From certificate loans to guaranteed purchase options, making decisions about your life insurance isn’t always easy. Read on for straightforward answers to your most puzzling questions.
How bad is it … to borrow from my life insurance certificate?
If you own permanent life insurance that builds cash value, you may be able to take a loan from your certificate. Certificate loans can be a quick and convenient way to help cover unexpected expenses.
Unlike a conventional bank loan, you’re not required to pay back a certificate loan. However, the outstanding loan balance will be deducted from your death benefit. Additionally, a certificate loan will accrue interest at the rate specified in your contract. Unpaid interest will compound, and if left unpaid, could cause your certificate to lapse.
A certificate loan may be a good option for you, but before you take a loan, make sure you understand how interest will accrue. Monitor any loan balance and plan to pay back at least the interest annually.
How bad is it … to not take advantage of opportunities to purchase more coverage?
A Guaranteed Purchase Option (GPO) Rider gives you the option to purchase additional life insurance coverage after major life events and at regular intervals throughout your life – without having to answer health questions, take a medical exam or prove that you’re insurable.
If you’ve suffered from an illness or disability since you purchased your life insurance and are now uninsurable, you should seriously consider exercising your GPO when it becomes available. It will most likely be your only option for purchasing more life insurance.
But if you’re healthy and already have a sufficient amount of life insurance coverage, it’s fine to let the option pass.
How bad is it … to not review my beneficiaries?
More than 50,000 Modern Woodmen certificates have beneficiaries (those designated to receive your life insurance or annuity benefits) that haven’t been updated in more than 30 years. If yours is one of them, then it’s definitely time for a review!
It’s also a good idea to review your beneficiary designations after a major life event, such as marriage, divorce, or the birth or adoption of a child. It only takes a few moments to ensure your loved ones will be taken care of.
To make a change, complete a Beneficiary Change Form (available under the Online Services tab). Questions? Contact Members’ Service at 800-447-9811.
How bad is it … to skip payments on my universal life certificate?
Unlike term or whole life, universal life insurance offers flexibility when it comes to premiums. You can control the timing and amount of payments, and can pay more or less than you originally planned (within limits).
It’s important to remember, however, that changes you make in premium payments will directly affect how long your certificate remains in force. The more you pay into the certificate, the longer your insurance will last.
It’s also important to review your annual statement and illustration (sent to you every year on your certificate anniversary date) to make sure you’re on the right track. So unless it’s an absolute necessity, don’t make a habit of skipping payments. You’ll thank yourself in the long run.
How bad is it … to not convert my term life insurance to whole life insurance?
Modern Woodmen term life insurance certificates allow you to convert some or all of your coverage to a permanent plan before the term is up, without having to provide evidence of insurability.
Before you make your decision, here are some things to consider:
• Cost. While term life insurance is usually less expensive, it only provides level, low-cost coverage for a specific window of time. When the term is up, your premiums increase substantially. Or, you’ll need to purchase new coverage – likely at a higher rate.
• Your health. If your health has deteriorated, you might not be eligible for affordable life insurance when your term insurance has reached the end of the level premium period (the term). Conversion allows you to secure permanent coverage without taking an exam or answering health questions.
• Cash value. Permanent life insurance builds cash value, which increases through the years on a tax-deferred basis. You could potentially utilize it during retirement or as a loan later on in your life.
• Continuous protection. A permanent plan is the smarter choice if your need for death benefit protection will remain the same or increase in the future. Permanent plans can provide protection for life – even if you live past age 121.
As your needs change, permanent life insurance may become the better choice – it all depends on your situation. What’s right for one person may not be right for another. Consider talking with your Modern Woodmen representative to help determine what plan will best meet your needs.