Accessing Life Insurance: A Simple Guide To Getting Covered

Life insurance is a financial safety net for your loved ones after you pass away. It provides money to help pay for burial costs, living expenses, bills, and education. While it is typically thought of as something that benefits others after your death, there are ways to access your life insurance while alive. This can be used to pay down debt, make mortgage payments, or finance major expenses. The first step to accessing your life insurance is to understand the type of policy you have, as different policies offer different benefits. For instance, permanent life insurance policies like whole, universal, and variable life insurance offer a cash portion that you can access while alive. On the other hand, term life insurance does not have this feature. Additionally, you may be able to borrow from your policy or surrender it to access the cash value. Understanding your policy and its options is key to accessing your life insurance effectively.

Accessing your policy online

Accessing your life insurance policy online is a straightforward process. Here is a step-by-step guide to help you access your policy:

Step 1: Identify your Insurance Provider

The first step is to identify the insurance company that issued your policy. This is important because the process for accessing your policy online may vary depending on the insurance provider. Some providers may have specific portals or platforms for you to access your policy, while others may offer access through a mobile app. Make sure you know the name of your insurance company and the type of policy you have.

Step 2: Visit the Insurance Provider's Website

Once you have identified your insurance provider, visit their official website. Look for a section or tab labelled "Policy Access," "Account Login," or something similar. This will usually take you to a secure login page where you can access your account.

Step 3: Create an Account or Login

If you haven't already, you will need to create an account with your insurance provider. This typically involves providing personal information, such as your name, email address, and creating a password. You may also be asked to create security questions or set up two-factor authentication for added security. If you already have an account, simply log in using your credentials.

Step 4: Navigate to your Policy

After logging in, you should be able to navigate to your policy details. Your insurance provider's website may allow you to view and download policy documents, update your beneficiaries, and make payments. Familiarize yourself with the platform to understand the features and options available to you.

Step 5: Understand Security Measures

When accessing your life insurance policy online, it is important to pay attention to security measures. Ensure that the website is secure and that your connection is encrypted. Look for "https" at the beginning of the web address, indicating a secure connection. Additionally, be cautious of phishing attempts and only enter your login information on trusted websites.

By following these steps, you should be able to easily access your life insurance policy online. Remember to keep your login information secure and update your policy details as needed. If you have any questions or concerns, you can always contact your insurance provider directly for assistance.

Using life insurance while alive

Life insurance is often thought of as something that is claimed by beneficiaries after the policyholder's death. However, there are ways to use your life insurance while you're alive.

Firstly, you need to ensure that your policy allows you early access. Whole life insurance, a form of permanent life insurance, will allow you to access the cash portion of your account while you're alive. Permanent life insurance policies, which don't have expiration dates, are more expensive than term policies, and you will need to build up an adequate cash amount in the account before you can use it.

There are a few ways to access the cash value of your policy while you're alive:

• Surrender your policy: You can withdraw the entire existing cash value of your policy by surrendering it, as long as your policy has a cash element and you've built up enough value in it. This essentially cancels your insurance, and you will no longer be paying premiums.
• Borrow from your policy: You can take out a loan on the existing cash amount of your policy. The amount you ultimately owe, including interest, will be taken from the death benefit before your beneficiaries receive it.
• Withdrawing a portion of the cash value: You can make a withdrawal from the cash value of your policy, which will result in a corresponding reduction in the death benefit. Withdrawals are not considered taxable income unless they exceed the amount you paid into the policy in premiums.
• Selling the policy: You can sell the policy and the rights to its death benefit to a third party, in a process called life settlement. This is usually limited to older individuals with policies that exceed $100,000 in cash value, and the money from the sale is taxable.

You can use your life insurance to fund education, supplement retirement income, or cover emergency expenses. It can be a good way to avoid raiding your retirement savings, and the cash value of a life insurance policy is usually not considered an asset when applying for means-based financial aid.

Finding a missing policy

When a loved one passes away, it can be challenging to locate their life insurance policy. Here are some steps you can take to find a missing policy:

Search the Deceased's Documents and Correspondence

Go through the deceased's paper and digital files, bank safe deposit boxes, and other storage spaces for insurance-related documents. Check their mail and email for premium or dividend notices, as well as annual reports, privacy notices, or other communications from insurance companies. Review their bank statements for checks or automatic drafts to insurance companies.

Contact Relevant Parties

Speak to the deceased's banker, financial adviser, attorney, accountant, or insurance agent. They may have information about existing life insurance policies. Contact the deceased's last place of employment or prior employers to determine if insurance was issued through their employer. Many employers offer group term life insurance as an employee benefit, and this may extend to spouses or dependents.

Review Financial Records

Check the deceased's tax returns for the past few years to identify any interest income or expenses paid to insurance companies. Life insurance companies often pay interest on permanent policies and charge interest on policy loans.

Use Online Tools

Submit a request to the National Association of Insurance Commissioners' (NAIC) Life Insurance Policy Locator Service. This free online tool assists in locating life insurance policies by asking participating companies to search their records. You will need information such as the deceased's social security number, legal name, date of birth, and date of death.

Additionally, you can contact your state's Unclaimed Property Office or use the National Association of Unclaimed Property Administrators' search tool to locate unclaimed benefits turned over to the state. This is especially relevant if a few years have passed since the death, as unclaimed insurance payouts may end up as unclaimed property after a certain period, usually about three years.

Be Aware of Special Challenges

Keep in mind that insurance companies may change their names, merge, or sell policies to other companies, which can complicate the search. If the company has gone bankrupt, contact your state's life and health guaranty association. If the policy was purchased in Canada, reach out to the Canadian Ombudservice for Life and Health Insurance for information.

Comparing types of life insurance

Life insurance comes in different shapes and sizes. Depending on your personal financial situation and long-term goals, you could benefit from a term, whole, universal, or variable policy.

Term life insurance is a good option for those who only need coverage for a certain number of years. It is generally more affordable than permanent life insurance and provides coverage for a set number of years. At the end of the term, you may be able to renew your policy, but usually only on a year-to-year basis and at an adjusted rate.

Whole life insurance, on the other hand, is designed for those who need straightforward, lifelong coverage. It is a type of permanent life insurance that provides coverage for your entire lifetime as long as you keep paying your premiums. Whole life insurance also includes a savings component that your premiums pay into, which builds cash value over time. This cash value can be accessed while you are still alive. However, because of this cash factor, whole life insurance policies are typically more expensive than term plans.

Universal life insurance is another type of permanent life insurance that offers coverage for your entire life as long as you pay the premiums. It is sometimes called adjustable life insurance because it is more flexible than whole life insurance. For example, universal life policies allow you to increase or decrease your death benefit and even adjust or skip your monthly premium within certain limits. As with whole life insurance, universal life insurance has a savings component that grows and allows for borrowing. However, the interest rate for a universal life policy's cash value is not fixed and can change over time based on market conditions.

Variable life insurance is a riskier type of permanent life insurance. It consists of a face value death benefit and a variable cash value. The cash value will rise and fall based on your payments and the performance of your selected investments. The greater range of investment options means variable life insurance could provide a greater benefit to your beneficiaries when you pass away, but it also exposes you to much higher risk, fees, and costs.

In addition to these main types of life insurance, there are also alternative types of life insurance that don't require a medical exam, such as simplified issue life insurance and guaranteed life insurance.

Shopping for life insurance

Calculate how much life insurance you need:

First, determine why you're purchasing life insurance. This could be to financially support dependents, cover funeral expenses, or leave a financial gift to loved ones. Consider your financial obligations now and in the future, and aim to take out a policy that matches them. You can use the DIME formula or online coverage calculators to estimate your coverage amount.

Decide on the type of policy:

There are two main types of life insurance: term and permanent. Term life insurance is generally cheaper and provides coverage for a specific term, usually between 10 and 30 years. Permanent life insurance, on the other hand, is more expensive and offers lifelong coverage with a cash value investment component. Within permanent insurance, the two primary types are whole life insurance and universal life insurance.

Research and compare different insurance providers:

Look for insurance companies that offer a combination of coverage options and a positive customer service experience. Check ratings from independent agencies to assess their financial stability and customer satisfaction. Compare quotes from multiple insurers to find the best value for your money.

Decide how you want to shop for insurance:

You can shop for life insurance through an independent local insurance agent, an independent online broker, or directly from an insurance company. Independent brokers can help you compare quotes from multiple insurers, while insurance companies offer the advantage of being experts on their own policy offerings.

Complete the application process:

Provide basic personal information, such as your age, height, weight, and any risky lifestyle habits. Be prepared to answer questions about your medical history and family health. You may also need to submit additional documents, such as proof of identity, income, and residency. Choose your beneficiaries and carefully review the policy details before signing.

Prepare for a medical exam:

Many life insurance companies require a medical exam before approving coverage. This may include providing blood and urine samples and allowing the examiner to take your vitals. Not all policies require a medical exam, and some may use your medical history instead.

Wait for approval:

The insurance company's underwriter will review your application, phone interview, and medical exam to determine your eligibility and premium. This process may take several weeks. If approved, carefully review the policy documents and make any necessary adjustments before signing.

Frequently asked questions