NBP Insurance » Life Insurance FAQ

New York State Life Insurance FAQ

Term Life Or Permanent Life Insurance?

The type of life insurance you need is dependent upon your particular needs. Term life insurance is appropriate and more cost effective for temporary needs, which may be a period of one to thirty years. On the other hand, permanent life insurance is better for permanent or long term needs. In some cases, a mix of both term life and permanent life insurance may be suitable.

Whole Life And Universal Life Difference?

Whole life insurance and universal life insurance are both types of permanent life insurance; however, universal life has flexible premiums and an adjustable death benefit. Whole life insurance premiums are fixed level and the death benefit is not adjustable. Another difference between these two types of insurance is the cash value of a universal life insurance policy is interest sensitive. If interest rates go up, so will the cash values. A whole life insurance policy's cash value is not very interest sensitive.

Advantage Of Level Term Life Insurance vs. Yearly Renewable Term Life Insurance

The advantage of level term life insurance is that the premiums remain level over a specified period of time. Yearly renewable term life insurance has a lower initial premium; however, the premium rises each year. Yearly renewable term life insurance is only cost effective for a few years because of the rising premiums. If you need term life insurance protection for more than a few years, then a level term life insurance policy can cost less.

Life Insurance Policies Riders, Options & Features

The following riders/options/features are available with some life insurance policies:

  • Conversion Feature
    Allows the owner of a term life insurance policy to exchange (or convert) the policy to a permanent life insurance plan (whole life or universal life) without evidence of insurability.
  • Spousal Discount
    If both a husband and a wife or two-business partners purchase life insurance at the same time, then a discount will be deducted each year from the total cost of both policies.
  • Children's Insurance Option
    Provides term life insurance coverage on each child of the insured's family.
  • Accelerated Death Benefit
    Accelerates the availability of a portion of the death benefit if the insured is diagnosed as terminally ill by a licensed physician (must be terminal within 12 months).
  • Waiver of Premium Option
    The insurance company will continue to make your life insurance premium payments if you become disabled.
  • Accidental Death Benefit Option
    An additional death benefit will be paid if you die by accidental means.
  • Guaranteed Purchase Option
    Guarantees that you may purchase additional life insurance in the future without proof of insurability.

Life Insurance Application Process

The life insurance application process consists of submitting an application and a medical exam to the life insurance company . It may also be necessary for the life insurance company to contact you for a brief telephone interview.

The medical exam can be scheduled at your home or work and is paid for by the life insurance company. The exam typically consists of medical history questions, blood/urine specimen, blood pressure/pulse readings, and height/weight readings. Sometimes additional requirements are necessary, such as an EKG. It is recommended that you schedule your exam early in the morning because test results are often better at this time.

Once we receive your completed life insurance application, it will be submitted to the insurance company. Underwriting usually takes approximately 4-8 weeks. Assuming your life insurance policy is approved, we will send it to you.

When Does My Life Insurance Coverage Begin?

Your life insurance coverage begins once the policy has been issued and all of the delivery requirements have been returned to the insurance company. Delivery requirements may include a premium payment, statement of health, delivery acknowledgement form or amendment of application.

Temporary coverage during the underwriting process may also be available with some insurance companies. In cases where temporary coverage (also called conditional coverage) is available, coverage begins once the completed application has been returned to the insurance company with a premium payment and you have completed the medical exam. The coverage is contingent upon you qualifying at the rate you applied for and a few other factors. Read the conditional receipt of your life insurance application for additional information.

What If I Received A Higher Rate Than I Applied For?

If you apply for life insurance through ReliaQuote.com and you receive a higher rate on your policy or you are declined, we will automatically shop your life insurance coverage with other life insurance carriers. We will identify other insurance companies that may be more liberal given the reason you received a higher rate or were declined. We will then send each of these insurance companies the information they need to make an estimate of what rate you will most likely qualify for with them. Once we have received the alternative rates, you will be contacted by a ReliaQuote.com Customer Service Representative who will explain your options. You will have the opportunity to stay with the original life insurance carrier you applied with or switch to another carrier that may be offering a better rate.

One of the benefits of this unique service is that you do not have to complete another medical exam or application for us to shop you with other carriers! We simply use your first application and medical exam results.

What Is The Tax Treatment Of Life Insurance Death Benefit Proceeds?

Life insurance death benefit proceeds are generally not subject to income taxation provided they are paid in a lump sum; however, they're a few exceptions to this rule. If a settlement option is used other than the lump sum option, then the interest earned on the principal death benefit is taxable.

Although life insurance proceeds are generally exempt from income taxation, they are subject to estate and inheritance taxes.

Should I Purchase Life Insurance On My Spouse?

In most cases, yes. At the very least, if your spouse contributes to the family's annual income then adequate protection would be needed to supplement his or her income should he or she die. If your spouse does not have an income but is a homemaker, then life insurance protection may be needed to cover daycare and other costs associated with the loss of a parent.