Life Insurance

What is life insurance and why do you need to look into Maryland life insurance options? Quite simply, it 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. Life insurance, for an individual, is a way an estate may be created immediately for one’s heirs and dependents. Countries where life insurance seems to be most accepted include: Canada, the United States, Belgium, South Korea, Australia, Ireland, New Zealand, The Netherlands, and Japan. Generally, speaking, the face value of policies in force, within these countries, well exceeds the country’s national income.

The major types of Maryland  life insurance policies include term, whole life, and universal life. Combinations of these basic policies are sold in high numbers or volume.

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

If you were to choose a whole life contract, it would run for the entirety of the insured’s life and include a gradual accumulation of 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.

A rather new entrant into the selection of Maryaldn life insurance options are universal life policies. This form of insurance was introduced into the United States in 1979. Since then it has become a major player in the life insurance industry. The contract allows the insured the flexibility to decide the size of the premium and amount of benefits within the policy. The insurer bills each month for general expenses and mortality costs, crediting the amount of interest earned to the insured. There are two types of universal life 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.

Types of life insurance in Maryland is generally classified in accordance with type of customer. The classifications include: ordinary, group, industrial and credit.

The ordinary life insurance market includes customers of whole life products, term life policies, and universal contracts. The market is made up primarily of individual purchasers of annual based premium insurance.

The group insurance market is mainly comprised of employers who set up arrangements for group contracts with the purpose of covering their employees.

The industrial insurance market is made up of individual contracts sold in small amounts. Premiums are collected on a weekly or monthly basis from the insured at their home.

Credit life insurance is normally sold on an individual basis, generally as part of an installment contract. The seller is protected for the balance of any unpaid debt if the insured dies before the completion of the installment payments.

Insurance may be issued with premiums set up (for payment) in two different ways. The premium may remain the same 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 (individual).

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 (over time) 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.

Selecting a family income policy will provide 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.

What type of life insurance policy you choose is based upon your needs.  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.

Maryland life insurance options are abundant!  After you explore your different options online through MarylandInsuranceBroker.com or other insurance websites, you are then ready to talk with an agent to finalyze your decision and protect both you and your family!

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