Frequently Asked Questions
Q: What's the difference between whole life insurance and term life insurance?
A: Whole life insurance provides coverage until the policyholder's death, no matter when that occurs. The policies build cash value that is used to keep premiums level throughout the policy's lifetime. Term life insurance is less expensive than whole life because it provides coverage for a specific period of time. It gives you a death benefit, but it doesn't build cash value.
Q: What are universal and variable life insurance?
A: Universal life insurance is a form of permanent insurance that relies on current projections rather than strong guarantees. The policyholder can pay an amount that may not be sufficient to carry the policy forward if the company's investments perform badly, thus eliminating the policy. Variable life insurance uses a mutual fund-type investment for the cash value. There are variable whole life policies and variable universal life policies. The cash value for those types of policies can be lost if the market performs badly.
Q: How much insurance do I need?
A: There are several ways to determine the coverage needed. One of the best ways is to do an analysis to determine your family's needs if you were no longer around. The needs analysis considers Social Security, inflation, and income from other assets. There are several ways to determine your needs for insurance, including estate taxes, future earnings, and industry averages based upon earnings. The bottom line is you need enough insurance to accomplish your desires for your loved ones in the event of your death.
Q: If I have a policy from my employer, isn't that enough?
A: That depends on the type of policy and the amount of coverage your employer provides. PEMCO's term and whole life policies can round out coverage, boosting it to meet your needs. And, consider what you'll do if you leave that employer. Will the policy end? Will you be in the same physical health as when you first got that employer-sponsored policy? If not, it may be difficult to get the same coverage with a new employer.
Q: How can I pay for my policy?
A: Choose one of PEMCO's convenient payment options. The Easy-Pay Plan automatically deducts your payments from the account at your financial institution. Or, choose PEMCO's Bill-Me (direct bill) plan. Either way, you may choose a monthly, quarterly, semiannual, or annual payment schedule.
Q: Does PEMCO Life offer a discount to individuals who own other PEMCO policies?
A: Yes! We offer a Life Plus discount for customers of PEMCO, School Employees Credit Union of Washington, or EvergreenBank. The discount varies with the type of policy. When requesting rates, make sure you let your representative know if you're associated with any of the companies listed above.
Q: What happens if I'm sick at renewal? How will my illness affect my renewal?
A: For the initial period of a term policy and the life of a PEMCO whole life policy, your premium would not change based on your health. For term policies after the initial period, there are guaranteed rates that would increase each year. Your health wouldn't affect those guarantees, but poor health could restrict your ability to buy a new policy instead of paying a renewal.
Q: What happens if a life insurance company finds out a policyholder withheld information on the application?
A: It's essential to provide complete and accurate information on your application. If significant information isn't disclosed, the insurance company could change your premium or deny benefits. For example, providing an incorrect date of birth could lead to a policy readjustment, which may mean less coverage for your family. Falsifying information or omitting serious illness could lead to a voided policy. If that happens, your loved ones would only be refunded the premiums paid prior to your death.
Q: My spouse bought life insurance and says I need some too. Do both of us really need life insurance?
A: It's important to buy life insurance if your death or your spouse's death would create financial hardship for your family. Many households rely on two incomes. If your income is an essential part of the budget, you probably need protection so your family could continue paying daily living expenses. Also, consider the value of a stay-at-home spouse. Life insurance can be used to fund essential services like child care and household tasks.
Q: Do I need life insurance if I'm single?
A: It's important to consider several factors and several types of insurance. First, think about major medical insurance to protect you in case of a catastrophic illness or injury. Second, you may also want to look at disability coverage to protect your income if you can't work. If you have loved ones who depend on your income, you should consider life insurance to protect them.
Q: What does preferred life insurance mean, and who qualifies?
A: The term preferred varies from company to company. In general, preferred rates are offered to applicants in excellent health, with few or no risk factors. Some risk factors include nicotine use, pre-existing health conditions, and weight problems.
Q: What are the financial ratings sometimes placed on life insurance companies? What do they mean to me?
A: Ratings are assigned to companies by various rating services. The criteria may vary between services, and not all companies will be rated by all services. Ratings reflect the service's evaluation of a company's stability, profitability, and claims payment ability. As a consumer, it's important to know a company's ratings, but it's equally important to look at the criteria used to determine it.
Q: When my child graduates from college, he/she will no longer be covered by my health insurance. Is life insurance an option I should consider?
A: In this case, you may want to consider two options: a short-term medical policy or student health insurance. Short-term medical insurance is for those who need coverage for 30 days to 12 months. Since your child will probably be job-hunting, this type of temporary coverage may protect him/her until an employer's plan becomes effective. Student health insurance can be renewed after your child is out of college, but it must be in place before your child graduates. If, for some reason, your child is uninsurable, find out whether you can extend coverage through your employer's COBRA plan.
Q: What's the difference between life insurance and survivorship life insurance?
A: Individual life insurance is written on the life of one person, while a survivorship life insurance contract is a single policy written on the lives of two people. Death benefits from a survivorship life policy are paid to a designated beneficiary – usually an irrevocable trust – after both insureds are deceased. Survivorship life insurance most often is used for estate planning purposes, with death benefits used for paying taxes, caring for a handicapped child, or as a charitable gift. It's important to know the value of your estate – including real estate, bank accounts, stocks, bonds, and personal belongings – because federal estate taxes are an issue for couples with joint holdings of $1.3 million or more.
Answers to many of these questions are based on Washington state regulations and PEMCO policies. For specific information, please refer to your policy. All coverages are subject to policy terms, conditions, and exclusions.
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