Life insurance is a necessity for family and loved ones, but it is an often misunderstood topic. These misconceptions don’t reflect the actual role life insurance plays in the average American’s life. This article covers important informative statistics about life insurance policies, how they impact you, and how they impact the average American.

While it may seem like a daunting task, it doesn’t need to be. Transparency is essential for understanding life insurance policies, so this article will give you a greater understanding of this ever-changing industry and the statistics that affect them.

At Boonswang Law, we help beneficiaries receive the life insurance benefits they are owed. If you need a life insurance attorney, call us today at 1-855-534-5560.

1. WHAT PERCENTAGE OF LIFE INSURANCE POLICIES PAY OUT?

The majority of life insurance policies do pay out. In 2018, life insurance policies paid more than $290 billion in benefits. However, 99% of term policies never pay out. This could be due to life insurance policy holders letting their policies lapse or due to life insurance companies failing to pay the benefits owed. (Source: Entreprenuer.com)

2. WHAT PERCENTAGE OF CONSUMERS PURCHASE LIFE INSURANCE ONLINE?

29% of consumers purchase life insurance online. This is up 17% since 2011 and continues to increase in popularity. This increase is attributed to the Covid-19 pandemic and the lack of in-person options. (Source: LIMRA)

3. WHAT PERCENTAGE OF AMERICANS HAVE LIFE INSURANCE?

In the United States, 54% of people are covered with some type of life insurance. This means around one-half of the United States isn’t covered by life insurance, however. This 54% of Americans with life insurance predominantly includes people ages 35-45. (Source: LIMRA)

4. HOW MANY AMERICANS ARE UNDERINSURED BY THEIR LIFE INSURANCE POLICY?

50% of people in the United States are underinsured. This means that people have life insurance, but the plan isn’t enough to cover expenses in the event of a death. This means that 50% of people with life insurance will still struggle to pay off debts, funeral costs, etc., after the death of the insured. (Source: LIMRA)

5. HOW MANY LIFE INSURANCE COMPANIES ARE THERE IN 2021?

As of 2018, there are in the US. The four largest and most predominant life insurance companies include MetLife/Brighthouse Financial, Northwestern Mutual, New York Life, and Prudential. (Source: Statista)

6. WHAT IS THE AVERAGE COST OF LIFE INSURANCE PER YEAR?

The cost of life insurance depends primarily on age and gender. For example, a 25-year-old female will need to pay $18.59/month, while a 25-year-old male will pay $22.67/month. A 50-year-old female will pay around $60.68/month for life insurance, while a 60-year-old male will pay $81.23/month. (Source: Bankrate)

7. HOW MUCH IS THE LIFE INSURANCE INDUSTRY WORTH?

Net premiums for the US life insurance industry totaled $1.32 trillion in 2019. 48% of premiums are from property/casualty insurance companies, and 52% are from life/annuity insurance companies. (Source: LIMRA)

8. WHAT PERCENTAGE OF MILLENIALS HAVE LIFE INSURANCE

Only 52% of millennials own life insurance, even though 80% acknowledge they need it. This is because millennials typically overestimate life insurance costs and don’t realize the value of coverage while they’re young and healthy. (Source: LIMRA)

9. TOP REASONS FOR BUYING LIFE INSURANCE IN THE U.S

There are a few main reasons why Americans buy life insurance. In a 2020 report, 84% of Americans said they get life insurance for burial expenses, followed by 66% for wealth transfer, 62% for income replacement, 57% for supplement retirement home, and 50% for paying off their mortgage. (Source: LIMRA)

10. HOW MUCH DO LIFE INSURANCE RATES INCREASE EACH YEAR?

Life insurance premiums increase every year of age at around 8-10% on average. If you’re in your 40s it could increase as low as 5%, but if you’re in your 50s it could increase as high as 12%. (Source: Investopedia) 

11. WHICH STATES SPEND THE MOST ON LIFE INSURANCE

The states that spend the most on life insurance are New York, California, and Texas. They spend around $71 billion, $62 billion, and $46 billion each year respectively. (Source: ThinkAdvisor)

12. WHO DOESN’T QUALIFY FOR LIFE INSURANCE?

You may not qualify for life insurance if you have serious physical or mental health issues. Dangerous habits or careers could also keep you from buying life insurance, such as skydiving or rock climbing. Life insurance companies will also look at your credit and criminal record to decide if you are eligible for life insurance.

13. WHAT ACCOUNTS FOR THE MOST DIRECT PREMIUMS?

Annuities account for 48% of direct premiums. This is followed by accident health insurance which accounts for 27% of direct premiums. (Source: LIMRA)

14. WHAT PERCENTAGE OF LIFE INSURANCE CLAIMS ARE RESCINDED?

Around 5,000 policies are rescinded every year. In 2017, life insurance companies withheld $372 million. By rescinding policies in the event of claims, the life insurance industry avoids paying out what they owe, which leaves many Americans without life insurance. (Source: Free Advice) 

15. WHAT CAUSES OF DEATH DOES LIFE INSURANCE NOT COVER?

Term life insurance may not cover accidental demise, death by self-inflicted injuries or hazardous activities, intoxication, drug overdose, homicide, or natural calamity such as a tsunami.

16. WHAT HAPPENS IF YOUR LIFE INSURANCE DOESN’T PAY OUT?

If your life insurance doesn’t pay out, contact a life insurance attorney who can help you receive the benefits you’re owed. At Boonswang Law, we have won many large settlements and achieved successful resolutions that were among the largest sums ever awarded in PA and the U.S. at large. We have experience, innovative trial strategies, and cutting-edge courtroom technology that we can use to help you recover the money you deserve.

What is a vanishing life insurance premium? Is it a good thing? Perhaps, for some people. Learn about vanishing life insurance premiums from noted life insurance lawyer Chad G. Boonswang, Esq. in this informative article.

If your claim was denied due to nonpayment of life insurance premiums or policy lapse, call the experienced life insurance lawyers at Boonswang Law. We have helped beneficiaries nationwide reverse their claim denial and get the payout their loved one intended. Your initial consultation is free of charge, and we take cases on a contingency basis only – meaning that we do not get paid unless and until you do. Contact us today.

Vanishing Premium Definition

Someone owning a permanent life insurance policy may elect to stop paying premiums once the policy accrues enough value to pay dividends or interest enough to cover the premium payment. In other words, the policyholder can elect to have their life insurance policy fund itself if they have a more lucrative place to put the money they otherwise would pay in premiums.

Whole life insurance and universal life insurance.are types of permanent life insurance.

Term vs Whole Life Vanishing Premiums

Term life insurance is coverage purchased for a specified term, such as 15 or 25 years, during which the policyholder pays periodic premium payments to maintain that coverage. Once the term ends, coverage ends. The policy has no present cash value and only pays out if the policyholder dies within the policy term.

In contrast, whole life insurance does accrue value and stays in effect for the policyholder’s life as long as premiums are paid. Most whole life policies carry a minimum rate of growth, and may grow much more depending upon the performance of the life insurance company’s investment portfolio. If the policy grows in value to the point where either interest or dividends are enough to pay the premium payments, the policyholder can elect to do that.

Vanishing Premiums vs Flexible Premiums

Another type of permanent life insurance is adjustable life insurance, which has flexible premiums and other features. After purchasing coverage, the policyholder can elect to pay more or less in premiums. The policyholder can also alter the amount of the death benefit and the cash value (the portion of the account invested) of an adjustable policy, while a whole life policy having vanishing premiums carries a fixed death benefit.

Flexible premium life insurance comes at a cost – the premiums are much higher than term life insurance and can be higher than for a whole life policy with vanishing premiums. Although you can borrow against the cash value of an adjustable policy the interest on that loan may not be tax deductible. Withdrawing from the cash value of an adjustable policy is a taxable event.

Modern Drawbacks with Vanishing Premiums

Historically, life insurance companies have been overly optimistic regarding the expected performance of their investment portfolio. Some even fraudulently inflated expected returns to attract policyholders. This led potential policyholders to believe that the premium would vanish much sooner than it actually did, so they purchased the policy. The policyholders did not have the information they needed to accurately calculate the cost of the policy and compare it with the cost of a term life insurance policy of equal coverage.

Today life insurance companies are highly regulated. By law they must inform potential policyholders of the risks of purchasing a whole life policy and disclose past performance of their investments, among other things.

One drawback of a vanishing premium in life insurance is that money is taken from the policy to pay the premium, reducing the amount the policyholder could otherwise realize from the investment. Another is the policyholder having unreasonable expectations regarding the growth of the value of the policy, and not planning to pay premiums out-of-pocket as long as they must.

Who Might Need a Vanishing Premium?

Policyholders concerned about long-term fluctuations in income, such as business owners, entrepreneurs, and self-employed/independent contractors, may need to take advantage of a vanishing premium at some point.

What to Do If You or a Loved One Has a Vanishing Premium Policy

If you have a life insurance policy with a vanishing premium and that option is available, you must calculate the true cost of using funds from your policy to pay premiums and compare that with what the premium payment could be earning elsewhere. Only then can you determine whether allowing your permanent life insurance to pay for itself makes financial sense to you.

Of course, if due to your financial situation at the time you do not have the funds on hand to pay the premium, then exercising the option to pay premiums from your policy saves your policy from lapse.

How a Life Insurance Lawyer Helps

Premiums must be paid, and if opting for a vanishing premium, that option must be exercised in writing. If this is not done and the premiums are not paid, the policy may lapse and terminate, and you will lose your paid premiums as well as the accrued cash value. Moreover, the life insurance company will deny your beneficiaries’ claims for your policy’s death benefits.

If your claim was denied due to nonpayment of premiums and policy lapse, call us. There are many reasons for life insurance lapse that are not the fault of the policyholder, and in those cases, we can get our clients paid. Speak to an experienced life insurance lawyer today about your case.

Life Insurance Conversion Privilege

What is life insurance conversion privilege, and how does it affect policyholders and their beneficiaries? Find out from the life insurance lawyers at Boonswang Law, who have gotten beneficiary clients paid in every state in the nation when life insurance companies delay or deny claims for death benefits.

If the life insurance company denied your claim for death benefits due to lapse, termination, or failure to convert, call us. Often the lapse in coverage was no fault of the policyholder, and in those cases, we can get you paid. Call us to discuss your case, free of charge!

Life Insurance Conversion Privilege Definition

In general, “conversion privilege” in life insurance is a policyholder’s right to convert a life insurance policy from one type to another without submitting to a medical exam or completing a new application. Conversion privilege may also guarantee the amount the policyholder pays in premiums for coverage under the new life insurance policy. Some policies may also refer to this as a “guaranteed insurability option”.

Types of Life Insurance Conversions

Group to Individual Life Insurance

By far, the most common type of conversion carrying privilege is when an employee or former employee converts their group life insurance coverage through their employer to an individual policy. Conversion privilege guarantees individual coverage regardless of the policyholder’s health, and guarantees premium payments for a specified number of years.

Term to Permanent Life Insurance

Term life insurance is the least expensive insurance someone can purchase because it provides coverage for a set number of years, called the “term,” then expires. If a policyholder wishes to renew their coverage once the term expires, chances are that their premium payment will increase because they have aged and there is greater risk they will die within the policy term.

If a term life insurance policy carries conversion privilege, the policyholder has the option to convert the policy to permanent life insurance without submitting to a medical exam. This option allows a policyholder to maintain coverage even if they suffer health problems near the end of the term.

Conversion privilege in a term life insurance policy will likely have an expiration date, and once the policyholder converts to a permanent policy they will likely pay more in premiums. However, conversion privilege gives a policyholder with health problems the option of maintaining life insurance. If they had to apply for a new policy, their coverage might get denied due to their present health.

There are many types of permanent life insurance, but most commonly they are called “universal” or “whole” policies.

Life Insurance Conversion Privilege Requirements

In order to convert a life insurance policy, the policyholder must strictly adhere to the terms of the provision in the policy itself. This provision will set forth the required documents, timeline, and due date, which will vary among policies.

If a policyholder fails to comply with the requirements set forth in the conversion privilege provision, they risk losing life insurance coverage. This might be a problem if the policyholder does not have multiple life insurance policies, but chances are the policyholder purchased this coverage for a reason, and unless that reason dissipated, they must carefully follow directions to convert their policy effectively.

Employer Obligations Concerning Life Insurance Conversions

Providing a Policy to the Insured

Federal ERISA law governs employer-provided group life insurance coverage, whether entirely subsidized by the employer or paid in part by the employee. Under ERISA, an employer must provide covered employees with a copy of the policy itself and inform them of the right to purchase accidental death and dismemberment coverage (AD&D coverage) as a rider.

Inform Insured of Conversion & Portability Rights

An employer has a duty to tell a covered employee of their right to continue coverage should they leave employment, and how to do so, in writing. They also must inform them of their right to apply for a waiver of life insurance premium for disability, if they become disabled.

Provide Information on Policy Changes

If any aspect of life insurance coverage changes, the employer must provide notice of that change in writing to all coverage employees.

Should You Convert Your Life Insurance?

Whether you are seeking to convert employer-provided group life insurance coverage to an individual policy, or someone holding a term life insurance policy who is considering converting to a permanent life insurance policy, there are several aspects of coverage to weigh in making your decision.

First, do you need life insurance after you leave your job or your term life insurance coverage expires? If you do, you will either need to convert your existing life insurance coverage or purchase a new policy.

Second, consider whether you will pay less in premiums when you convert than if you should purchase new coverage. This will require some research on your part. Factors such as your current age and health will affect the relative cost of each option.

Last, consider whether the needs of your beneficiaries will be best met by converting your policy or by purchasing new coverage. What are their needs? Is there an end date to those needs or are they continuing? How old is your beneficiary and what is the likelihood they will predecease you? All of these questions must be answered and weighed before you make a decision to convert an existing policy or to purchase new coverage.

Life Insurance Conversion vs Portability

If group life insurance coverage is “portable” an employee can take this coverage with them when they leave employment, and simply pay their employer the premiums. This option is usually available to employees who are younger than 69 and not leaving their employer due to illness, injury, or retirement. Most “ported” group life insurance will cover a former employee until age 70.

Portability may be a more cost-effective option than conversion for an employee seeking to leave work but maintain life insurance coverage. The employee should compare the cost of premiums, the breadth of coverage, and whether they will need coverage past age 70 in making this decision.

Failing to Convert Your Life Insurance Policy

If a policyholder fails to convert their life insurance policy before the required deadline in term life insurance, or before the date provided in the conversion packet provided by their employer, life insurance coverage will lapse and terminate. This means that the life insurance company will deny a claim for death benefits due to lapse. However, there still may be something that can be done, and the beneficiary should appeal the life insurance claim denial.

Talk with an Experienced Life Insurance Lawyer

Unfortunately, many policyholders and employees get faulty advice from their agent or their employer and fail to effectively convert their policy as they intended. If the failure to convert was no fault of the policyholder or employee, their beneficiaries may still get a payout.

If your claim was denied due to lapse caused by failure to convert, talk with the life insurance lawyers at Boonswang Law. We investigate the cause of the lapse and if the policy would have converted but for the failure of an agent or employer to adhere to their legal requirements, we can get you paid. Call us at (855) 553-9010 to discuss your case with us, free of charge.

You would think that because you pay life insurance premiums, your beneficiaries will automatically get their payout if you die within the policy term. It is rarely that simple.

Life insurance companies only make money when they collect premiums and don’t pay death benefits, so they look for ways to deny your beneficiaries’ claims. They may investigate your medical history to find out if you had any undisclosed illnesses, conditions, medications, or surgeries they can use to rescind your policy due to alleged misrepresentation. If the policy is rescinded, the life insurance company won’t pay.

Noted national life insurance lawyer Chad Boonswang explains how this happens and what to do about it in this comprehensive article. If your life insurance claim was denied due to misrepresentation, call the life insurance lawyers at Boonswang Law for help with your life insurance claim denial appeal. We have helped life insurance beneficiaries across the nation get the death benefits they deserve. Call us today to discuss your case.

Do Life Insurance Companies Check Medical Records Following a Policyholder’s Death?

The short answer is yes, they can. As part of most life insurance contracts, the policyholder agrees that their representative provides the life insurance company with medical records if requested. The clause may also state the circumstances under which the life insurance company will request medical records, such as:

• The incontestability period applies
• The policyholder died of drug overdose
• The policyholder died from alcohol abuse
• The policyholder died from complications related to smoking
• The policyholder died from self-inflicted wounds
• The policyholder died due to an undisclosed illness
• The policyholder died due to an undisclosed disease
• The policyholder died due to an undisclosed condition

Life insurance companies are supposed to check medical records before issuing a policy when a policyholder’s answers on the initial application and medical questionnaire indicate there may be further medical issues, or if the life insurance company needs more information about the policyholder’s health before underwriting a policy.  In reality, they rarely do so.

Do Life Insurance Companies Need Permission to Obtain Medical Records?

Yes. Under the Access to Medical Reports Act (1988) and the Data Protection Act (2018), the policyholder’s executor or other representative must provide the life insurance company with the policyholder’s medical records. The life insurance company cannot obtain medical records on their own without a representative’s consent.

That said, there are private services which provide life insurance companies with prescription histories and lab test results for a fee, without your permission. Also, life insurance companies can obtain anything in the public record, such as a DUI or a bankruptcy filing.

Life insurance companies are motivated to collect all information possible to assess the risk a policyholder will die within the policy term and they charge premiums according to that risk. They may subscribe to a service such as the Medical Information Bureau (MIB) for this purpose.

Life insurance companies are also motivated to investigate a policyholder’s cause of death if the policyholder dies within the contestability period or of undisclosed illness, disease, lifestyle habit, or condition. Obtaining the policyholder’s medical records is part of that investigation.

How Many Years of Medical Records Can Life Insurance Companies Check?

When initially underwriting a life insurance policy, life insurance companies sometimes check up to 10 years of an applicant’s medical records. If a policyholder dies under suspicious circumstances, the life insurance company looks at the medical record they have and the record generated by the policyholder from the date that they applied for life insurance coverage to the date that they died.

Why Life Insurance Companies Want to Check Medical Records

Life insurance companies look at medical records to ascertain whether the policyholder died of an undisclosed injury, illness, disease, condition, or lifestyle habit. If the policyholder failed to disclose what eventually caused their death, the life insurance company denies their beneficiaries’ claims due to misrepresentation.

Life Insurance Companies Demanding Medical Records

Life insurance beneficiaries rarely have a choice – they must provide the life insurance companies with the medical records they demand to have their claim for death benefits processed and paid.

If the life insurance company is asking for consent to view medical records, they are probably looking for something to give them cause to allege the policyholder lied on their application and rescind the policy and deny your claim due to misrepresentation.

Life Insurance Company Asking for Health Care Providers of Policyholders

Most policyholders must provide life insurance companies with the name and contact information of their primary care physician as well as any medical provider they regularly see, or they’ve seen in recent years. This facilitates gathering medical information on the policyholder before issuing the policy as well as after death.

Talk with a Life Insurance Lawyer for Help

If your life insurance claim was denied due to misrepresentation and policy rescission, call us for help. We discuss your case with you free of charge.

Know that many claims which get denied due to misrepresentation are paid after we look into it and show the policyholder did disclose everything they knew or the policyholder made an innocent mistake. Don’t take no for an answer. Call us to get your life insurance claim paid.

Sometimes. It depends upon what state and federal law controls the life insurance policy and whether the policyholder was married in a community property state or not.

Learn from the nation’s top life insurance lawyers how divorce may affect a life insurance beneficiary designation. If your spouse or ex spouse had life insurance and died and you believe you should be the beneficiary, call us. We have helped clients across the country get the life insurance payout they are entitled to.

Named Beneficiaries in Life Insurance

Under most circumstances, a named beneficiary receives the life insurance payout even if the policyholder’s will says otherwise. However, certain legal situations may change that. This situations include:

• If the insured was married in a community property state
• If the insured failed to change the beneficiary designation after divorce in a revocation upon divorce state
• If the insured changed an irrevocable beneficiary designation
• If the insured named someone other than the beneficiary designated by court order

If any of these apply to your spouse or ex spouse and you think you should be their life insurance beneficiary but are not, call us – we may be able to help you.

Who Becomes the Beneficiary of a Life Insurance Policy After a Divorce

The answer to this is, it depends.

Many states have revocation-upon-divorce laws that eliminate an ex spouse as a policyholder’s beneficiary automatically upon divorce. This means that a policyholder must designate someone else as the beneficiary. Otherwise there will be no named beneficiary if the policyholder dies, the death benefits may pay to the estate.

*Note that a will does not supersede a beneficiary designation. If the policyholder wishes to change beneficiaries, they must do so following the procedures provided by the life insurance company.

Can a Divorce Decree Override a Named Beneficiary?

Yes. If the policyholder was married in a community property state and got divorced, the ex spouse may be entitled to some of the death benefit regardless of who is the named beneficiary.

Also, if the policyholder is a child support or spousal support obligor, is under court order to name their support obligees as life insurance beneficiaries, and fails to do so, those support obligees may be entitled to the death benefit regardless of who is the named beneficiary.

In either of these cases, the people who believe they should be the named beneficiaries but are not must file an interpleader and contest the beneficiary designation. Beneficiary disputes are notoriously difficult to win. Call us for help if you need to dispute a beneficiary designation.

States that Revoke a Person’s Beneficiary Rights Following Divorce

As of this writing, the following states have some form of revocation-upon-divorce statute that automatically removes an ex spouse as life insurance beneficiary after divorce:

• Alabama
• Alaska
• Arizona
• Colorado
• Florida
• Hawaii
• Idaho
• Iowa
• Massachusetts
• Michigan
• Minnesota
• Montana
• Nevada
• New Jersey
• New Mexico
• New York
• North Dakota
• Ohio
• Pennsylvania
• South Carolina
• South Dakota
• Texas
• Utah
• Virginia
• Washington
• Wisconsin

A few states like California do not have revocation-upon-divorce statutes.

How Federal ERISA Law Treats Life Insurance and Divorce

Bear in mind that if the policyholder has group life insurance through their employer, that policy is governed by ERISA which supersedes state law. Under ERISA, a named beneficiary cannot be changed by the act of divorce. Therefore, if a policyholder lives in a revocation-upon-divorce state, names their spouse as their life insurance beneficiary, and then gets divorced, their ex spouse remains as their beneficiary.

If a policyholder does not wish their ex spouse to benefit from their death, they must update their group life insurance beneficiary themselves as any state revocation-upon-divorce law has no effect.

Re-Designating a Beneficiary Following Your Divorce

Many revocation-upon-divorce states specify a procedure to redesignate an ex-spouse as a life insurance beneficiary following divorce.

Redesignation is common when the policyholder is a child support obligor or a spousal support obligor and is under court order to name their obligees as life insurance beneficiaries. Beneficiary redesignation ensures that the obligees’ income stream continues upon the policyholder’s death.

Rights to Life Insurance of Divorced Spouses

Someone may be entitled to a portion of their ex spouse’s death benefits even if they are not named as beneficiaries on the life insurance policy.

In community property states, income earned during the marriage qualifies as community property – meaning, that income belongs to both spouses equally. If the policyholder paid some or all of their life insurance premiums with that income, their ex spouse may get a prorated portion of the life insurance payout even if someone else is the designated beneficiary.

Talk with an Experienced Life Insurance Lawyer

We have experience in every state in the nation, as well as with working under federal ERISA law, helping life insurance beneficiaries and those who are otherwise entitled to some of the death benefits get their due. Let us help you too with either an appeal of your life insurance claim denial or an interpleader action to challenge the beneficiary designation. Call us today to discuss your case, free of charge.