Secure Financial Solutions

Illinois Life Insurance

Why do I need Illinois life insurance?

Life insurance protects the future for your family, business, or anyone you provide financial support for by providing cash to pay present and future expenses when you die. It can help cover daily living expenses, pay off the mortgage and other outstanding loans, fund tuition, and ensure that your loved ones are not saddled with debt.

Your family will not be forced to sell your home and will be able to continue the standard of living that was provided when you were living. Your beneficiaries will not have to pay federal income taxes on the money they receive from a life insurance policy.

What is the best Illinois life insurance policy to have?

The best life insurance policy to have is the one you can afford and is in force when you die! Avoid any agent that tells you his one type of life insurance policy is the best for all situations! There is no such thing!

How much Illinois life insurance do I need?

People have different needs when it comes to life insurance. We can help you determine how much life insurance you and your family need based on your financial responsibilities, income and what fits in your budget.

For many people, a life insurance policy should have a death benefit of 10 times your annual income. Your need could be higher or lower depending on your situation. Please consider other expenses such as day care, tuition, mortgage, medical bills, funerals, family relocation, and retirement costs when calculating your life insurance needs.

Types of Illinois Life Insurance

TERM LIFE INSURANCE

Provides a death benefit for a fixed number of years. This type of insurance can be used for temporary financial needs that extend over a certain period of time, such as mortgages, tuition, and other loans. For example, a 10 year term policy only pays the death benefit if you die within the 10 year period.

Terms are as short as 1 year and as long as 30 years. A few companies even have a 40 year term. Some term policies are available with “return of premium” or “ROP” riders, which can refund all or most of the premiums paid into the policy at the end of the term!

Advantages

Term life offers the most death benefit for the money! Return of premium option can provide a tax free refund of all premiums paid if policy is kept the entire term period. Most policies have a guaranteed conversion option to permanent insurance, regardless of your health status.

Disadvantages

Premiums are only guaranteed for a specific period. Many policies say they are “guaranteed renewable to age 95”. This may be true, but the renewal rates after your initial term period can be 10 to 200 times higher than your original term! You may not qualify for a new term policy at older ages with another company due your health status. While the cost is lower than other types of insurance, term policies DO NOT provide permanent coverage for the rest of your life, and also DO NOT build cash value.

WHOLE LIFE INSURANCE

Provides a fixed amount of coverage for the rest of your life, which never expires as long as premiums are paid. Premiums never increase and your coverage never decreases. A portion of your premiums are invested by the insurance company.These policies are "permanent insurance" and build guaranteed cash values at a fixed rate.

Advantages

Guaranteed cash values with lifetime coverage! You have the option to create a “paid up” policy at an earlier age if desired. Additional death benefit is possible with dividends depending on the insurer’s performance.

Disadvantages

Whole life is the most expensive type of policy for the money when death benefits are compared with term or universal life! Most whole life policies must be kept for many years to build reasonable cash values.

UNIVERSAL LIFE

These policies are another type of "permanent insurance" similar to whole life, in which your death benefit may be guaranteed beyond what term policies can offer, and some cash values may accrue. Variable universal life policies offer the potential for increased cash values that are linked to stocks, bonds and mutual funds, but contain many risks and should not be recommended to most individuals.

Advantages

The guaranteed death benefits of whole life, but at lower premiums than whole life. These policies are the lowest cost form of lifetime protection available. “No lapse” options are available to guarantee coverage and premiums for your entire life, even if the policy contains no cash value. Your premiums and death benefit guarantees can be adjusted if needed. You have the option to create a “paid up” policy at an earlier age if desired.

Disadvantages

Most “No lapse” universal life policies build very little or no cash values. Cash values can fluctuate in some policies, such as variable universal life to the point where increased premiums are needed or the coverage may lapse before your death. Important information on permanent insurance!

Please keep in mind, with all permanent life insurance policies (whole and universal life), the cash value is different from the death benefit. Cash value is the amount available if you surrender (cancel) your policy before death. Surrender charges can last as much as 20 years in some policies. The death benefit is the money that will be paid to your beneficiary if you die.

The beneficiary does not receive the cash value in addition to the death benefit of your policy. After cash value has grown inside the policy (this can take several years).

Consider the following

You can borrow from the insurer using your cash value as collateral. Loans are available with no credit required. If you don’t repay the loan (including interest), it will reduce the amount paid to your beneficiaries after your death. Make certain that the loans are structured properly. You may have tax consequences if the policy lapses while you have outstanding loans.

You can use the cash value to pay your premiums or to buy more coverage (sometimes called paid up additions).

You can exchange the policy by using the cash value for an annuity that will provide income for life or a specified period.

You can cancel (surrender) the policy and receive the cash value in a lump sum. You only pay taxes on the value that exceeds what you’ve paid in premiums.

Cash value insurance is designed to be kept for the long term.

Canceling a cash value policy after only a few years can be expensive.


Accidental Death insurance worth the money?

Generally, you can purchase AD&D insurance as a separate policy or as rider (endorsement) on a basic life or health insurance policy. Its name states exactly what it covers; accidental death and dismemberment. However, there are limitations on the coverage. These limitations make accidental death and dismemberment insurance less useful, although it is also usually relatively inexpensive.

The first thing to consider is whether AD&D insurance is a good deal for you. Is it likely you will have to use it? In most cases, life, health, and disability insurance already cover situations AD&D protects against. It can double, or at least add to, the amount of money you receive in case of a covered accident, but it may be wiser and more cost-effective to put the money you'd be paying towards the premium into a standard life or other insurance policy instead.

A leading consumer website warns consumers that "AD&D is a very, very limited form of insurance. When it comes to insurance, you want to be covered and protected in all instances, not just certain ones."

What Does AD&D Cover?

In the event of a fatal accident or an accident that results in you losing your eyesight, speech, hearing, or a limb, AD&D will pay you or your beneficiaries a specified amount. However, there are stipulations to the coverage. To receive benefits related to an accident, your injuries or death must occur within three months of the accident date. Also, you will only collect benefits if your death or injuries are proven, direct results of the accident.

Most policies with “$1,000,000 of coverage” only pay that amount if you die on a “common carrier”. The amount they pay for other accidents is much less. (from $5,000 to $200,000). So in order to collect the large sum, you not only have to die by accident, but it has to be on a commercial bus, train, or airplane!

Dismemberment coverage works on a "per-member" basis. If you lose one member (a hand, foot, limb, sight in one eye, speech or hearing), the insurance company will usually pay 50 percent of the full benefit. If you lose two members, you will receive the whole benefit. Coverage amounts for partial or complete paralysis vary, but are usually 25 or 50 percent.

Optional coverages sometimes include hospital stay coverage after an accident, and spouse and children coverage.

Typical exclusions of AD&D coverage include death during surgery, resulting from a mental or physical illness, bacterial infection, hernia, or a drug overdose. In addition, many policies do not cover risky activities such as skydiving, car racing, and involvement in a war. It is important to read the fine print when applying for this kind of policy. While it may seem like you're getting better and more adequate coverage, in reality, you're not.

Is Accident Protection Worth It? Accidental death and dismemberment insurance can be a good supplement to a life insurance policy. Depending on the amount of coverage needed, AD&D insurance premiums average around $100 per year. Even with the low cost of accidental death and dismemberment insurance, many would prefer to use the money they could be paying for the policy and put it towards more health or life insurance coverage. Also, since most people die from other causes than accidents, buying AD&D doesn't seem to make a lot of sense.

An accidental death policy (minus dismemberment coverage) is a similar policy to consider. If, for example, you had a $100,000 life insurance policy and you added an accidental death rider, and you were killed in a covered accident, your beneficiary would get $100,000 from your life insurance and $100,000 from you accidental death insurance. Will It Really Help?

If you're working in a high-risk job, such as construction, the AD&D policy may be a good idea, although high-risk jobs result in higher premiums. It is inexpensive accident coverage, and it won't hurt to have the extra coverage. However, realize that an accidental death and dismemberment policy is extremely specific and thus unlikely to pay a benefit. If you already have a life insurance policy, purchasing a larger benefit amount might not cost much more, and it will cover more circumstances.

Selecting a life insurance company in Illinois

Life insurance companies are required by law to maintain reserves to guarantee that they can meet obligations to their policyholders.

Financial ratings are available at: A.M. Best Company – www.ambest.com
Fitch Ratings – www.fitchratings.com
Moody’s Investor Services – www.moodys.com
Standard & Poor’s – www.standardandpoors.com

Check with the Illinois insurance department to make sure the company is licensed to offer a particular policy.

What to look for in your life insurance policy

Almost every life insurance policy will contain an illustration. A policy illustration shows financial projections for each year you have the policy such as the premium schedule, cash values, and death benefits.

With a term life policy, the projections extend to the end of the term. With a cash value policy, projections can extend up to your 120th birthday! Your actual costs and benefits could be higher or lower than those in the illustration because they may be based on non-guaranteed amounts and depend on the future financial performance of the policy.

When looking at guaranteed amounts, the insurance company will honor them regardless of policy performance. The policy illustration can be complicated, so please ask us for a review of any life insurance policy you have currently or are considering purchasing.

Many policies offer different riders such as

Guaranteed purchase option
The option to buy more insurance until a certain age without taking a medical exam.

Waiver of premium
Allows you to discontinue paying premiums after a certain period if you become disabled.

Accelerated death benefit
This allows you, under some conditions, to receive the death benefits of your life insurance policy before you die. Such conditions may include terminal or catastrophic illness, confinement to a nursing home, or need of other long term care services.

Accidental death benefit
This pays an additional amount if death occurs as a result of an accident.

Disability rider
Pays you a monthly benefit after a waiting period (usually 90 days from the time you became disabled) for a maximum length of time (usually up to 2 years) if you become disabled. This rider can cost more than the original life insurance death benefit. You may want to compare this cost with a separate disability policy to see if it is worth the extra premium.

Your policy should also have the following information

Health rating (preferred, standard, table rating) and tobacco use class (smoker/nonsmoker)

Premium schedule

Death benefit for each policy year

Options for payment of death benefit (lump sum or annuity)

Other things you need to know when buying Illinois life insurance.

Make sure that you fully understand any policy you’re considering and that you are comfortable with the company, agent, and product. Most states require insurers to provide a buyer’s guide to explain life insurance terms, benefits, and costs.

Always answer questions on your life insurance application truthfully. Most states allow the insurer to cancel or rescind a policy within the contestability period if there is fraud or material information omitted from the application.

Be sure your application has been filled out accurately. Promptly notify your agent or company of errors or missing information.

When you buy a policy, make your check payable to the insurance company, not the agent.

Once your insurance policy is delivered, you may have a free look period (usually 10 days after you receive the policy), when you can cancel the policy without any cost. Please read your policy carefully. If you decide not to keep the policy the insurer will cancel the policy and provide a refund. This information is in your policy.

Keep your life insurance policy with your other financial records or legal papers, where your survivors are likely to look for it. Do not keep your policy in your safe deposit box! In most states, boxes are sealed temporarily on the death of the owner, delaying the payment of benefits. It is not required, but it may be a good idea to notify your named beneficiaries to the fact you have a life insurance policy so they can notify the insurance company upon your death to collect benefits without unnecessary delays.

Contact your original agent or insurance company, before canceling your current policy to buy a new one. If your health has declined, you may no longer be insurable at affordable rates. If you replace one cash value policy with another, the cash value of the new policy may be relatively small for several years.

If you have a complaint about your insurance agent or company, contact the customer service division of your insurance company. If you’re still dissatisfied, contact your state insurance department listed on your policy.

Contact us for a policy review periodically or when a major event occurs in your life, such as a birth, divorce, remarriage, or retirement, to be certain your life insurance coverage is adequate and your beneficiaries are correctly named.