Louisiana Department of Insurance Office of Consumer Advocay
Volume 2, Issue 9

West Baton Rouge Home & Health Fair
West Baton Rouge Parish Library
Port Allen, LA 70767
9:30 a.m. - 11:30 a.m.

District 10 Councilwoman Tara Wicker

BISCO - Homeowners Insurance Workshop
1:00 p.m.

Councilwoman Ronnie Edwards Monthly Meeting
Glen Oaks High School
6650 Cedar Drive
Baton Rouge, LA 70812
6:00 p.m. - 7:00 p.m.

For speaking engagements scheduled after the release of the newsletter or for more detailed information about engagements listed in the newsletter, visit our Web site at www.ldi.la.gov. Click on the Events tab found in the center of the home page.

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The Importance of Having and Maintaining Life Insurance

Everyone has a series of milestones in his lifetime – college graduation, marriage, buying a home, the birth of a child and retirement, just to name a few. Throughout these important life events, there will be a need to secure and maintain sufficient life insurance to protect loved ones. Since these life events may happen in any order, it is important to realize that each event triggers the need to review and enhance a life insurance portfolio.

Parents often purchase life insurance on their young children. The younger and healthier an individual is, the better his chances are of getting lower premium rates. Following school graduation, a young person may consider maintaining the same life insurance policy that his parents have secured to ensure future insurability.

A consideration for young marrieds is increasing individual life coverage to ensure that in the event of an untimely death, the surviving spouse is protected against financial loss.  After marriage, couples may consider purchasing a home or beginning a family. These are two more life events that should cause a review of and perhaps an increase in life insurance to cover the loss of incomes, any outstanding debts, and future expenses. Higher premiums may be the result, but it will ensure that heirs will not have financial hardships trying to pay off debts when they may be struggling to make ends meet.

When a parent purchases life insurance to provide for his children in the event of his death, it is important to consider the child’s college tuition and fees or other training in the death benefit. This amount can be kept as an endowment for the child. With each additional child, policy increases may be necessary. The death benefit should include the present salary for a number of years, the cost of day care along with education fees and other household expenses which may be incurred within a year.

Every stage of life is unique in its insurance and financial planning needs. If a consumer is retired and still has the same life insurance coverage from 20 years ago, then the present coverage is likely not suited to his current needs. There are also some retirees that feel they don’t need life insurance or that it’s too expensive for them to maintain. Completely dropping all life insurance isn’t a very prudent move. While individuals may not need the degree of coverage they did during their child rearing and mortgage years, maintaining age and need appropriate life insurance should still be a factor in their financial plan.

Consumers may find that a “life insurance needs calculator” is an easy way to arrive at how much life insurance coverage is needed. The calculator estimates costs of various categories of expenses. The total cost reveals the amount of life insurance coverage needed.  Subtract from the result, the amount of life insurance you already have. The balance shows the amount that should be purchased.

To pass along the proceeds of a life insurance policy, the key is to name one or more beneficiaries. In most instances it is a family member, but it can be a friend or, for charitable donation purposes, an institution. One possible use could be to fund an education, to make sure a child's college can be paid for free and clear of any estate taxes or potential problems. Other possible uses include paying off a mortgage or helping pay expenses for a friend or relative who cannot care for themselves.

Life insurance policies provide an important, but often untapped, benefit when it comes to privacy and the disposition of assets. Probated wills are public documents, but life insurance policies are private contracts. They do not have to be mentioned in a will and do not normally pass through probate. As a result, life insurance policies can be used to pass along assets with the utmost confidentiality and privacy intact.

Life Insurance for Children

Childhood is probably the healthiest age for most people; however, illness and accidents will and do occur, so parents should consider and prepare for the unthinkable.  Whether parents have the means to afford a funeral or not, it is important to consider the implications of an unexpected loss.  A family’s financial interests and future should be protected in the loss of a child. Funeral expenses can be unaffordable and cost anywhere between $5,000 and $10,000.  Having a life insurance policy could completely cover or partially offset these unexpected costs.

Insurance protecting the life of a child is very affordable for a healthy child. Health conditions like Type 1 Diabetes, heart defects, cancer or epilepsy can make life insurance more costly, but even more necessary. Securing a policy when the child is very young is a good way to lock in more affordable premiums and avoid having to prove insurability as the child ages and potentially has health issues.  Typically, once covered, a child will always be covered regardless of a future health condition. It is important to verify with any life insurance company that the policy purchased specifically states that the child will never be denied life insurance no matter what medical problems he may face throughout his life.

Today, life insurance can also be used as a financial planning tool or investment.  Many policies offer a death benefit as well as benefits that mirror traditional savings accounts and investment vehicles.  Funds can be cashed out or loaned at a time in the future and used for college or other family expenses.  Sometimes a child has a lengthy illness before dying, and when health care costs are prohibitive or not covered by health insurance, life insurance cash values and loans can cover these out of pocket costs. 

There are many different types of life insurance policies. Some policies provide coverage for a lifetime while others provide coverage for a specific number of years. Some build cash values and others do not.  Others may even offer benefits while the insured is still living. Ultimately, the policy choice should be based on family needs and affordability.  Discuss coverage and options with a qualified insurance professional or financial planner and make the best decision for your family.


Life Insurance Awareness Month is the Perfect Time to Get Your Insurance Rates in Shape

September is Life Insurance Awareness Month and there's no better time to understand how your lifestyle could affect your insurance policy. Diet and exercise are the best ways of maintaining a healthy lifestyle, but given the current economic downturn, it’s becoming even more important to also keep a healthy budget. Fortunately, balancing your budget and staying healthy can go hand-in-hand. The National Association of Insurance Commissioners (NAIC) provides these tips on how a healthy lifestyle may lower your insurance premiums while it lowers your risk of health concerns.

How can your health or lifestyle affect your insurance rates?

When you apply for individual life insurance, you provide answers to detailed questions regarding your health. Your answers provide insurance companies with an idea of your overall health. Based on your answers, insurance companies may ask for additional medical information or tests prior to considering your application for coverage.

The cost of an individual life insurance policy takes into account your age, height, weight, medical history, occupation, driving record, your family health history and personal habits.

Maintaining a healthy weight, practicing good health habits and seeking regular medical care can be important in lowering your insurance costs. Health and lifestyle information gathered by the insurance company is used to determine whether you get coverage, as well as the premium you are charged.

What are some of the habits that can increase premiums?

Smoking. Smokers pay higher premiums than non-smokers. Even if you only smoke a few cigarettes a day, an insurance company could charge you the same premium as a heavy smoker.

If you are a smoker or if you use smokeless tobacco, it may be possible for you to lower your insurance premium by quitting. After you have remained “smoke-free” for a time specified by your insurance company, you may qualify for the lower, non-smoker premium.

High-risk activities.
You will be asked about your hobbies and activities on your application. Insurance companies typically charge higher premiums if you participate in high-risk activities. High-risk activities include mountain climbing; horseback or motorcycle riding; flying an airplane or other aviation-related activities (e.g. ultra light flying, hang gliding, or sky diving). You might be able to lower your insurance premiums by limiting your participation in high-risk activities. Talk with the insurance company or broker about your options.

Want to learn more?
Some insurance companies provide information regarding lifestyle and good health habits on their Web sites. These tools often include online nurses; health assessment and coaching; symptom checkers; weight-loss and smoking cessation advice; and information on improving your overall health and well-being. Ask your insurance company or broker if you have access to these types of programs.

Get smart about your insurance needs! For more information on life insurance options, as well as tips for choosing the coverage that is right for you and your family, visit www.InsureUonline.org.

Excerpts taken from NAIC Consumer Alert - September 2009

Deputy Commissioner
Clarissa A. Preston, CIC, APIR

Office of Consumer AdvocacyP.O. Box 94214Baton Rouge, LA 70804-9214
(225) 219-0619 or (800)259-5300www.ldi.la.govconsumeradvocacy@ldi.la.gov