Who needs life insurance?

If people depend on you financially, such as a spouse, children, a business partner or elderly relatives, having life insurance can protect them if they can no longer depend on your earnings.

How much life insurance do I need?

The first step is to determine how much cash and income your dependents will need if you die. Instead of relying on your monthly income, your family will receive an insurance benefit upon your death. It is then up to the beneficiary of your policy to decide how to use that money. If you have younger children, a mortgage or both, you may want to have a higher death benefit to make sure your family can meet its financial obligations should you die. The beneficiary of your policy can decide to use the money from the death benefit to pay monthly bills, or to pay off the mortgage. A financial advisor can assist you with figuring out how much coverage to purchase. Insurance agents can also help with that decision. You can click here to find an agent or agency near you. You may also want to use this calculator to get a general idea of how much life insurance coverage you and your family need.

Do I need more insurance as I age?

As you age, you may consider reducing the amount of life insurance on yourself or your spouse for cheaper premiums. If your children are older and if the mortgage is nearly paid off,  you may need less life insurance.

What are the types of life insurance?

There are two types of life insurance — term and permanent. Term life insurance provides coverage for a specific period of time, whether it’s for 5, 10, 20 or 30 years. Permanent life insurance, also known as “cash value” life insurance, covers a policyholder for his or her entire life and has a financial component of the policy that will accumulate cash, like a savings account. Both types of insurance pay out what is known as a death benefit, which is the amount of money paid to the beneficiaries named in the policy upon the death of the insured.

What is term life insurance?

Term insurance provides protection for a specified period of time. Terms of one, five, 10 or 20 years or up to the age of 65 are available. This type of policy only pays a benefit if you die during the policy term. Term insurance doesn't build cash value. If you stop paying your premium, the insurance expires. This insurance is generally less expensive than other types of life insurance.

What is permanent life insurance?

Permanent life insurance is designed to provide protection for the entire life of the policyholder, assuming the premiums are paid on time. Permanent life insurance includes a death benefit and a financial component that will accumulate cash over the life of the policy. With permanent life insurance, part of the premium you pay goes toward building cash value. Therefore, the premiums are generally higher than term life insurance.

What are the types of permanent life insurance?

  • Whole life — Premium remains constant throughout the life of the policyholder. Non-participating and participating are two forms of whole life. Participating whole life pays a dividend based on the profits earned by the insurance company. Typically, premiums of participating whole life insurance are higher than non-participating.
  • Universal life — Universal life is more flexible than whole life insurance. This type of insurance invests a portion of your premiums into bonds or mortgages. The policyholder can increase or decrease the amount of the premium used toward the death benefit or the cash value.
  • Variable life — Variable life insurance is similar to universal life insurance, but the policyholder has a wider selection of investment options, including the stock market. This can yield a high rate of return in a favorable market. However, in a poor-performing market, the death benefit and cash value of the policy may decrease.

Note: As with all investment decisions, consult with a trusted financial advisor before making a purchase.

What are life insurance riders?

Riders are amendments that tailor a life insurance policy to your needs. Attaching a rider to a life insurance policy will typically raise the premiums.

What are some types of riders?

  • Accidental death benefit — Secures an additional amount of money to be paid to the beneficiary if the policyholder dies are result of an accident. The rider is often referred to as “double indemnity,” which doubles the amount of the death benefit.
  • Waiver of premium — Says your insurance company will waive your premiums in the event you become disabled and are unable to pay.
  • Accelerated death benefit — Allows you to collect a specific amount of the death benefit if you are diagnosed with a terminal illness that requires long-term care. The downside would be a reduction in the benefit after the policyholder’s death.

Note: Speak to your insurance agent about other riders that may be suitable for your needs.

Is cash value growth in a life insurance policy tax-deferred?

Permanent life insurance allows money to accumulate tax free, meaning you don't have to pay income tax on the growth each year. However, if you surrender the policy for its cash value, the gain on that value over the policy’s life is then taxable if it exceeds the total premiums paid.

Can I take out a loan with life insurance?

Permanent life policies allow the policyholder to borrow against the cash value of the policy. Any unpaid loans will be deducted from the death benefit or from the cash value of the policy.

Can a life insurance policy be used to cover long-term care?

Some permanent life insurance policies allow you to use some or all the death benefit to help pay for long-term care. Some policies will only pay for long-term care for a specific amount of time. The money used is deducted from the death benefit. You can buy stand alone long-term care insurance from your insurance agent, or purchase a “combo” permanent life insurance policy that includes long-term care coverage. For more information about long-term care insurance, see our long-term care insurance page.

What if my insurance company goes bankrupt?

The Missouri Life & Health Insurance Guaranty Association will pay your claim if your insurer becomes insolvent. The Guaranty Association is similar to the FDIC for banks. In Missouri, the maximum limit for a death benefit of life insurance policies is $300,000, while the cash value limit is $100,000. For example, if you have a life insurance policy with a death benefit of $250,000 with company XYZ and that company becomes insolvent, the Guaranty Association will pay the $250,000 death benefit if you die. The Guaranty Association is funded by insurers doing business in Missouri.

Is the insurance company I'm considering reputable?

The Missouri Department of Insurance keeps records of each insurance company’s consumer complaint history, known as the complaint index. The higher a company’s complaint index, the more cautious you should be about purchasing a policy with that company. You can view the Consumer Complaint Index. If you have questions, call the Insurance Consumer Hotline at 800-726-7390 or email us.

What do I do if a deceased loved one purchased a life insurance policy in Missouri?

The NAIC Life Insurance Policy Locator can assist you as consumers in locating life insurance policies and annuity contracts of a deceased family member or close relationship. For information on how to complete the request form, please see the Frequently Asked Questions.

When a request is received, the NAIC will:
• Ask participating companies to search their records to determine whether they have a life insurance policy or annuity contract in the name of the deceased that you entered.
• Ask participating companies that have policy information to respond to you, as the requestor, if you are the designated beneficiary or are authorized to receive information.