Life and Disability Insurance

Types of Life Insurance Policies

There are two basic kinds of life insurance policies: Permanent and Term Insurance.


Whole Life Policies

Photo of happy and secure familyWhole Life policies, a type of permanent insurance, combine life coverage with an investment fund. Here, you're buying a policy that pays a stated, fixed amount on your death, and part of your premium goes toward building cash value from investments made by the insurance company.

Cash value builds tax-deferred each year that you keep the policy, and you can borrow against the cash accumulation fund without being taxed. The amount you pay usually doesn't change throughout the life of the policy.

Universal Life

Universal Life is a type of permanent insurance policy that combines term insurance with a money market-type investment that pays a market rate of return.

Variable Life and Variable Universal Life

Variable Life and Variable Universal Life are permanent policies with an investment fund tied to a stock or bond mutual-fund investment. Returns are not guaranteed and subject to the whims of the stock market.

Term Insurance

The other type of coverage is Term Insurance, which has no investment component. You're buying life coverage that lasts for a set period of time provided you pay the monthly premium. Annual-renewable term is purchased year-by-year, although you don't have to re-qualify by showing evidence of good health each year.

  • When you're young, premiums for annual-renewable term insurance are dirt cheap - as low as a two hundred dollars per year for $250,000 worth of coverage.
  • As you get older, premiums steadily increase. Level-premium term has somewhat higher - but fixed - premiums for longer periods, anywhere from five to thirty years.

There is no simple answer to how much coverage is enough.

Some financial planners say you need enough insurance to replace five to ten years of your salary. If you have young children or significant debt, you should bump up your coverage so you have enough to replace as much as 10 years of your salary, they say. That would mean a person making $50,000 a year should have anywhere from $250,000 to $500,000 worth of coverage or more.

Remember, the sole purpose of life insurance is to replace your income in case you die, so that your dependents can maintain their current lifestyle.

Factors to consider include:

  • Whether the surviving partner will have child care expenses if one partner is out of the picture.
  • Do you have other assets on which to draw?
  • Will your children be out of the nest soon?

These, and many other factors, influence the decision on how much coverage you need.

Buying a whole-life policy doesn't necessarily mean you are fully insured. Because of the investment component of whole life, the policies are much more expensive than term. Don't simply buy less coverage, as it defeats the purpose of buying insurance in the first place: to cover dependents.

Next, you've got to figure out how long you need the policy. The cheapest rates, known in the business as Select or Preferred, go to those who are in good health and who have a family history of good health. If you take heart medication or are grossly overweight, you may pay 50 percent more than preferred rates. If you smoke, have a risky occupation, or engage in risky sports like skydiving, you'll pay even more for life insurance.

If you fall into one of these more expensive categories, it pays to have us shop around. One company may charge much more than another, depending on how it estimates the risk of your condition (that's called underwriting). This is where our knowledge may come in very handy. Internet and phone quote services aren't set up to deal with nonstandard policies.

Why, some people might ask, should I tell the insurance company about negative information that will raise my rates? Well, even if you somehow get around the medical tests and other checks done before the policy is issued, it doesn't pay to try to fool the insurer.

Insurers may investigate suspicious claims. If the company finds out you've lied, the claim may be denied, or your heirs could be tied up in court for years. So there's a good case to be made for getting a policy early in life while you are still in good health. However, it doesn't make much sense to buy one until you have dependents.

Individual Disability Insurance

Do I Need Disability Insurance?

photo of woman with disabilityFor many people, losing just one paycheck can be difficult, but when accident or illness keeps you from working for an extended period of time, this difficulty can turn into disaster.

Without supplemental disability insurance, families can be forced to cut back on even the basics, like food, clothing, transportation and housing. And in many cases be unable to pay their monthly living expenses.

Disability Income insurance helps you replace some of the income lost due to a disabling accident or illness and we help you make the best choice for the right plan for you and your family.

Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase individual policies. Premiums and available benefits for individual coverage vary considerably between companies, occupations, states and countries.

In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time, and start payments of benefits more quickly following a disability claim. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances.

Five Ways to Protect You

There are five ways we have identified how a disability income protection plan will work for you and your family.

  1. HELPS REPLACES VITAL INCOME: A disability insurance plan helps you and your family maintain your standard of living.
  2. RESIDUAL OR PARTIAL DISABILITY BENEFIT *: A disability insurance contract pays up to 100% of your usual benefits for a period of time following Total Disability for losses in income or being unable to work full time or both.
  3. WAIVER OF PREMIUM: With this type of benefit, you can stop paying your premium when you're disabled.
  4. GUARANTED COVERAGE: You are covered until age 65, or age 70 with company approval. Your premium cannot change unless premiums are adjusted for everyone in your class.
  5. "OWN OCCUPATION" DEFINITION OF TOTAL DISABILITY: Many companies adhere to the "any occupation" of disability. Ours offers you an advantage over those types of disability insurance by protecting you "in your regular occupation."

Disability income insurance is paid directly to you for covered disability when you are totally disabled and can't work due to accident or sickness. You are protected, on or off the job, 24 hours a day, 365 days a year. You are considered totally disabled when you are under the regular care of a physician and are unable to perform the substantial and material duties of your own occupation.

Income Protector works in conjunction with Social Security and Workers' Compensation to help you maximize your benefits. When no social benefit** is paid, Combined Insurance pays you the full benefit amount of your selected plan. When a social benefit is paid, our disability income protection makes up any shortfall between your target replacement paycheck and your social benefit payment.*** However, Combined Insurance will never pay less than 40% of the benefit amount purchased.