What Your Agent Is Not Informing You

Sometimes, the most important part of a conversation is what’s not said. Information can be omitted by accident or on purpose. Asking the right questions can help you uncover this missing information, especially when you’re shopping for life insurance. Here are five things that your life insurance agent probably isn’t telling you.

Agent Works for the Life Insurance Company, Not You - An agent is someone who is authorized to act on behalf of a principal (someone else). An agent is required to represent the interests of their principal. In other words, under contract law, an insurance agent is an agent of the life insurance company. This means that they are not legally your agent. This is an important distinction. The majority of life insurance agents are professionals who will do their best for their clients. However their primary duty is to the insurance company.

They May Be Limited in the Products They Sell - There are two types of life insurance agents: Captive agents represent one life insurance company and Independent life insurance agents represent multiple companies. If you are working with a captive life insurance agent, you will receive proposals for only their company’s products. An independent life insurance agent should provide proposals from more than one life insurance company. It’s okay to work with a captive life insurance agent, as long as you’ve taken the time to determine that this is the right company for you.

The Insurance Agent’s Commission Will Vary by Product - Life insurance agents are compensated by commissions, which are paid as a percentage of the premium for your policy.
An agent’s commission will be different for each type of life insurance policy. Because of that, a life insurance agent might steer you toward a policy that will pay them a higher commission. While you can ask about the commission that a life insurance agent will make, the response may not be helpful. The commission does not always impact which policy is the best choice.

Premiums Are Not Always Guaranteed - The premiums on a life insurance policy may or may not be guaranteed. Without a guarantee, you could end up paying more than anticipated. 

1: Life insurance products with guaranteed premiums are:
- Guaranteed level premium term life insurance
- Whole life insurance
- Guaranteed universal life insurance

2: Life insurance products with non-guaranteed premiums include:
- Universal life insurance
- Indexed life insurance
- Variable life insurance

The premiums for these non-guaranteed policies are based upon projected, non-guaranteed assumptions, such as projected gains in cash value. If the policy does not meet these projections, you may need to pay more in premiums in order to keep the policy in force. Life insurance companies usually do not inform their clients that they will need to increase their premiums to continue their policy as planned. This is why it’s important to order an in-force life insurance illustration every two to three years.

A Life Insurance Policy Is Not An Investment - Many life insurance agents will bury the fact that you are purchasing a life insurance policy. They will focus on the cash value component, and that you can use life insurance to fund your retirement, among other scenarios. Indeed, a cash value life insurance policy can be used in certain situations to help supplement other investment goals. But buying life insurance for these situations only makes sense when there is also an actual need for life insurance, because on all life insurance policies there is a cost to you for the insurance itself.

Getting What You Need - Being an informed consumer will help you find out what your life insurance agent may not be telling you. Your life insurance agent should be willing to answer any questions and to provide that information in writing. You can help yourself by being sure that you understand your life insurance needs, the goal in buying the product, and the product that is being offered. If you don’t understand something, then you should not buy it.

ASABRI Suffers US1.65 Billion Investment Losses

ASABRI, the state-owned insurance company that serves members of the Indonesian military and police, has suffered investment losses estimated at IDR23tn ($1.65bn). The losses are estimated based on an audit by the Supreme Audit Agency (BPK), and are deemed to be the result of investment decisions that were not prudent nor based on sound business judgment and good risk management.

This case has drawn the attention of market players because it is similar to what happened at another state-owned insurer Asuransi Jiwasraya that had to be rescued by the government.

ASABRI's estimated losses are far greater than those of Asuransi Jiwasraya. The state incurred losses of IDR16.81tn from 2008 to 2018 by Asuransi Jiwasraya’s investment mismanagement as audited by the BPK.

Both ASABRI and Asuransi Jiwasraya had invested in shares affiliated to Benny Tjokrosaputro (Bentjok) managing director of Hanson International and Heru Hidayat as chief commissioner of Trada Alam Minera Tbk. Both men are currently in prison and serving life sentences.

A team of investigating prosecutors at the Attorney General's Directorate of Investigation for Special Crimes has named eight people as suspects in the ASABRI case.

Indonesia General Insurance Poise For Unit-linked

The Indonesian general insurance industry is expected to obtain approval shortly to market investment-linked insurance products (PAYDI), when it would pose competition to the life insurance sector which currently is the only segment selling the plans.

The financial regulator OJK has held discussions and hearings involving insurance associations, including the Indonesian General Insurance Association (AAUI), on the subject of technical regulations for PAYDI.

Mr Dody Achmad Sudiyar Dalimunthe, AAUI executive director, says that PAYDI will be a separate product from general insurance business lines. According to him, unit-linked products in general insurance will be added to the benefits of other plans such as property, motor vehicle, health insurance products.

The draft of an OJK circular giving effect to general insurers selling PAYDI plans has been studied by the AAUI and its member companies. According to Mr Dody, the general insurance industry is ready to market the unit-linked products which is expected to give a lift to the non-life market.

Life Insurance - Advantages

Life insurance can be essential for protecting your family financially in case of a tragedy, but many people go without it. In fact, nearly half of American adults do not have life insurance. One reason is that people assume life insurance is too expensive. For example, when asked to estimate the cost of a $250,000 term life policy for a healthy 30-year-old, the majority of survey respondents guessed $500 per year or more. In actuality, the average cost is closer to $160 a year

Life insurance provides a number of useful benefits. Among them:

Life Insurance Payouts Are Tax-Free - If you have a life insurance policy and die while your coverage is in effect, your beneficiaries will receive a lump sum death benefit. Life insurance payouts aren’t considered income for tax purposes, and your beneficiaries don’t have to report the money when they file their tax returns.

Your Dependents Won’t Have to Worry About Living Costs - It is recommended - having life insurance that's equal to seven to 10 times your annual income. If you have a policy (or policies) of that size, the people who depend on your income shouldn't have to worry about their living expenses or other major costs. For example, your insurance policy could cover the cost of your children's college education, and they won’t need to take out student loans.

Life Insurance Can Cover Final Expenses - The national median cost of a funeral that included a viewing and a burial was $7,640 as of 2019.4 Since many Americans do not have enough savings to cover even a $400 emergency expense, having to pay for a funeral can be a substantial financial burden.5 If you have a life insurance policy, your beneficiaries can use the money to pay for your burial expenses without having to dip into their own savings or use credit.

You Can Get Coverage for Chronic and Terminal Illnesses - Many life insurance companies offer endorsements, also known as riders, that you can add to your policy to enhance or adjust your coverage. An accelerate benefits rider allows you to access some or all of your death benefit in certain circumstances. Under some policies, for example, if you are diagnosed with a terminal illness and are expected to live less than 12 months, you can use your death benefit while you’re still living to pay for your care or other expenses.

Policies Can Supplement Your Retirement Savings - if you purchase a whole, endowment, unit-linked, Universal, or variable life insurance policy, it can accumulate cash value. in addition to providing death benefits. As the cash value builds up over time, you can use it to pay expenses, such as buying a car or making a down payment on a home. You can also tap into it if you need to during your retirement years.

Life Insurance 101 - Simplified

At its simplest, your life insurance premium is the amount you pay to your insurance provider for your life insurance policy. It’s the same as your car insurance premium or your homeowners insurance premium. Your life insurance premium is the cost of your coverage.

Together with your life insurance provider you’ll come up with a plan for when your life insurance premiums are due. You might owe them money every month or each quarter, or you might need to pay your life insurance premium in full once a year.

You need to know your premium because if you can’t pay it, your policy will lapse. That means that if you pass away, your beneficiaries won’t get any of the death benefit. And even if you do realize you missed a premium payment and move to pay it right away, it might be too late – even just one missed payment is grounds for your provider to cancel your coverage.
How are life insurance premiums used?

Now that you know what a life insurance premium is, you might be wondering where that money goes once you hand it over to your insurer. Generally, insurance providers can do three things with your life insurance premium:

Use it to cover their liabilities - Insurance providers have to be ready to pay out on claims. For a life insurance company, that means that if one of their insureds passes away, they need to pay out the death benefit — plus any other policy perks — to the policyholder’s beneficiaries. They keep some of their life insurance premiums payment money on hand to make good on the agreements they have with their insureds.

Use it for business expenses - Like any other company, an insurance organization costs money to run. Your insurance provider can use your life insurance premium to pay for salaries, office space and more.

Invest it - Some insurance providers invest a portion of the money they receive. Good returns on those investments allow them to keep the cost of their insurance products as low as possible. But don’t worry – insurers are subject to liquidity ratio requirements that ensure they have sufficient liquid assets on hand to cover claims as they need to be paid out.
How are life insurance premiums determined?

Premiums on life insurance policies vary from person to person. Why? Before they issue you a life insurance policy, insurance providers evaluate you to determine how risky you are to insure. In life insurance, a higher risk level means you’re more likely to pass away soon and that means that your insurer is more likely to have to pay out your death benefit. So younger, healthier people generally see lower premiums on life insurance policies.

Here are some of the main factors an insurance company considers when determining your life insurance premium. 

Type of coverage - You can choose between two main types of life insurance - term and permanent policies. Term policies cost less, but they expire after a certain period (the term). Permanent policies stay in force for the duration of your lifetime, but you get a higher life insurance premium for that longevity.

Age - The earlier you buy life insurance, the less you’ll pay for it. To get a feel for how much lower your life insurance premium could be if you buy a policy now. The takeaway? A healthy 50-year-old will pay three times as much (or more) for a policy as a healthy 25-year-old.

Sex - Since women tend to live longer, they are less likely to die while the policy is in force which means the insurer is less likely to have to pay out the benefit. As such, women usually get cheaper premiums on life insurance.
Health

Health - Most life insurance policies require a medical exam. This is your insurance provider’s way of making sure a preexisting condition won’t drastically shorten your life. The healthier you are, the less you’ll pay for your life insurance premium. And you can control your health, at least to an extent. So if you want lower premiums on life insurance, maintain a healthy diet, exercise regularly and definitely quit or avoid smoking.

Lifestyle - The way you live impacts your risk level in the eyes of insurers. Motorcycle ownership or a penchant for skydiving – or other risky and dangerous behaviors – will land you a higher life insurance premium.

Riders - Just like other insurance policies, you can add supplementary contract (also called endorsements) - to your life insurance policy to expand your policy benefits. You can add a rider to cover the cost of your long-term care later in life, for example. Riders give you add perks with your policy, but they also make your coverage cost more.

PIAM - Covid Not Covered

Medical and health insurance policies issued by general insurance companies do not provide coverage for pandemics such as Covid-19, the General Insurance Association of Malaysia (PIAM) said today.

The reason for this is that pandemics have been assumed as a rare event and thus, the absence of wide coverage under most policies. Pandemics are generally a risk with high exposure. As insurance premiums will commensurate with the risk exposure, insurance premiums will naturally be higher if a pandemic is covered. Higher premium may affect consumers’ affordability and accessibility to essential medical health insurance protection,” PIAM said.

PIAM noted that while the probability and frequency of a pandemic are low, its severity is high. If it occurs, a pandemic will affect a large section of the population thus affecting the risk-pooling concept of an insurance company. If pandemic is required to be covered, more data will be needed to readily and accurately predict its cost and impact. Primarily, pandemics are not priced into medical insurance premium to make them more affordable to consumers.

What Is And What's Not Covered Under Life Insurance

A life insurance policy is a contract between you (the policyholder) and an insurance company. In exchange for paying regular premiums, the insurance company pays a death benefit to your beneficiaries if you die. Life insurance coverage provides a financial safety net, and it could replace your wages or be used to pay off the mortgage or college costs for the kids. 

A: What Does Life Insurance Covers - if you die due to natural causes, an illness, or an accident, your designated beneficiaries will get the life insurance payout. Here's a quick rundown of the types of deaths that are covered under life insurance policies:

1: Natural Causes - Life insurance covers death due to natural causes. If you die of a heart attack, cancer, an infection, kidney failure, stroke, old age, or some other natural cause, your beneficiaries will receive the insurance payout.

2: Accidents - Your life insurance policy will pay out death benefits to your beneficiaries if you die from a motor vehicle accident, drowning, poisoning, accidental drug overdose, or another tragedy.

3: Murder - The death benefit will be paid to your beneficiaries if you are murdered—unless your beneficiary murdered you or is closely tied to your murder.

4: Suicide - Life insurance covers suicide, and your beneficiaries will receive the death benefit unless the death occurs during the "contestability period"—typically the first two years of the policy—provided there's no other exclusion in the policy that forbids it.

5: Pandemic Illness - If you have an existing policy and die of COVID-19, it's categorized as a natural cause, and the insurance company will pay out the benefit to your beneficiaries. However, suppose you buy a new policy during an ongoing pandemic and lie on your application about your health or exposure to the illness. In that case, the insurer can refuse to pay out.

B: Which Types of Deaths Are Not Covered by Life Insurance - If you don't die due to one of the reasons mentioned above, your insurer may not pay the death benefit to your beneficiaries. Here are the situations when your beneficiaries may be unable to collect benefits:

1: Risky Activities - Depending on the situation and your policy, you may not be covered if you die while participating in a risky activity. Risky activities are recreational pursuits that have an increased potential for injury or death, such as:

Scuba diving
BASE jumping
Hang gliding
Auto racing
Aviation
Rock and mountain climbing

The risky activities category also includes some jobs, such as working as a logger, pilot, offshore oil rig worker, offshore fisherman, and underground miner.

If you participate in risky activities, whether for fun or work, you can still buy a life insurance policy—but you might end up paying higher premiums. And, depending on how risky the activity is, your insurer may add an exclusion to the policy that prohibits payments if you die while engaged in that activity.

If you engage in any risky activities, tell your insurer during the application process. Otherwise, your insurer can cancel your policy or refuse to pay out the death benefit.

2: Murder - Under the "Slayer Rule," if your beneficiary murders you—or is somehow tied to your murder—they will not receive the death benefit.2 Instead, your insurer will pay out the death benefit to your contingent beneficiaries or to your estate.

3: Suicide - In general, life insurance covers suicide. However, most policies have a "suicide clause"—or contestability period—during the policy's first two years. Life insurance policies won't cover a suicide that occurs during this period. Things can get tricky if a policyholder dies of a drug overdose during this time. However, in this case, the insurer would need to prove the overdose was intentional to withhold the death benefit.

4: Other Reasons Life Insurance Won't Pay Out - If you lie on the application. Life insurance companies can withhold death benefits if you lie on your application (that's insurance fraud, by the way). For example, the insurer can cancel your policy, and your beneficiaries would lose out on benefits, if you lie about your:

Family health history
Medical conditions
Alcohol and drug use
Risky activities
Travel plans

5: Not naming a beneficiary (or they predecease you) - The death benefit payout gets complicated if you don't have designated beneficiaries—or if you do and they predecease you. In these situations, the death benefit goes to your estate and not necessarily to your loved ones. It's essential to designate primary and contingent beneficiaries to receive the insurance death benefit in the event of your untimely death. Otherwise, the benefits are subject to probate, and they ultimately may not end up where you intended.

The Bottom Line - Life insurance can provide peace of mind and a valuable financial safety net for your loved ones. In general, policies cover deaths due to natural causes, illness, and accidents. Still, insurers can withhold benefits in certain situations. Be sure to read your policy's fine print to understand what's covered—and what is not.