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Consumer Tips


Understanding the Importance and Basics of Life Insurance

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Life insurance provides money typically to beneficiaries after a loved-one who has life insurance dies. Coverage is often provided by employers but can also be purchased separately through an insurance agent. The Ohio Department of Insurance urges consumers to regularly review their need to secure life insurance as part of their financial and estate planning.


Life Insurance Can Help:

  • Replace your income with non-taxable death benefit 
     
  • Reduce the financial burden on your family of having to continue without you
     
  • Put the kids through school 
     
  • Pay the mortgage, car note, and other debts you leave behind
     
  • Pay your funeral expenses 
     
  • Pay your estate taxes

Types of Life Insurance:

  • Term Life: Generally less expensive than other life insurance products and is designated for a certain time period or to a certain age. Term is named for the contract's limited length or "term" and is pure life insurance. Term policies generally last for 1, 5, 10, 15, or 20 years, or to some specified age such as age 65 or age 100. 
     
  • Whole Life: Lifetime coverage at a premium that does not increase with your age after you buy. 
     
  • Universal Life: Premium amount and death benefit are both flexible. Able to change the amount of your premium payments and/or death benefit after you buy the policy. Increasing your premium payments as you age is important to maintaining your universal life policy.

Who Can Take Out a Policy on My Life?

  • Only someone who has an "insurable interest”, such as someone in your immediate family. A stranger cannot buy a policy to insure your life.

How Much Life Insurance Should Someone Get?

  • Your life insurance plan should be structured to meet your life circumstances. 
     
  • How much life insurance a person should get depends on their life situation. Some people have life insurance through their employer, which sometimes use 1x salary or 2x salary as a coverage limit and may allow the employee to purchase additional term insurance.

Life Insurance Shopping Tips:

  • Your life insurance plan should be structured to meet your life circumstances (for example, a single person may need less life insurance than a couple or a couple with children). 
     
  • Life insurance is complicated. Utilize the services of trained insurance professionals. Check with the Ohio Department of Insurance to ensure your agent and company are licensed to do business in the state. 
     
  • An agent is not allowed to be the beneficiary of a life insurance policy the agent has sold you – unless the agent is a family member or a funeral director. Nor is the agent allowed to misrepresent any aspect of the policy being sold or a policy you already own or encourage you to put incorrect information on your application. 
     
  • Decide what type of life insurance policy you want: term, whole life, universal life or a combination of these policies. Make sure you calculate your total premiums for the life of the policy. It is possible to pay more in premiums than the face amount of the policy. 
     
  • Some policies have an accelerated benefits feature, which is a policy provision that lets the policyholder, under certain conditions, collect part of the death benefit before he/she dies. 
     
  • Be alert to any promise that you will never have to pay premiums again (the vanishing premium pitch). Also, make sure you are aware of any surrender penalties. 
     
  • Don’t sign any life insurance application that has not been completely and accurately filled in and dated, and make a copy for your files. 
     
  • Immediately study the policy once you receive it and make sure it’s exactly what you ordered: many life companies will offer a “free-look” (or “right to review”) provision. Take advantage of it. 
     
  • The policy owner is the only person who can cancel the policy. If premium payments are not being made the insurer will generally send a payment notice before cancellation.
     
  • Make your premium payment check to the insurance company, not the agent.
     
  • A failure to pay your premium will cause your policy to lapse or it could be terminated. 
     
  • Review your policy periodically. Your insurance needs change during different periods of your life.

Contact Information:
Ohioans with questions about life insurance can call the Department's toll-free consumer hotline at 1-800-686-1526. A life insurance informational toolkit is also available on the Department’s website at www.insurance.ohio.gov. The toolkit provides tip sheets, publications and links to other helpful web sites.

 


The State of Ohio is an Equal Opportunity Employer

Ohio Department of Insurance
50 W. Town Street, Third Floor - Suite 300
Columbus, Ohio  43215
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John Kasich, Governor | Mary Taylor, Lt. Governor / Director
General Info: 614-644-2658 | Consumer Hotline: 800-686-1526
Fraud Hotline: 800-686-1527 | OSHIIP Hotline: 800-686-1578