Life Insurance

Just what is life insurance and should you be looking at getting Illinois life insurance for you and your family?  Life insurance, by definition, is a plan under which large groups of individuals may equalize the burden of loss from death by distributing funds to the beneficiaries of those who die. When you choose a life insurance plan for your family and heirs in Illinois, you have created an estate where upon your death, they will inheirit the proceeds of your life insurance policy.

During the twenty-first century, nearly $21.3 trillion dollars of life insurance is in force in the United States. Assets of more than nine hundred United States life insurance companies totaled close to $3.1 trillion dollars, making life insurance one of the largest institutions of savings in the United States. This fact is also true of other prosperous countries where the product of life insurance has become an important way to save (and invest) making significant contributions to the national economy.

There are thrree major types of life policies: term, whole life, and universal life. It is also possible to get a hybrid type of policy that combines some of two or more of these insurance types.

The simplest and most common Illinois life insurance type is term life insurance. The policy is designed to be issued for a set period. The protection under these policies expires at the end of a specified period and no cash value remains upon expiration of the contract.

The second most popular form of life insurance is whole life contracts run for the entirety of the insured’s life with the gradual accumulation of a cash value. The cash value of the contract is less than the face value of the policy and is paid to a policy holder when the contract reaches maturity or is surrendered.

Universal life policies are relatively new. The contract was introduced into the United States in 1979. Universal life insurance policies have become more and more popular in both Illinois and the rest of the country. The contract allows the insured the flexibility to decide the size of the premium and amount of benefits within the policy. The insurer charges (the insured) each month for general expenses and mortality costs, crediting the amount of interest earned to the insured. There are two different ways of setting up these type of contracts: Type A and Type B. In Type A policies, the death benefit is a set amount, and in Type B policies, the death benefit is a set amount plus any cash value that has accumulated within the policy.

There are usually two different ways that you can pay your Illinois life insurance premium: it will remain level throughout the premium paying period; or the insurance may be issued with a policy that provides for a periodic increase in premium relative to the age of the insured.

Almost all ordinary life policies are issued with a premium that is the same throughout the payment history of the policy. This makes it necessary to charge more than the actual cost of the insurance in the earlier years of the policy. The necessity of charging more than true cost is to make up for higher costs down the road. Therefore, the additional charges in the earliest years of the contract are not technically overcharges, but an essential element or part of the total insurance plan. This establishes the fact that mortality rates increase with age. The policyholder does not overpay for protection due to the claim on accumulated cash values during the early years of the policy. The policyholder at his or her discretion may borrow against the cash value of the policy or totally recapture the value by allowing the contract to lapse. The insured does not, however, have a claim on any earnings accrued  by the insurance company through the investment of funds paid by its policyholders.

An insurer is able to provide many different types of policies by combining term life insurance and whole life insurance. Two examples of package contracts are the family income policy and the mortgage protection policy. In each package a primary policy type, generally whole life is combined with term insurance and calculated in such a way that the amount of protection continues to decline during the duration of the policy. Mortgage protection insurance is designed in order that the built-in decreasing term insurance is approximate to the amount of mortgage remaining on a property. In other words, as the mortgage is paid down, the amount of insurance declines accordingly. The declining term insurance expires at the end of the mortgage period, leaving the base policy still in effect.

In similar fashion, the family income policy provides decreasing term insurance within the package in order to provide a specified income to the beneficiary over a period equivalent to the period of time when the dependent children are young.

Some whole life policies allow the policyholder to place a limitation on the period during which the premiums are to be paid. Examples of this include: Twenty year life policies; thirty year life contracts, and life policies paid to age sixty five (65). The insured initially pays a higher premium in order to compensate for the limited premium paid in the future. At the end of the stated paying period, the policy is declared to be “paid up,” however policy remains in effect until death or the policy is surrendered.

You need to decide whether you want a term ro whole life insurance policy.  Term life policies are adequate when the need for protection is for a specified period of time. Whole life policies make the most sense when the need for protection is permanent.

The universal life plan earns interest at a rate approximately equal to rates available on long term bonds and thus can be used as a convenient savings plan. In addition, the insured may adjust the death benefits as needs change. The policy offers the owner cost savings in the way of commission expense providing flexibility for the insured by eliminating any necessity of canceling one policy and purchasing another when the insured’s requirements change.

Within Illinois there are a variety of life insurance options available.  You can begin your search by checking out options available on IllinoisInsuranceBroker.com.  After you’ve gotten some idea of what is available and the costs, you are then able to sit down with an Illinois life insurance insurance agent to complete the policy.

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