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FAQs


Frequently Asked Questions

The two related terms, "peril" and "hazard," are often used in reference to the insurance industry. Essentially, a peril is something that causes, or can cause, a loss, while a hazard is something that makes the occurrence of a peril or loss more likely.

Peril and Hazard Defined

A peril is an event or circumstance that causes or may potentially cause a loss. Examples of perils include fire, flooding, hailstorms, tornadoes, hurricanes, auto accidents, or home accidents, such as falling.

A hazard is an action, condition, circumstance or situation that makes a peril more likely to occur or a loss more likely to be suffered as the result of a peril. Examples of hazards include dangerous behaviors, such as skydiving or base jumping, that increase the likelihood of injury. Hazards are commonly divided into three classifications: physical, moral and morale.

Your need for life insurance varies with your age and responsibilities. It is a very important part of financial planning. There are several reasons to purchase life insurance. You may need to replace income that would be lost with the death of a wage earner. You may want to make sure your dependents do not incur significant debt when you die. Life insurance may allow them to keep assets versus selling them to pay outstanding bills or taxes.

Consumers should consider the following factors when purchasing life insurance:

  • Medical expenses previous to death, burial costs and estate taxes;
  • Support while remaining family members try to secure employment; and
  • Continued monthly bills and expenses, day-care costs, college tuition and retirement.

All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.

Term Insurance

Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.

Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.

You can renew most term insurance policies for one or more terms, even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at a certain age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase. You may be able to trade many term insurance policies for a cash value policy during a conversion period even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Permanent Insurance

Permanent insurance (such as universal life, variable universal life and whole life) provides long-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher.

Copays and deductibles are features of health insurance plans. A copay is a fixed amount paid by a patient for receiving a particular health care service, with the remaining balance covered by his insurance company. A deductible is a fixed amount a patient must pay during a given time period, usually a year, before his health insurance benefits cover the costs.

For example, suppose a patient has a health insurance plan with a $30 copay to visit a primary care physician, a $50 copay to see a specialist and a $10 copay for generic drugs. The patient pays these fixed amounts for those services regardless of what the services actually cost. His insurance company pays the balance; the amount paid by the insurance company is known as the covered amount. Therefore, if a visit to the patient's endocrinologist costs $250, the patient pays $50 and the insurance company pays $200.

Now suppose the same patient has a $2,000 annual deductible before his benefits cover the costs. In January, he sprains his ankle playing basketball, and treatment costs $300. He pays the full cost because he has yet to meet his deductible. In April, he has back problems, which cost $500 to treat. Again, he pays the full cost. In August, he breaks his arm playing touch football, and the bill for his hospital visit comes to $3,500. On this bill, the patient pays $1,200; this is what is left of his deductible. Because the deductible is met at this point, the insurance company pays the remaining $2,300.

Individuals can transfer the risk of financial loss from a wide variety of sources to a third party through the purchase of an insurance policy. In exchange for a premium, an insurance company provides financial protection in the event income is lost due to death or disability; a medical condition results in burdensome expenses; or theft or damage occurs to property. The major types of insurance coverage available to consumers to protect from these common occurrences include life, disability, health, property, home and auto insurance.

The ability to earn an income is one of the greatest assets an individual can possess. Both life insurance and disability insurance are available to cover the potential loss of earned income due to death or debilitating short- or long-term disability. Life and disability insurance policy premiums are based on age, gender and current health of the individual applying for coverage, and each policy can come in different forms that also affect premiums. For instance, term life insurance provides coverage on the insured's life only for a set number of years before it expires, and therefore it is less expensive than permanent or cash value life insurance policies.

Health insurance helps offset the cost of medical care due to an accident or injury, and policies often cover preventative screenings or exams; a portion of hospital costs; and some prescription drugs. The premiums associated with health insurance are based on age, gender and past medical history, and the insured may be required to satisfy a deductible before full benefits are paid. Without health insurance coverage, individuals are left to absorb the exorbitant costs of medical care for both routine exams and emergency situations.

Property, home and auto insurance provide coverage for an individual's possessions up to certain limits and may impose a deductible before benefits are paid. Homeowners, renters and vehicle owners are required to purchase coverage due to the high cost of replacing valuable items in the event of damage or theft. Insurance premiums for property, home and auto policies are based on the value of the underlying asset and the insured's risk profile.

You can use our universal life policy( Lifeline) to establish such a fund. There are two components of the policy, one is for protection and the other is for savings. The policy combines death benefits with a savings component or cash value that is reinvested and tax deferred. The savings portion is accumulated throughout the life of the policy and can often be cashed in at some future point. Because these policies are permanent, any early termination of the contract by the policyholder would result in penalties. During the earlier stages of your life, a large portion of the premium paid to this policy is routed to the savings component. During the later stages of life, when the cost of insurance is higher, less of the premium is devoted to the cash portion and more to the purchase of insurance.

Your insurance broker will assess your needs based on the details you provide about your home or vehicle. In case of home insurance, a complete inventory of your belongings will help you get the right coverage and make it easier to file a claim.

Yes. You could save on your home and car insurance if you insure them both with Demerara Mutual . Savings amounts will vary based on your insurance profile and whether you have additional insurance coverage with us.

A thorough "life insurance needs analysis" looks at your current and ongoing expenses, plus your future expenses like college, or your funeral. But simply adding up all those numbers could amount to a bigger policy than you need. You should also subtract assets that can go toward those expenses, such as savings and investments.

Typically, you will have a 30- or 31-day grace period. If you pay within this time period, your policy will continue in force. If you don't pay within the grace period, your policy may lapse, depending on the type of policy you purchased. With a permanent policy, however, your life insurer may use your cash value, if available, to cover premium payments.

If you are unable to pay because you have become disabled, and you elected a "waiver of premium" provision or rider on your policy, you do not have to pay premiums for the duration of your disability. Universal life insurance policies generally offer policyholders increased flexibility in premium payments that may be important when your cash flow is variable.

A policy (other than universal life insurance) lapses when you fail to pay your life insurance premium by the end of the grace period. If you have a permanent life insurance policy and enough cash value in it, you may borrow from the policy to pay the premium. If you have a term life policy and don't pay your premium within the grace period, your policy will lapse and simply end.

An advantage to buying life insurance when you're young and healthy is you'll be able to lock in a good rate for the duration of the policy. If you have dependents in the future, you will have secured a low rate and guaranteed your "insurability," meaning you won't have to worry about higher rates as you age and possibly experience declining health.

The older and less healthy you are when you buy a policy, the higher the price.

However, if you have no dependents, you don't have a current need for life insurance. You'd be better off putting your money toward savings.

Group policies generally don't require medical exams, unless you have to prove your “insurability” in order to buy a large group life amount. Most group life insurance enrollments are held annually through your employer.

"Simplified issue" policies require that you answer some medical history questions but don't require an exam, such as individual flexible annuity plan.

"Guaranteed issue" policies require no medical exam just a declaration of good health, but you will pay significantly more in premiums than you would with an underwritten policy, even if you've had some health issues. These policies can be an easy way to get coverage to pay for your funeral.