriting, and medical exam requirements. You should be aware of these rules as you shop around, and can find a list of them, along with state specific resources within our State guides.

7 Ways to Save on Your State Life Insurance

There are many ways to save on life insurance. Most importantly, you need to shop around, as different companies charge different rates. With hundreds of companies to choose from, comparison-shopping can save you significantly. Beyond shopping for a good deal, here are 7 ways you can save on your purchase.

  1. Term Insurance: If you really want to save, consider buying Term Life. While it may not have the cash value of Permanent Life, Term Life insurance gives you the greatest insurance value for your money, with monthly premiums being as much as 10 times less than a Whole Life Insurance policy with similar death benefits.
  2. Shop Online: One of the best ways to compare rates is to use the Internet.
  3. Get Healthy: One of the surest ways to save is to buy it when you are the healthiest. Get healthy and stay healthy and you will fall into the “preferred” or lowest rate group when receiving a quote. If you are overweight, or a tobacco user, you will certainly pay more, so consider making some lifestyle changes. You’ll live longer – and pay less!
  4. Buy the Right Amount: Save by buying only the amount you need. Experts recommend you purchase at least 7x your annual income, 10x if you have kids. You can use an online death benefit calculator to more precisely figure out the amount of Life Insurance you should purchase.
  5. Riders: If you need to make an adjustment to your policy, consider the use of riders before canceling and purchasing a new policy. Depending on the change you need to make, this may, or may not be possible, however it is always less money to add a rider to your policy than it is to purchase new one.
  6. Buy Young: When you are single without any dependants, you probably do not need this product at all. However, you should buy a policy as soon as the need arises; once you are married perhaps, certainly by the time you have children. The younger and healthier you are when you apply. the cheaper the monthly premiums will be.
  7. Payment Options: If you can, try to pay your premium annually rather than monthly. Most insurance companies add fees to monthly premium payments. Also, some companies will apply a discount for premiums paid directly from a checking account.

5 Ways You Didn’t Know You Could Use Your State Life Insurance

You may not realize that there are ways you can use your policy beyond its primary purpose of paying a death benefit.

  1. Living Benefits – If you or a family member with a policy were to be diagnosed with a terminal illness, you may be able to leverage the policy to pay for the often-exorbitant cost of care. This is known as Living Benefits or Accelerated Death Benefits. Check with your state agent to see if your policy has such a provision.
  2. Cash Value – Do not forget that if you have any kind of Permanent Life Insurance, such as Whole Life, Universal Life, or Variable Life, the policy can be used to save you from financial ruin in the event of an emergency. You can borrow against your accrued cash value anytime with no other collateral or income verification required. It provides not only a death benefit, but can be a lifeline in hard times.
  3. Long Term Care – Long term care, such as skilled nursing care, can be very expensive and exhaust retirement funds or a family’s assets. In some circumstances, your policy can be used to pay for long term care. If you have such a rider on your insurance policy, a portion of its value may be used to pay for long term care. The death benefit will be reduced by that amount.
  4. Premium Waivers – In some circumstances, your policy will pay for itself when you cannot. Often your agent can suggest a “waiver of premium” rider on your policy. If you have this rider, and you lose your job or become disabled, your premiums will be waived and your policy will remain in effect for a limited time, usually around six months.
  5. Conversion – If you have a Term Life policy, you may be able to convert that to a Permanent Life policy such as Whole Life. Usually you can make such a conversion without a medical exam, which can prove invaluable if you are diagnosed with a serious medical condition and want to make sure you are covered by your Life Insurance beyond the length of the term.

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