Ensure Your Health Care Coverage

November 15, 2020

Changing your calendar to the month of November signals the need to review your health insurance coverage for the coming year. If you don’t have health insurance coverage through an employer, you’ll need to buy it yourself if you want coverage in 2021.

The Affordable Care Act (ACA) (also known as Obamacare), enacted in March 2010, called for the creation of a health insurance exchange in each state, with three primary goals:

• Make affordable health insurance available to more people. The law provides consumers with subsidies (“premium tax credits”) that lower costs for households with incomes between 100 percent and 400 percent of the federal poverty level.
• Expand the Medicaid program to cover all adults with income below 138 percent of the federal poverty level.
• Support innovative medical care delivery methods designed to lower the costs of health care in general.

In the article, “Insurance Coverage after Job Loss—The Importance of the ACA during the Covid-Associated Recession,” published on October 22 in The New England Journal of Medicine, the authors state, “The ACA, having created several new options for health insurance unrelated to employment, will protect many recently unemployed people and their families from losing coverage.” The article also emphasizes, “The very virus that has brought about record unemployment levels is the same agent that makes health insurance—and the new options created under the ACA—more important than ever.

Open Enrollment for 2021

In every state, open enrollment for ACA-compliant 2021 health coverage for individuals and families started on November 1 and, in most states, will end on December 15, 2020. This deadline applies to the 36 states that use HealthCare.gov and it also may apply in some of the states that run their own exchanges.

You can enroll for a health insurance plan online, over the phone, or in-person. When you enroll in a plan through the exchange, you need to have the following information on hand for each enrollee:

• Name, address, email address, Social Security number, birthdate, and citizenship status.
• Household size and income if you’re planning to apply for premium subsidies or cost-sharing reductions. A wide range of documentation can be used to prove your income, including pay stubs, W2s, or your most recent tax return.
• Coverage details and premium for any employer-sponsored plan that’s available to your household (regardless of whether you’re enrolled in that plan or have declined it).
• Payment information that the insurer will be able to use to charge your premiums.
• Your doctors’ names and zip codes, so that you can check to make sure they’re in-network with the health plans you’re considering.
• A list of medications taken by anyone who will be covered under the policy. Each insurance plan has its own formulary so you’ll want to check to see which one will best cover the medications you need.
• If you want to enroll in a catastrophic plan and you’re 30 years old or older, you’ll need a hardship exemption (note that premium subsidies cannot be used with catastrophic plans, so these are generally only a good idea if you don’t qualify for a premium subsidy, but can meet the requirements for a hardship exemption).

Coverage Effective January 1

In almost all cases, your coverage will take effect on January 1, 2021 if you sign up during the open enrollment window in the fall of 2020. If you’re already enrolled in an individual-market plan and you’re picking a different plan during open enrollment, your current plan will end on December 31 and your new plan will take effect seamlessly on January 1 if you continue to pay your premiums.

December Deadline Limitations

If you don’t enroll in an ACA-compliant health insurance plan by the end of open enrollment on December 15 in most states, your buying options may be limited for the coming year. Open enrollment won’t come around again until November 2021, with coverage effective January 1, 2022. Exceptions include:

• Medicaid and CHIP enrollment are available year-round for those who qualify. If your income drops to a Medicaid-eligible level later in the year, you’ll be able to enroll at that point. Similarly, if you’re on Medicaid and your income increases to a level that makes you ineligible for Medicaid, you’ll have an opportunity to switch to a private plan at that point, with the loss of your Medicaid plan serving as the qualifying event that triggers a special enrollment period.
• Native Americans can enroll year-round in in plans through special provisions in the ACA that apply to Native Americans.
• If you have a qualifying event during the year, you’ll have access to a special enrollment period. Qualifying events include marriage (if at least one spouse already had coverage prior to the marriage), the birth or adoption of a child, loss of other minimum essential coverage, or a permanent move to a new geographical area where the available health plans are different from what was available in your prior location (if you already had coverage prior to your move).     

You can access a guide to all of the qualifying events that trigger special enrollment periods in the individual market including details about the specific rules that apply to each of them.

No Federal Penalty but Some States Levy Tax Penalties

There is no federal government penalty for being uninsured in 2021 but four states (Massachusetts, New Jersey, California, and Rhode Island) and Washington, DC, impose tax penalties for not having health insurance.

For More Information About ACA-Healthcare Coverage

Follow these steps:

• Get a quotation at healthinsurance.org. 
• ‘Window shop’ anonymously on your state exchange (if you’re in Washington, DC, or one of the 14 states that run their own exchanges) or HealthCare.gov’s plan browsing page if you’re in one of the other 36 states.
• Consult with a trained advisor by setting up an appointment with a navigator or broker in your area who will be able to help you sort through the available options and figure out which one will best meet your needs.
• Talk with your health care providers if you’re considering a policy change during open enrollment. You’ll want to know which provider networks include your doctors, and whether any network changes are planned for the coming year.

Auto-Renewal for Existing ACA-Compliant Health Plan

If you’re already enrolled in an ACA-compliant health plan through your state’s marketplace, you can probably let your plan automatically renew for 2021. Auto-renewal is an option for nearly all exchange enrollees, although Pennsylvania and New Jersey have transitioned away from HealthCare.gov and are using their own new enrollment platforms instead. Residents in those states need to pay close attention to notifications they receive from the marketplace with instructions on how to renew coverage or select a new plan for 2021.

But, relying on auto-renewal for ACA-compliant insurance coverage may not be in your best interest. No matter how much you like your current plan, it pays to shop around during open enrollment and see if a plan change is worth your while because:

• In most states, you won’t be able to pick a new plan after your coverage is auto-renewed. 
• Your subsidy amount will generally change from one year to the next. If your subsidy gets smaller, auto-renewal could result in higher premiums next year. 
• If you receive a subsidy, auto-renewal could be risky even if the subsidy amount isn’t declining. This FAQ explains details that you may encounter if you let your individual health insurance plan automatically renew.
• If your plan is being discontinued, auto-renewal will result in the exchange or your insurer picking a new plan for you. 
• Auto-renewal might result in a missed opportunity for a better value. 

You might still decide that renewing your current plan is the best option for 2021. But, it’s definitely better to actively make that decision rather than letting your plan auto-renew without considering other available options.

After you have squared away your health care coverage for 2021, you can record all the decisions you make, enrollment forms you submit, and confirmations you receive at InsureYouKnow.org. By doing that, you’ll be able to review your health insurance coverage commitments in November 2021 in preparation for 2022.

Hold onto Your Hat (and Your Home)! It’s Hurricane Season!

August 14, 2020

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The word hurricane comes from the Taino Native American word, hurucane, meaning evil spirit of the wind. An Atlantic hurricane or tropical storm is a tropical cyclone that forms in the Atlantic Ocean. In the Pacific Ocean, hurricanes are generally known as typhoons and in the Indian Ocean they are called tropical cyclones.

The National Oceanic and Atmospheric Administration (NOAA) warns that as many as 25 named storms—twice the average number—will occur in 2020 to present an extremely active season that began on June 1 and ends November 30 with more frequent, longer, and stronger storms in the Northern Atlantic Ocean.

Storms get names once they have sustained wind speeds of at least 74 miles per hour. NOAA anticipates that 2020 could deliver a total of 19 to 25 named storms. That would put this year in league with 2005, which experienced more than two dozen named storms including Hurricanes Katrina and Wilma. Each year, only 21 storm names are designated because the letters Q, U, X, Y, and Z are not used. The first hurricane of the year is given a name beginning with the letter “A.” The list of names selected for 2020 storms starts with “Arthur” and ends with “Wilfred.”

If all the allotted names are used, the National Hurricane Center will use the Greek alphabet for additional names. This has only happened one time on record—in 2005 when the Atlantic Ocean experienced 28 named storms.

“We are now entering the peak months of the Atlantic hurricane season, August through October,” National Weather Service Director Louis Uccellini said in a recent news teleconference. “Given the activity we have seen so far this season, coupled with the ongoing challenges that communities face in light of COVID-19, now is the time to organize your family plan and make necessary preparations.”

FEMA’s (Federal Emergency Management Agency) Ready website provides checklists to help you put a plan together, consider specific needs in your household, download and fill out a family emergency plan, and to practice your plan with your family/household.

In planning for hurricanes and in dealing with outcomes of storm damage, you’ll also need to review your insurance coverage to make sure it matches your needs. Hurricanes provide little advance notice of their arrival, and as landfall approaches, insurance companies may temporarily suspend new coverage and coverage changes.

An insurance representative can review your policy, explain limits and deductibles, and help you identify coverage gaps. “You should ask your representative for tips on hurricane risk mitigation that may lower your insurance premiums and better protect your property,” says Tom Woods, assistant vice president of property underwriting for USAA.

Insurance Information Institute (III) website shares precautionary measures you can take to protect your home as well as your business from destructive storms. Don’t wait until a hurricane watch is issued, because it may already be too late to take certain recommended precautions, including reviewing your insurance policies.

III also offers a hurricane season insurance checklist that can help you understand your coverage and whether it’s adequate to repair or rebuild your home and to replace your belongings. Keep in mind that your homeowners insurance covers the cost of temporary repairs for hurricane damage, as well as reasonable additional living expenses over and above your normal living expenses if you have to relocate.

However, your homeowners policy doesn’t cover flood damage, so you may want to consider looking into flood insurance. If you live by the coast, you may also need a separate policy for protection against wind and wind-blown water damage. Check for wind-damage exclusions, and if wind damage isn’t covered by your standard policy, buy one from your state’s insurance program. In hurricane-prone states, for instance Louisiana, Texas, and Florida, some standard home insurance policies won’t pay for windstorm damage. So, if you want coverage, you need to buy an extra windstorm insurance policy in addition to your normal home insurance policy. In this case all wind damage would fall under this policy instead of your traditional homeowners policy.

After reviewing and revising insurance coverage with your insurance professional for your home, car, and business, store your updated insurance policies at InsureYourKnow.org where they will be readily available if a hurricane comes calling and wreaks havoc on printed versions of policies kept in your home or office.

During hurricane season, visit FEMA’s Ready website for more information and stay tuned to the National Hurricane Center for updates on tropical storm and hurricane activity in the Atlantic Ocean.

Does Life Insurance cover the coronavirus?

May 18, 2020

The checkbox on new hire paperwork about life insurance, may start to seem a little more important during the days of COVID-19. For many it was an obvious choice when the employer was giving something for “free.” Professionals have a safety net policy to help their family members for a short time. For consultants, self-employed and business owners, life insurance was a security blanket. A new stress has emerged as the media has suggested that the coronavirus cause of death would not be covered – this is not a true statement. 

The most common causes of death – heart disease, cancer, and accidents, are still present and affecting all age groups. 74% of deaths in America stemmed from 10 causes, and the coronavirus may make it on the top-10 list. The CDC reports that about 647,000 Americans die from heart disease each year, while nearly 600,000 people die annually from cancer. Currently the increasing numbers of people affected by the virus are resulting in changes in all kinds of data. Insurance companies will be a valuable additional source of data as they collect this information. The Yale School of Public Health recorded an estimated 15,400 excess deaths in the United States from March through early April, twice as many as were publicly attributed to COVID-19. Life insurance companies are receiving higher numbers of applications as end-of-life conversations and preparedness are emerging as necessary, not taboo topics.

Reviewing your Life Insurance coverages

This is a good time to review the safety net or security blanket policies that you may have. You will come across many different types of life insurance policies when you start shopping––and not all of them are available from every company.  

When you narrow down a policy, reviewing the type of insurance you have against your current lifestyle and needs may be advantageous. New applications are being accepted, and many companies have extended the time needed to complete the medical exam to 120 days, or 4 months. News9, an Oklahoma based news outlet, reported that individuals shopping for new policies may notice that e-signatures are now acceptable.

According to Glen Mulready, Oklahoma Insurance Commissioner, older individuals may have more trouble finding coverage.Insurance companies view older applicants as high risk and with the current economy, some have decided to limit exposures. Fortunately, there are a variety of life insurance companies, so there is a policy type for all. Finding an agent that is affiliated with multiple providers may be advantageous and save time when reviewing rates.

Accessing your Life Insurance

Upon your death, your next of kin will need to make a claim to access the life insurance policy or policies that have been created for you. These people may or may not be your beneficiary. There are three steps that need to take place before any money is released.

• Locating the policy. This involves finding the name of the company or companies that you purchased life insurance from. The NAIC, has an online life insurance policy locator service – https://eapps.naic.org/life-policy-locator/#/acknowledgment
• Connecting with the agent. The agent from the company will assist with the timeline process, provide the policy number, and necessary forms to be completed.
• Completing the Paperwork. Fill out the forms, order the death certificate and mail the forms to the company without delay. Often there is a choice to pick a lump sum or installment payouts.  

Typically, the insurance money is released within a few weeks––but there are exceptions. According to Marketwatch, an insurer might deny a claim for a coronavirus death if the policyholder submitted an inaccurate or incomplete application. With this in mind, it may be worth spending a few minutes reviewing your paperwork for gaps.

As you work through the process of applying for your life insurance, reviewing your coverages or submitting a claim for a loved one, document all your findings and notes on InsureYouKnow.org – an online information storage site that allows you to access documents, and files remotely relating to your affairs. There are various levels of access to allow your family members, caregivers or business associates insight into the documents, as needed. There is even a reminder feature to help you update or revisit the policy from time to time.

The weird and wonderful world of Insurance Policies

October 15, 2019

Auto insurance, disability insurance, health insurance, home insurance, life insurance, pet insurance, travel insurance…. The list is endless. The insurance industry was valued at a booming $1.2trillion in 2017, and can feel like an alphabet soup of options.

In previous blogs we’ve touched on the 4 types of insurance you must have, life insurance and pet insurance, and we hope you have followed some of these ideas and advice. This post is a little lighter and talks about some of the weird and wonderful, lesser known types of insurance out in the marketplace.

It is clear that despite the trillion dollar industry, there are entrepreneurs and companies out there looking to assume risk for some of the more absurd and unlikely events. Here are a few categories of insurance that made me take a second look – and then file in my mind as a useful piece of trivia to bring out during the holiday season.

 

A is for – Against Death by Laughter

There are lists of people that have died due to laughing. Intense laughter can increase the body’s blood pressure and ability to bring oxygen into the lungs. For some people – asthma attacks or heart attacks could occur as a result. The insurance policy against death by laughter has been utilized by a comedy troupe “in the event that an audience member died from laughter,” movie producers, and was popular in the early 1900s with movie goers who were concerned they may have adverse reactions to the film they are enjoying.

B is for – Body Part Insurance

Yes – there are people who will insure specific parts of their body, and there are companies that will evaluate the loss and put a financial number on it. The consumer for this type of insurance is usually famous athletes or entertainers who rely on certain body parts for their livelihood. Additionally, companies may insure individuals that they have signed deals with to ensure that they will get their money’s-worth. Examples of parts that have been insured under this policy type include voices, taste buds, teeth, mustaches, hair, and fingers.

C is for Change of Heart Insurance.

As its name suggests, this insurance exists for individuals that may be investing a large sum of time and money in a Wedding event, and are nervous about a change of heart. According to businessinsider.com – the average cost to get married in the USA is $38,700. Created to support the parents or families that are forking the bill for the event, it provides a refund if the couple decide that the engagement isn’t going to work out and wish to cancel the wedding ceremonies and festivities. The coverage has a couple of caveats that would make it viable for a small market. One – it cannot be purchased by the couple, only by those supporting the wedding, and Two – the change of heart must lead to a cancellation of the events at least 365 days before the scheduled date.

 

Whatever policy you choose, or decline from having – Insureyouknow has a tool to uncomplicate life. It can be utilized to digitally store all your documents and information in case you need to access it remotely – or from the comforts of your own home. Whether it’s a new policy you have purchased, or renewed, or a policy you have declined or cancelled– be sure to upload the policy and any related documents to insureyouknow. An insureyouknow subscription will allow you recall these documents, in the rare case that you or a family member may need it.

Note: This post was inspired by Wisebread’s article listing their top 10 insurance types, so feel free to read more about some of the policy types mentioned in this blog, and others.

Is Pet Insurance Worth It?

May 23, 2019

Anyone with pets knows that taking care of them isn’t cheap. According to the American Pet Products Association, Americans spent more than $72 billion on their pets in 2018. From food to boarding, there are a lot of expenses associated with owning a pet.

One of the biggest expenses is veterinary care. A trip to the veterinarian isn’t cheap, nor should it be. Veterinarians have spent years in school learning how to care for and treat animals. They’re doctors for animals, and when Rover swallows something he shouldn’t or Tigger suddenly stops eating, their expertise is worth every penny.

But when money is tight, an unexpected trip to the vet can break your budget for the month. And that’s if you can afford to pay for care at all; some pet owners feel they have to put their beloved family member down because they can’t afford expensive medical treatments.

There is a potential solution: pet insurance. Just like your health insurance helps cover the cost of your medical care, pet insurance can defray some of the expenses associated with veterinary care. And just like you need to understand how your health insurance policy works in order to avoid an unexpected bill, you need to read the fine print on any pet insurance policy before signing on the dotted line.

If you’re trying to decide if pet insurance is the right decision for you, here are a few questions to ask yourself:

• Does your pet have any preexisting conditions? If so, stop right there. If your vet has diagnosed your pet with an ailment or disease already, pet insurance won’t cover any care for it. That may include illnesses or accidents related to the condition.
• How old is your pet? Generally speaking, the older the pet, the higher the premiums. You’ll get the best rates when your pet is still young. Keep in mind that the rate most likely will rise as your pet ages, and it’s not uncommon for people to drop pet insurance after their pet reaches a certain age.
• Is your pet prone to hereditary conditions? Many large dog breeds are known for hereditary conditions, such as hip dysplasia and torn ACLs. Insurers often won’t cover treatment for these conditions even if your pet wasn’t showing any symptoms when you initially bought coverage.
• Can you afford to save up instead? If you can afford it, it might be smarter to have a separate savings account for pet care. If you never need it, great—you can put that money toward paying down debt or a down payment on a house. Just keep in mind that should the worst occur, medical expenses can add up quickly.

Pet insurance is growing in popularity; according to the North American Pet Health Insurance Association, about 1.4 million pets in the U.S. and Canada were covered by a plan in 2014, up from 680,000 pets in 2008. If you’re considering purchasing pet insurance, be sure to explore all your options, including whether you can get it through your employer. Eleven percent of U.S. employers offer pet insurance benefits, according to the Society for Human Resource Management.

If you decide to purchase pet insurance, be sure to upload the policy and any related documents to InsureYouKnow.org. When you need to access them quickly, you’ll be glad they’re in a safe, secure, easy-to-find location.

Do You Need Long-Term Care Insurance?

December 4, 2018

No one likes to think about growing old. In fact, many people pretend that it’s never going to happen. But instead of fearing the inevitable, it’s better to plan for it.

In addition to starting to save for retirement at an early age, it’s important to think about what you’re going to do if your health starts to decline. According to AARP, by the time you hit 65, chances are 50-50 that you’ll need long-term care (LTC) due to chronic illnesses, disabilities or other conditions, such as Alzheimer’s disease. And it’s not cheap; if you pay for it yourself, you’re looking at an average annual cost of $140,000.

LTC insurance can help. LTC insurance is different from health insurance, which you’ll still need. It helps cover costs that your regular health insurance won’t, such as help with daily activities like bathing, getting dressed and eating. These services may be provided in your home or at a nursing home or assisted living facility.

Unfortunately, LTC insurance is cost-prohibitive for many due to poor planning on the part of insurance companies. When these policies were first introduced, insurers greatly underestimated the amount they would pay out in claims. People were living longer, but they weren’t necessarily staying healthier, so insurers were paying for care longer than they had anticipated. In addition, insurers thought people would prefer to receive care in their homes, but many opted to move into more expensive assisted-living facilities.

As a result, many insurers stopped offering LTC insurance. In 2000, 125 companies were selling standalone LTC policies; by 2014, only 12 companies were. Those that still do sell them have raised their premiums drastically. For example, earlier this year, Mass Mutual announced it was raising premiums on existing policies by 77 percent. Today, premiums average $2,700 a year.

There are options you can consider if you can’t afford LTC insurance. Maybe relatives can help with your care. Maybe you can pull some equity from your home. Maybe you can build up your savings even more and plan on paying for future LTC out of pocket.

But if you have a family history of Alzheimer’s or simply believe LTC insurance would bring you more peace of mind, it may still be your best bet. Here are a few things to keep in mind when you start looking for a policy:

• Begin your search in your 50s or early 60s at the latest. Prices rise sharply as you age. You can pay 10 percent more for a policy when you buy it at age 65 rather than at 64. Keep in mind that you won’t qualify for coverage if you wait until you actually need care because then you will be considered as having a preexisting condition.
• Shop around. Like with any other major purchase, it’s important to do your homework and research your options. If the process sounds daunting, you might want to consider getting assistance from an insurance agent or broker.
• Look into group rates. Premiums may be more affordable if you qualify for a group rate through an employer-sponsored plan or plan offered by a professional organization you belong to. Before you sign up, be sure to read the fine print and find out if you can keep the policy if you leave the organization.
• Consider a joint policy. You may get a better rate by purchasing a single policy that covers you and your spouse or another family member. The discount is typically 30 percent off the price of separate policies. If you’re interested in going this route, you’ll want to find out what the maximum benefit is for everyone under the policy and consider whether that will be enough for both of you.

If you do purchase an LTC insurance policy, be sure to keep all related paperwork safely stored on InsureYouKnow.org along with all your other important documents. It’s the best way to make sure you can find them quickly and easily should the need arise.

Term Life vs Whole life Insurance

May 25, 2017

Safeguarding the future of your dependents does not begin in the future but it all begins now. That is why most if not all individuals in the working class category aim to secure the future of their loved ones through insurance products. Life insurance helps you achieve this and term life insurance is cheaper compared to whole life insurance in its own battle of term life vs whole life.

However, it is important to note though expensive, whole life insurance has other additional benefits. In the case of term life insurance, coverage is between one to thirty years and it is often referred to as the pure life insurance. The reason is because it is meant to serve your dependents in the event you die prematurely. The has no other value, which means that if you die within the term the policy covers, your beneficiaries only receive the death benefit.

It is important to opt for a term life insurance which is in line with when your family will need the funds the most such that in case you are not around, whatever you leave behind, will be able to supplement your income and serve them accordingly. If you live long enough, then such funds at maturity will serve as security for you when you finally retire.

In the case of whole life insurance, there is lifelong coverage as well as cash value, in which case, the latter acts as the investment component of this policy. No taxes are charge on your funds as the cash value grows and you can borrow against the policy, only that you will need to surrender your policy, meaning that you will remain without cover.

In the event you fail to repay this loan with the interest attached, then this will reduce your death benefit. The best thing with whole life insurance is that cash value growth and death benefit are guaranteed and premiums remain unchanged throughout your lifetime. Also, there is the probability of benefiting from the insurer’s surplus in this case, which is paid as dividends but there is no guarantee.

In the battle between term life vs whole life, Term life insurance may be cheaper but in most cases, you family will not get a payout because there is no cash value attached. It works best if;

• You are looking for the most affordable coverage available in the insurance market.
• If you cannot afford permanent life insurance but you want it because there is provision to convert most term life policies to permanent coverage.
• You are looking for a policy that will only cover a specific period such as the time to pay off your mortgage, or the time it will take to raise your children.

On the other hand, whole life is appropriate if;

• You want to equalize inheritance such as leaving one child with property and compensating that with a benefit payout for the other child.
• You wish to provide funds to pay estate taxes to avoid a case where your heirs have to sell part of the property in future to pay for such taxes in future.
• You wish to spend what you have saved after retirement and still cater for your funeral expenses because with whole life, a payout is guaranteed.
• You have a special needs child and you would want to have a fund to take care of that child.

Types of Insurance

September 13, 2016

Planning to buy a life insurance plan? Here’s what you need to know about the different types of life insurance:

Term Life Insurance

Term life insurance is the simplest type of life insurance where you buy life coverage for a specific period of time and pay a monthly premium. It only pays if death occurs during that set period, which usually ranges from one year to 30 years.

Term life insurance is the cheapest form of life insurance starting from as low as few hundred dollars a year for $300,000 worth of coverage. Term life insurance, in most of the cases, doesn’t have any investment component linked to it. You are just paying an annual premium to protect your dependents in case anything happens within the policy term.

There two further sub-categories of term life insurance:

Level term – Fixed premiums and death benefits stay the same throughout the term of the policy

Decreasing term – Death benefits decrease each year incrementally throughout the term of the policy

When opting for Term life insurance, choose a term that fits your current financial situation and figure out the number of years you and your family are more financially vulnerable.

Whole Life Insurance

Also known as permanent life insurance, whole life insurance is more expensive than a term insurance policy but has many additional benefits. A whole life insurance policy provides lifelong death coverage even if you die aged 100 and comes with an investment component known as policy cash value. You can also borrow money against the cash value of your policy plan or even surrender the policy for cash.

There are three main types of whole life insurance; traditional whole life, universal whole, variable whole life.

Traditional whole life – This is the most common type of whole life insurance where the premium stays the same throughout the policy’s term and the death benefit is guaranteed. The policy cash value also grows at a guaranteed rate and best of all, you don’t have to pay taxes on the gains while they are accumulating.

Universal whole life – This is a type of permanent insurance policy that provides the most flexibility. It provides the option of increasing death benefit later on in the policy term by passing a medical examination. The insured also has the option to change the policy premiums if enough money has been accumulated in the cash value account. The only downside with universal life insurance is that the returns are not guaranteed since it is tied to a money-market type investment that pays a market return rate – which can be positive or negative.

Variable Life Insurance – This type of permanent life insurance provides the opportunity of combining death benefits with an investment component that comprises of stocks, bonds and money market mutual funds. The risk factor for variable life insurance policy is higher but the returns can be equally rewarding as well. If the investments tank, the death benefit and cash value may decrease, however, some policies guarantee a minimum death benefit.

Variable life insurance policy also comes with great flexibility for the insured in terms of the ability to change and adjust the annual premiums. So if your financial situation changes during the policy’s term, you have the ability to increase or decrease your premium. The policy cash value account can also be used to pay the premiums, if needed. While there are certain added benefits of variable life insurance, one big downside is that the cash value returns are not guaranteed and the risk of investments lie completely on the policyholder.

Final word

Whichever type of life insurance you eventually opt for, it is essential to be aware of the risks and rewards and choose a plan that fits your current financial status and future life goals.