Finding a Life Insurance Company in Illinois

Life insurance can protect your family’s standard of living in the event of your untimely death. It can also be used for other purposes, such as estate planning. If you’re looking for life insurance in Illinois, here are some things you should know.

The Illinois Department of Insurance regulates the sales of life insurance in Illinois. Anyone who sells life insurance in Illinois needs to be licensed by the state to do so.

Be sure to always compare policies by using  a FREE comparison tool such as the one above.

How Much Life Insurance to Buy

The first step is to determine the amount of insurance you need. This will depend on your circumstances, such as whether you have a family to support, or have a mortgage or other debt.

If you have a spouse and children, consider how much money they would need to continue their lifestyle if you were not able to provide your income. This might include paying off a mortgage, paying for college for the children, and paying for retirement for your spouse.

If you work outside the home and your spouse does not (or vice versa) don’t assume that only the working spouse needs life insurance coverage. If a stay-at-home parent dies prematurely, it can be very expensive to pay for the services they provided, such as childcare, cooking, housecleaning, and so on. Consider a life insurance policy to cover the cost of these services should they become necessary.

If you are older, your children are self-supporting adults, and your mortgage is paid off, you may not need as much life insurance. You may, however, want to use life insurance to leave an inheritance for your children.

It is always less expensive to buy life insurance when you are younger. The cost to insure you goes up as you age, so older you are when you take out a policy, the higher the premium will be.

What Kind of Life Insurance to Buy

There are many different kinds of life insurance, and it’s important to choose the kind that’s right for you. Once you decide what kind of insurance you need, you can compare the different companies that offer that kind of insurance to get the best policy for you.

There are two major categories of life insurance: term insurance and whole life insurance. There are several variations of each kind.

Term Insurance

Term life insurance provides protection for a period of time, usually one, ten, twenty or thirty years, or until a specific age, such as 65 or 80. Term insurance pays a death benefit if you die during the term of the policy.

Term insurance is usually the least expensive kind of life insurance. For this reason, people often buy term insurance when they need a large amount of insurance. For example, if you have young children at home and a large mortgage, term insurance is a good way to get a lot of coverage for a reasonable price.

Once the term of your policy ends, or you stop paying the premiums, you no longer have coverage and there is no cash value in your policy. The exception to this is in the case of a renewable term policy, which can be renewed once the original policy expires. The renewal policy is usually more expensive, since the cost of insurance goes up as you age.

Some term life insurance policies can be converted into a whole life policy without having to fill out a new application.

Some term policies have a level death benefit, meaning the death benefit stays the same throughout the term of the policy. Others have a decreasing death benefit, and are often used to protect a mortgage, since the mortgage balance will decrease over time. Some policies have an increasing death benefit, and a commensurate increase in the premium.

Whole Life Insurance

Whole life insurance is intended to provide lifetime coverage. It accumulates cash value and may pay dividends.

When you purchase a whole life policy, part of the premium you pay goes to cover the cost of insurance, and part of it accumulates as cash value. The cash value can:

Accumulate in the policy, and be refunded to you if you cancel the policy, be borrowed against, be used to pay premiums, or be used to purchase additional insurance.

Some whole life insurance policies pay dividends. These are known as ‘participating policies.’ The dividends are paid at the discretion of the insurance company and are not guaranteed. If your policy pays dividends, you can get them in cash, keep them in the policy to earn interest, use them to pay the premium or use them to buy additional insurance.

There are many variations on the whole life policy, including policies with an increasing premium or a decreasing face amount; policies with a pre-determined number of payments; joint policies for two or more insureds; survivor or second-to-die policies that pay out after the second spouse dies, and so on.

Some whole life policies have investment features. Universal life insurance is a sort of hybrid between term and whole life insurance. It can have a flexible death benefit and flexible premiums. Some of the premium payment is invested and earns interest at a guaranteed minimum rate.

It accumulates cash value, although at a slower rate than a traditional whole life policy. If you purchase a universal life insurance policy, monitor it carefully to make sure that the cash value remains sufficient to keep the policy in force.

Variable life insurance is similar to universal life, but the cash value is invested in an investment account, similar to a mutual fund. This account is a security, so variable policies are subject to the regulation of the Securities and Exchange Commission.

It is important to understand that these investments can lose value. Pay very close attention to this type of policy, since a downturn in the market can put your life insurance coverage in jeopardy.

As with a whole life policy or a universal life policy, you can borrow against the cash value in a variable life policy. You can also use the cash value to pay premiums, or purchase additional insurance.

Mandatory Provisions

Life insurance policies sold in Illinois must contain the following features:

• Incontestability clause: Once a life insurance policy has been in force for two years, it cannot be voided. This means the insurance company has two years to determine if the application was properly completed. If you file a claim within two years of the date the policy was written, the company can go back and review the application to make sure it is complete and correct. If the application was not completed correctly, the company can deny the claim.
• Grace period: The insurance company must provide a grace period of 30 days for you to pay your premium. If any premium is not paid within 30 days of the due date, the policy can be cancelled.
• Free look period: You have ten days to review your new life insurance policy after it is delivered to you. If you change your mind, you can cancel the policy and get a refund of any premium you have paid.

Allowable general exclusion: The company can refuse to pay a death claim if:

• The insured dies by suicide within the first two years of the policy,
• The insured’s death is due to war while serving in the armed forces or in a civilian noncombatant unit serving with the armed forces, or
• The insured dies when flying in an aircraft other than a commercial airliner on a regularly scheduled route.

Understanding the different kinds of life insurance that are available in Illinois will help you to compare policies from different companies and decide which one is best for you. Use the FREE tool below to get started!