Life Insurance: How Many Policies Should New Jersey Residents Apply For?

If you're thinking about becoming a life insurance agent in New Jersey, you'll need to obtain a New Jersey life insurance license. The process is relatively straightforward, but there are a few steps you'll need to follow. First, you'll need to complete a pre-licensing education course, which will prepare you for the New Jersey life insurance licensing exam. After passing the exam, you'll need to get a fingerprint-based background check and submit your license application, which includes an application fee. Once you've completed these steps, you'll just need to wait for your application to be reviewed and approved. It's important to note that there are continuing education requirements to maintain your license, so be sure to stay on top of those. Now you're ready to begin your journey toward becoming a life insurance agent in New Jersey!

Term vs. Whole Life Insurance

To apply for a life insurance license in New Jersey, you must complete a five-step process:

• Complete a pre-licensing course. In New Jersey, you must take a 24-hour pre-license course on life insurance, including three hours of ethics coursework.
• Take the New Jersey Life Insurance Licensing Exam. The exam contains 83 scored questions, and you must score 70% or higher to pass.
• Get a fingerprint-based background check.
• Complete and submit the New Jersey Life Insurance License Application.
• Wait for your application results.

Now, here is an overview of term vs. whole life insurance:

Term Life Insurance

Term life insurance provides coverage for a set term or a specific amount of time, usually between 10 and 30 years. If the policyholder passes away during that period, the beneficiary will receive a payout. Term life insurance is generally cheaper than whole life insurance and allows you to choose a term based on your unique situation, possibly reducing costs in the long run. It is a popular choice for young families due to the lower premiums upfront.

However, if you outlive the term, your coverage will end, and you won't receive any benefits. Term life insurance also does not cover you for your entire lifetime, and the policy will not accumulate cash value like an investment account.

Whole Life Insurance

Whole life insurance provides coverage for your entire life cycle. It typically costs more because it serves as an investment and has a cash value that grows tax-free over time. Whole life insurance premiums remain the same throughout your life, and the death benefit is guaranteed. The cash value grows in a tax-deferred account at a secured rate, making it a popular choice for those seeking to maximize their financial potential.

The main disadvantage of whole life insurance is that you cannot choose the length of the policy, and it is usually more expensive than term life insurance.

The choice between term and whole life insurance depends on your financial goals, dependents, and investment purposes. Term life insurance is generally sufficient for most people, especially those with temporary coverage needs or those on a budget. On the other hand, whole life insurance is suitable for those seeking lifelong coverage, investment potential, and guaranteed cash value growth.

Alternatives

There are additional life insurance options outside of whole and term life insurance, such as universal life insurance, variable life insurance, and indexed universal life insurance. These alternatives offer different levels of flexibility and are suited for specific financial goals.

Free Look Period

The New Jersey State Code requires life insurance companies to give consumers a Free Look Period to review their policy and decide if they want to keep it. This period serves as a consumer protection mechanism, giving you time to thoroughly review your policy and determine whether it suits your needs. During this time, you can choose to cancel your policy without penalty and receive a full refund. This period usually starts when your annuity contract is delivered to you, and it is typically between 10 and 30 days, though it can vary by state and insurance company.

In New Jersey, the Free Look Period is 10 days from the issuance of the policy. This means that if you decide within this timeframe that you no longer want the policy, you can cancel it and receive a full refund. This is a valuable right that gives you the opportunity to carefully consider your new contract and how it aligns with your needs without being pressured or badgered. You can use this time to research your policy, seek advice from professionals, and ensure you understand how your policy works.

The Free Look Period is an important feature of the insurance sales process, and it is standard practice for insurers to offer this provision even in states where it is not legally required. This period is sometimes referred to as a Grace Period, though this term usually relates to the amount of time allowed for late payments. Remember, the Free Look Period is different from the Grace Period allowed for late payments under the New Jersey State Insurance Code, which gives you at least 30 days to bring your account current before the insurer can cancel your policy for non-payment.

Grace Period

Life insurance companies in New Jersey typically offer a grace period of 30 days for missed payments, during which your life insurance coverage will remain active. This means that if you fail to make a payment by the due date, you will have 30 days to make the payment before your policy lapses. During this grace period, your coverage will remain in effect, and your beneficiaries will still be able to receive the insurance payout if the insured person passes away.

It's important to note that the grace period varies by insurer, with some companies offering a longer grace period of up to 60 days. It's always a good idea to review the terms of your specific policy to understand the grace period allowed and any other conditions that may apply.

If a payment is missed and the grace period has passed, the policy may lapse, and the insurance company may refuse to pay out any benefits. However, even in this situation, there may be options for beneficiaries to restore coverage or recover benefits. For example, if the policyholder was entitled to a grace period that was not properly communicated, beneficiaries may be able to challenge the lapse and argue that the insurance company failed to adhere to the policy's terms.

In addition, if the lapse was due to the policyholder's incapacity or lack of understanding, it may be possible to argue for the reversal of the lapse. This could apply if the policyholder was suffering from a medical condition or cognitive impairment that prevented them from managing their financial affairs. Courts in New Jersey have recognized that policyholders with diminished mental capacity may not fully understand the consequences of missing payments.

It's worth noting that life insurance companies are required by law to notify policyholders if their coverage is about to lapse and to provide a grace period during which payments can be made without losing coverage. This notification ensures that policyholders are aware of the consequences of missed payments and gives them an opportunity to take action before their coverage terminates.

Guaranty Fund

The New Jersey Life & Health Insurance Guaranty Association (NJLHIGA) is a guaranty fund that provides protection to resident policyholders in the event of an insurance company insolvency. The association is committed to providing information and assistance to policyholders when they need it the most.

The guaranty fund is a safety net that aims to mitigate the effects of loss on claimants and policyholders who find themselves without coverage through no fault of their own. This safety net includes three separate entities that administer the claims of insolvent insurance carriers: the New Jersey Property-Liability Insurance Guaranty Association, the New Jersey Surplus Lines Insurance Guaranty Fund, and the Workers' Compensation Security Fund.

In addition to these three entities, there is also the Unsatisfied Claim and Judgment Fund (UCJF), which handles claims associated with uninsured motorists and personal injury protection claims of uninsured pedestrians struck by private passenger automobiles.

The New Jersey Life & Health Insurance Guaranty Association covers non-residents under certain conditions:

• The insurers that issued the policies are domiciled in New Jersey.
• Those insurers never held a license or certificate of authority in the states in which those persons reside.
• Those states have associations and coverage provisions with respect to residency similar to the association created by the relevant act.
• Those persons are not eligible for coverage by those associations.

The guaranty fund provides a limit of $500,000 in life insurance death benefits with respect to any one insured individual, with a maximum of $100,000 in net cash surrender and net cash withdrawal values for life insurance.

To obtain a life insurance license in New Jersey, individuals must complete a five-step process, including completing a pre-license course, taking the licensing exam, undergoing a fingerprint-based background check, submitting a license application, and waiting for the application results. This process is administered by the New Jersey Department of Banking & Insurance.

Average Life Insurance Rates

The average cost of life insurance in New Jersey depends on a variety of factors, including age, health, lifestyle, and the policy's term length and coverage amount. For example, the average cost of monthly premiums for life insurance in the state is $45 for women and $55 for men, with rates varying due to factors like age, health, occupation, and lifestyle habits.

The average cost of life insurance for a healthy 35-year-old in New Jersey who is buying a $500,000, 20-year term policy is $27 per month ($307 per year) for women and $32 per month ($373 per year) for men.

The best life insurance companies in New Jersey depend on individual needs, including age, health, and lifestyle. The top companies in the state include Legal & General America, Brighthouse Financial, Lincoln Financial, MassMutual, and Prudential.

Frequently asked questions