Life insurance 101: what do I need to know?
Life insurance is important to your financial security. As a vital part of your financial plan, it needs to be reviewed regularly. As you experience changes in your life and career, your goals and protection needs may change.
What's the difference between group and individual insurance?
Group life insurance is typically offered as a benefit through your employer or membership in an association. Group life insurance can fill some of your life insurance needs, but probably doesn’t meet them all. Most often it is an inexpensive way to supplement an individual life insurance program.
Group policies typically offer two or three times your annual salary in coverage – some or all of it paid for by the employer or offered as supplemental, employee-paid coverage. Supplemental coverage is relatively inexpensive at younger ages, but rates increase with age.
Factors that distinguish group life insurance from individual insurance policies include:
Guaranteed coverage amounts
Under group life insurance programs a certain amount of coverage is often “guaranteed” – that means you won’t have to answer questions about your health or take a medical exam to qualify for the coverage. For amounts of coverage beyond the guaranteed amount, you may need to answer a few health questions and provide some details about your medical history. If the amount of coverage you’re requesting requires a medical exam, it’s typically a much simpler process than the full physical required for an individual insurance policy.
Group premium rates
Group insurance underwriters use what is known as an experience approach when assessing the risks involved with a group life insurance policy. Rather than basing rates on an individual’s lifestyle habits and health factors, they group people together and set rates based on the risk of the group as a whole.
Administration and billing systems designed for groups
The insurance company issues a life insurance policy to the employer or association – individuals insured under the policy typically receive certificates of insurance, which outline their rights under the policy. The insuring company or a third party administrator typically handles the details of who in the group is covered and for what amount and provides a customer contact center to answer individual insureds’ questions about their coverage.
Portable or convertible coverage
When you leave the group for whatever reason you may be able to continue your coverage, without providing proof of your good health, and pay premiums directly to the insurance company. Premium rates may be higher than those paid by active employees. If you lose eligibility for coverage, you have the option to convert group coverage to an individual policy with the issuing company at the current rates for that type of policy.
Many group plans allow an increase in coverage following a family status change. Often, there will be a certain amount you may increase by answering questions about your health or having a medical exam. Sometimes increases in coverage are automatic, as when you receive an increase in salary. Consult your specific benefits plan for the qualifying family status changes accepted.
Why do I need life insurance?
Life insurance is an essential part of any financial program. Most people buy life insurance to replace income that would be lost at the death of a wage earner. The cash provided by life insurance also can help ensure your dependents are not burdened with significant debt when you die. Life insurance proceeds could mean your dependents won't have to sell assets to pay outstanding bills or taxes. An important feature of life insurance is that generally no income tax is payable on proceeds paid to beneficiaries. If you have questions about tax matters, talk to your tax advisor.
This information should not be considered tax advice. You should consult your tax advisor regarding your own tax situation.
How much life insurance do I need?
Before buying life insurance, you should bring together your personal financial information and review your family's needs. There are a number of factors to consider when determining how much protection you should have. These include:
- Any immediate needs at the time of death, such as final expenses, burial costs and estate taxes;
- Funds for a readjustment period, to finance a move or to provide time for family members to find a job; and
- Ongoing financial needs, such as monthly bills and expenses, day-care costs, college tuition or retirement.
Our insurance needs calculator will help you determine how much insurance you may need to sufficiently provide for the well-being of your family.
How do I choose a beneficiary?
Designating a beneficiary is an important right of life insurance ownership. It lets you determine who receives your policy benefits. Under current tax law, life insurance benefits paid to a beneficiary are generally not taxable income.
- Primary Beneficiary — The person or persons named will receive the benefit.
- Contingent (Secondary) Beneficiary — Policy benefits will be paid to the contingent (secondary) beneficiary, if the primary beneficiary is not living.
- Irrevocable Beneficiary — Once you designate an irrevocable beneficiary, you may not change it without the beneficiary's written permission.
- Default beneficiary — If you do not name a beneficiary, policy benefits will be paid in order of priority as listed in the policy.
How to designate multiple beneficiaries
After determining whom you want to select as your beneficiary or beneficiaries, you may then choose what percentage of the benefit each individual should receive.
Primary Jane Doe, daughter, and John Doe, son
- Jane and John will equally share the proceeds. If any additional children are born, they will not be eligible to receive a portion of the proceeds.
Primary Susan Doe, spouse
Contingent Jane Doe, daughter, 75 percent and John Doe, son, 25 percent
- The proceeds will be paid to Susan Doe. If Susan is not living, then the proceeds will be paid 75 percent to Jane Doe and 25 percent to John Doe.
Primary William Doe, Trustee, his successors or successor in trust under the William Doe Revocable Trust Agreement. Executed by the insured on June 1, 1995.
- The proceeds will be paid to a formal trust. If the Trust is an institution, the address of the institution should be included.
What is medical underwriting, and why must I answer health questions?
Most group life policies offer a certain amount of guaranteed coverage. When you apply for more than the guaranteed amount of insurance, you need to provide evidence of insurability (EOI).
What is the underwriting process?
When your EOI reaches our office, we create a record for you. An underwriter then reviews your EOI. Factors such as current physical condition, medical history, height and weight are considered to determine if you meet the company's acceptance standards for this type of insurance.
What information is required?
Most EOI forms are processed using only the information you provide. However, in some cases, a physical examination is needed. The basic physical examination includes height, weight, pulse, blood pressure and a medical history questionnaire. The examination may include special testing such as a blood test, urinalysis and an EKG.
If an examination by a qualified medical professional is required, we will notify the exam center of any required testing, and you will receive notification which will include a brochure to help you prepare for the examination. The exam service will contact you to schedule an appointment. Most exams can be done in the convenience of your own home and take less than 30 minutes. There is no charge for the examination, and a copy of the exam and lab results are available to you at no cost.
We may also call or send a letter to you to clarify information during the evaluation process. A review of your past medical records may be necessary to evaluate your EOI. If so, we will request these from your doctor or other health care provider by mail. We will also send a letter notifying you that your medical records have been requested. Your medical records are considered confidential, and information is not released to anyone else without your consent or a court order.
How long does it take?
When you complete the physical examination, a report of the examination is sent to Securian. We usually receive the reports in our office within a week of the examination. If blood tests or a urinalysis are needed, they are handled by an independent laboratory. Those results are received within a week to 10 days of the examination. If we need to write to your doctor for medical records, there may be some delay in the doctor's office responding to our request. Sometimes it helps if you call the doctor's office and ask for a prompt response.
Once we receive all the information requested, we will review it promptly. We will notify you of our decision by mail. Infrequently, additional information might be needed. If further information is needed to evaluate your EOI, we will notify you by mail within a few days.
How do I make changes to existing coverage?
If you have a user ID and password for LifeBenefits, you can often manage many aspects of your policy online. Just log in and the options available to you will appear.
If you don't have a user ID and password or your company hasn't opted for LifeBenefits to manage your policy, call us at 1-800-843-8358 and a Customer Service Representative will assist you.
What do I do if I have a claim?
Securian is committed to providing superior service to you and your family when you have a claim. Our goal is to process all claims promptly, fairly and courteously. Most claims are processed in 5-10 calendar days of receipt of the necessary claim information.
If you or your family wish to present a claim, please contact your company's benefits department for specific instructions. You may also call us concerning the status of a claim at 1-888-658-0193.
How do I learn more about a life insurance company?
Before purchasing life insurance, employees are encouraged to evaluate the financial strength of the insurance company as well as its ethical reputation. This can be done by requesting information from the state insurance department or reviewing information from an insurance rating service. Employees can also check the state insurance department's web site (if available).
We are highly rated by the major independent rating agencies that analyze the financial soundness and claims-paying ability of insurance companies. Learn more about the rating agencies and view our ratings.