LIFE INSURANCE

a guide for consumers

 TABLE
TABLE OF
OF CONTENTS
CONTENTS
Click page number to navigate to chapter

4 Introduction to Life Insurance

5 Traditional Life Insurance
7 Variations of Traditional Life Insurance
10 Compare Different Kinds of Life Insurance for Yourself
11 How Cost is Determined
12 Hybrid and Combination Products Explained
14 Credit Insurance
16 How to Select an Insurance Agent
16 How to Select an Insurance Company
17 Life Insurance Consumer Tips
19 Your Life Insurance Rights and Responsibilities
20 Insurance Discrimination Against Victims of Abuse
20 Protecting Your Privacy
21 Medical Privacy and the Medical Information Bureau
21 Insurance Fraud Costs Us All!
22 Frequently Used Terms

NOTE: Most insurance rates and forms in Florida are regulated by the Office of
Insurance Regulation (OIR). Other financial services are regulated by the Office of
Financial Regulation (OFR). Although both work closely with the Department of
Financial Services (DFS), they are separate entities that are a part of the Financial
Services Commission. Because DFS handles consumer-related matters, consumers
should remember that DFS is their point of contact for all problems and questions.

DFS distributes this guide for educational purposes only; it does not constitute an
endorsement for any service, company or person offering any product or service.
 INTRODUCTION TO LIFE INSURANCE

If you are planning to purchase or make changes to your existing life insurance policy, reviewing
this guide is a great step in empowering yourself with the ability to make the best financial
decision for your family’s financial planning goals.
When considering purchasing coverage, first consider your needs and understand the different
types of insurance products available. These types of insurance policies are not one size fits
all. There are many types to choose from. This guide was developed to help consumers make
educated decisions and to help understand the benefits and risks involved in financial planning.
A life insurance policy allows you to set aside money to provide a measure of financial security
for your family upon your death. It can help your family meet the financial needs previously
covered by your income.
If you decide to buy a life insurance policy, you should define your needs by deciding how much
protection you need and can afford, and what kind of insurance policy to buy. The main purpose
of a life insurance policy is to provide survivor benefits for beneficiaries.

Defining Your Needs

• Determine the amount of your income and how it is used
to support your family. Your new policy should come as
close to making up the difference as you can afford.
• There are several jobs you may perform for your family that are
just as important as the salary you provide. Determine how much
money it would cost to replace those jobs in addition to your salary.
For example, do you stay at home and take care of your children?
How much would a full-time nanny or day care cost if you weren’t
there to care for your children? Are you the primary person in
charge of maintaining your home? How much would it cost to
replace lawn care and someone to handle household repairs?
• There are many other factors to consider as well. Factors
such as your marital status, number of dependents, future
education costs, current and anticipated family income, and
your current assets and debt obligations all play a role in
determining the amount of life insurance that is right for you.

What follows are brief descriptions

of different kinds of life insurance
to help you understand the variety
of plans that are offered.

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 TRADITIONAL LIFE INSURANCE

You have a choice of two traditional types of life insurance: Term or Whole Life.
TERM INSURANCE
A “term policy” involves coverage purchased for a specific time period and pays a death benefit only if the
policyholder dies during the time for which the policy is written, and premiums are paid. If a person has a
child when they are twenty and wants coverage until their child reaches the age of 20, they could choose a
20-year term policy.

Key Characteristics: Useful for:

• The premium is more affordable • Parents of young children
during your early years. • People with large financial
• Pays benefits only if the insured obligations and home buyers
dies during the coverage period.
• Does not usually accumulate cash value.
• Is suitable for large amounts of coverage
for specific periods (i.e., one, five, 10
or 20 years, etc.) or to age 60 or 65.

With term insurance, coverage ends after the specified term in your policy is reached, unless it includes a
provision allowing you to renew your policy without providing evidence of insurability, such as passing a
physical exam. However, your premiums will increase as you age.
A term insurance policy may be convertible. This means you could exchange the policy for a whole life policy
without providing evidence of good health. Although the premium for the whole life policy will be higher than
the original term policy, the premium will not change again for the rest of your life.

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WHOLE LIFE
Whole life insurance, also known as “permanent insurance” involves coverage effective for the entire life of the
policyholder. A whole life policy pays a death benefit when the policyholder dies, regardless of his or her age.
Key Characteristics: Useful for:
• Provides a fixed amount of life insurance • Death or burial expenses – Be wary of
coverage and a fixed premium amount. policies sold specifically as burial expense
• Benefits are payable upon the death of policies, as you may end up paying more
in premiums than the policy is worth.
the insured or on the maturity date- often
the policyholder’s 100th birthday. • Estate or probate taxes.
• Coverage can increase only with the purchase • Cash – The owner can give up the policy
of an additional policy, or, if available, and receive the accrued cash value.
through additional riders or dividends. Other Common Characteristics
• Policy coverage is provided for life. (check with your company or agent):
• Premiums are paid at a fixed rate throughout • If you miss a premium payment, the
your lifetime, if the policy remains active. company can draw from the cash value to
keep the policy in force, but only if such a
• The cash value accumulates from premiums
provision is included in the policy or the
paid and increases over the years.
insured has given prior authorization.
• The earnings (for tax purposes) include only the
• You may elect to stop paying premiums and
amount accumulated in excess of the premiums
use the cash value to continue the policy at
paid. You may owe taxes on such earnings if you
a reduced level of protection, or the contract
surrender the policy. In most cases, you will not
may let you continue the policy as extended
owe taxes on the earnings if you do not surrender
term insurance for a specified time.
the policy. Check with your tax professional.
• You can use the cash value to buy an annuity
• Policies with cash values include provisions that
that provides a guaranteed monthly income
allow you to take out loans on your policy for
for a specified time. (For more information,
up to the amount of the cash value. The loans
refer to Annuities - a guide for consumers.)
accumulate with interest, but repayment is not
required prior to death. If you die and the loan • You may use the policy as collateral to borrow
has not been repaid, the insurance company from the insurance company or bank.
deducts the owed amount, plus interest, from • You may assign the accumulated
the death proceeds paid to your beneficiary. cash value to the lender.

Some whole life policies are called “participating “ or “par” policies, which means they earn dividends. Policy
dividends can be taken in cash, used to pay premiums or used to buy more insurance. They are refunds of excess
premiums, so they are usually not taxable.
Each whole life policy contains a table that shows you how much cash value it accumulates. These policies
provide larger values the longer you keep them. If you cancel your policy, you can receive its cash value in a lump
sum. If you surrender or cash in your policy, you pay taxes only when the sum of the cash value and the policy
dividends, if any, exceed the total of the premiums you have paid.

Note: Due to surrender charges, if you surrender your policy during its early years (for example, during
its first or second year), you might receive much less than, or none of what you paid into the policy, so
read your policy thoroughly.

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 VARIATIONS OF TRADITIONAL LIFE INSURANCE

Other kinds of life insurance are simply variations of term and whole life policies. Variations of whole life
insurance include universal life, excess interest whole life, variable life, limited-payment whole life, single-
premium whole life and endowment policies.
UNIVERSAL LIFE
Key Characteristics:
• You can increase or decrease the face
amount” of your insurance, within limits
stated in the policy, to meet your changing
needs. You may have to provide evidence
of insurability, such as a physical exam.
• You can decide, within policy guidelines,
on the amount of premiums and the
schedule of payments. There may be
limits on premiums because of tax laws.
Check with your tax professional.
• You may select a policy that is interest­
sensitive or one that has a guaranteed rate.
Useful for:
• Meeting various financial obligations that
may occur during a lifetime, such as those EXCESS INTEREST WHOLE LIFE
that involve marriage or raising a family. Key Characteristics:
• Providing guaranteed death benefits for people • Any interest that exceeds the amount
who need them but want the opportunity guaranteed is credited to the policy.
to earn more interest on the policy’s cash
• The premiums and death benefits are
value. With an interest­sensitive policy, you
fixed and the rate of increase on cash
accept at least part of the investment risk.
value depends on interest credits.
• These policies are interest and/or market sensitive,
Note: A combination of low interest depending upon investment of premiums.
rates and the rising cost of insurance
could result in the future elimination Useful for:
of your policy’s death benefit and cash
value. Make sure you ask your agent
• People who need guaranteed death benefits but
about this possibility. Also, be sure want the opportunity to gain more interest on
you understand which cash values a policy’s cash value. With most universal life
are guaranteed and which are not. and excess interest whole life policies, you will
receive annual statements showing the insurance
As you get older, the cost of insurance
protection accrued, the cash values and the interest
rises. Therefore, if returns do not
meet projections, your premium
rates paid, with interest rates varying annually
payments may need to increase to or more frequently. The statement also shows
keep the policy in force. See the how much of your premium money goes toward
guaranteed section of your policy. buying the insurance and how much goes toward
paying the company’s administrative fees.

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VARIABLE LIFE
Key Characteristics:
• These policies allow for limited control
over the investment of the policy’s cash
value through allocation of premiums
to and transfers between the policy’s
“subaccounts” with variable rates of return.
• Depending on the policy chosen, premiums
can be either fixed or flexible.
• Policies can be interest- and/or market­sensitive, LIMITED-PAYMENT WHOLE LIFE
depending on how premiums are invested. You pay premiums over a shorter period, such as
20 years, but the policy provides protection for life.
Useful for: Due to the shorter payment period, you pay higher
• People comfortable with making investment premiums than you would for a traditional whole life
decisions who want to choose from the policy with the same face amount. Think of it like a
limited investment options available through mortgage on a Life Insurance Policy. For example, the
their policies. Under this plan, benefits total cost of a $100,000 policy is X amount of dollars
and cash values fluctuate according to the and instead of paying for the policy for life, you chose
performance of the investment subaccounts. to pay higher monthly installments so that the cost is
paid for in 20 years.
Note: As a policyholder, you assume SINGLE-PREMIUM WHOLE LIFE
both the benefits of high-paying
investments and the risks of negative You pay the total premium in one lump sum when
investment performance. Since there you submit your application. This normally provides
are no guarantees, you could lose your you protection for life. Think of it like paying cash for
investment. Some policies have optional a house. The total cost of the property is x amount of
guarantees available for an additional dollars and instead of paying a monthly payment, you
charge. Check your policy for any pay one lump sum.
guarantees that may be available.
ENDOWMENT POLICIES
There are two kinds of variable life policies: These policies offer insurance protection for a specified
period of time, with emphasis placed on the rapid
• Scheduled premium variable life
accumulation of money. The policy “endows” if the
insurance policies have premiums with
set payment times and amounts. insured lives to the end of the policy period. When the
policy endows, the owner will receive a payment equal
• Flexible premium variable life insurance to the policy’s face amount.
policies have premiums that allow changes
in payment time and amount. In the past, insurers sold these policies with
endowment dates, such as the 10th or 20th
In addition to a Florida insurance agent ‘s license, anniversary, or with a stated age, such as 65. This
an agent who sells variable life policies must also made them attractive for use as savings plans for
be registered as a representative of a broker-dealer college or retirement. Federal tax changes now require
licensed by the National Association of Securities such policies to endow at age 95 or later to qualify as
Dealers and be registered with the U.S. Securities insurance for tax purposes. There will most likely be
and Exchange Commission. Be sure to request a tax consequences when the policy endows. Therefore,
prospectus that contains extensive information about these policies are not often sold. See your tax
the company’s investments and investment policies. professional for more information.

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COMBINATION PLANS
These policies combine whole life with term insurance in one contract. You may buy a permanent whole life
policy and later decide to increase your coverage for a specified time to meet a specific need (such as a mortgage,
business debt, etc.). You could do this by adding a term “rider” to your whole life policy for an additional
premium. A rider adds specific coverage and benefits to an existing policy for a specified period of time, usually
for a charge.
For example, you may need $250,000 worth of coverage until your mortgage is paid for, then you will only need
$50,000 to cover final expenses. You would purchase a $50,000 Whole Life Insurance Policy to cover you until
age 100 or until you die, whichever comes first, but you will also add a 30-year $200,000 term policy to cover
you until your mortgage is paid for. You are paying a lower premium on the $200,000 30-year term rider than
you are on the $50,000 Whole Life Insurance Policy because it will only cover you through that term and will
not generate cash value.
MODIFIED PREMIUM LIFE
You pay a lower premium initially,
which increases in the later years of the
policy. Such policies may be suitable for
people who want whole life insurance
but need lower initial premiums.

MODIFIED DEATH BENEFIT LIFE

You pay a premium that usually remains
the same during your lifetime, but the
death benefit or face amount changes at
a set time. Such policies may be suitable
for people whose insurance coverage
needs will decrease after retirement.
When buying either a modified premium
life or a modified death benefit life policy,
either the premiums or the amount of life
insurance will change. Make sure you have
a clear understanding of these changes
before completing an application.

GRADED DEATH BENEFIT

You pay a level premium that pays the full
amount of your death benefit for accidental
death, but a much smaller amount for other
causes of death in the first few years. After
the first few years, this type of policy will
behave like a standard whole life policy. The
graded death benefit policy is often sold as a
guaranteed issue policy through the mail or
other media. Make sure you ask your agent
or financial adviser about the potential tax
consequences of buying any insurance product.

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 COMPARE DIFFERENT KINDS OF LIFE INSURANCE FOR YOURSELF

TERM LIFE EXCESS INTEREST WHOLE LIFE

• Low initial premium • Permanent protection
• May be renewable and convertible
• Fixed premium
to whole life insurance
• Protection for a specified period • Fixed death benefit
• Premium increase with each new term
• Cash value growth dependent
• Typically, no cash value
on current interest credited
to the cash value account
TRADITIONAL WHOLE LIFE
• Permanent protection • Additional funds “dumped”
• Fixed premium into the policy allowed (the
company credits excess interest
• Fixed table of cash values to funds allowing fast growth)
• Fixed death benefit
• Policy loan availability usually • Allowed to defer taxes on earnings
free of current taxation (loans generated by the policy until
may become retroactively taxable cash or interest withdrawal
if contract terminates)
• Policy loan availability usually
free of current taxation (loans
UNIVERSAL LIFE
may become retroactively taxable
• Flexible premium if contract terminates)
• Flexible death benefit
• Cash value reflects VARIABLE LIFE
º premiums paid • Long-term protection
º current interest after deducting • Fixed or flexible premiums
any “mortality charge” (the cost of
life insurance based on a mortality • Investment control of cash value, stock,
table used by the insurer) bond, money market or other accounts
º surrender charge (the policyholder bears investment risk
º investment fee
• Varying death benefits and cash
• Deferment of taxes on earnings
values in relation to the performance
generated by the policy unless you
of funds in separate accounts
withdraw cash value or interest
• Policy loans usually free of current • Deferred taxes on earnings generated
taxation (excess value may become by the policy until cash value
taxable if the contract terminates) or dividends are withdrawn

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Will Your Premiums Change?
Insurance companies sell many modern term life policies and some whole life policies with indeterminate or
nonguaranteed premiums. In the first few years, these policies typically feature a lower premium than a policy
having similar benefits with guaranteed or fixed premiums. The company can, and usually will, raise the premiums.
Check your policy for a table of guaranteed maximum premiums. Be sure to find out if the policy you are
considering has guaranteed fixed premiums or premium rates that can rise. Make sure you can afford the
premiums for as long as you want to keep the policy.
Disappearing Premiums
Life insurance policies with accumulated cash values frequently offer the policyholder the option of using the
policy’s cash value or dividends to cover premium payments at a future date. Although the premiums seem to
“disappear” or ‘’vanish,” charges are still being made, which reduce the policy’s cash value.
If you choose this option. you should carefully monitor your policy’s cash value. Changes in interest rates, cost
of insurance, policy expenses and loans can quickly eliminate your policy’s ability to pay for itself. Such changes
could force you to resume premium payments to keep your policy.

HOW COST IS DETERMINED

The cost of life insurance can vary from company to company. More than 700 licensed insurance companies sell
life insurance in Florida and comparing costs can be very difficult. For example, a company might offer a policy
that is competitively priced for 25-year-­olds, but not for 40-year-olds. Several factors determine the cost of a
policy. They include:

• Type and amount of coverage

• Age, health and habits (such as smoking)
• Family history
• Mortality tables, which identify statistical death probabilities by age
• Administrative expenses (such as policy fees)
• Current interest rates
• Surrender charges (what you pay if you cash in your policy)

The Cost Index (Provided by your company or agent)

The insurance industry developed a system called the Cost Index to aid in comparison shopping. It is worth your
time to understand this system because it can help you find the best buy for your insurance needs. This system
compares costs of similar life insurance plans. A policy with a smaller index number is usually a better buy than
a comparable policy with a larger index number. Insurance agents and companies must provide you with the
Cost Index and a “Buyers’ Guide to Life Insurance.” These fully explain the use of cost and payment indexes.

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 HYBRID AND COMBINATION PRODUCTS EXPLAINED

As people begin to live longer and longer, many life insurance companies have found that traditional long-term
care (LTC) policies are not profitable enough. Additionally, many consumers are reluctant to buy long-term
care insurance because they fear that their investment will be wasted if they do not use it. So, some insurance
companies have attempted to solve this problem by combining life insurance with long-term care insurance. The
idea is that policy benefits will always be paid, in one form or another. These products are relatively new, and the
features are changing as the product evolves. Simply put, a hybrid long-term care policy combines the benefits of
life insurance (or annuity) with long-term care benefits.
The amount of the long-term care benefit is often
expressed in terms of a percentage of the life
insurance benefit.
There are several life insurance policy options you can
use to help pay for long-term care services:

• Combination (Life/Long-
Term Care) Products
• Accelerated Death
Benefits (ADBs)
• Life settlements

The amount of money you receive from these types HOW A HYBRID POLICY WORKS
of policies varies, but typically the accelerated benefit
A person can buy a hybrid policy by paying a one-
payment amount is capped at 50 percent of the death
time lump sum premium or by paying over a number
benefit. Some policies, however, allow you to use the
of years. If it turns out long-term care is not needed,
full amount of the death benefit.
the policy works much like a traditional life insurance
For ADB policies that cover long-term care services, policy, with a death benefit paid to a beneficiary when
the monthly benefit you can use for nursing home the insured person passes away.
care is typically equal to two percent of the life
insurance policy’s face value. The amount available If the insured person does need long-term care, the
for home care (if it is included in the policy) is policy will pay benefits toward those expenses. Like a
typically half that amount. traditional long-term care policy, the benefits are paid
in an amount chosen when the policy is purchased,
For example, if your life insurance policy’s face value and expressed as an amount per day, month or year.
is $200,000, then the monthly payout available to you But here’s where a hybrid policy really shines. If long-
for care in a nursing home would be $4,000, but only term care is never needed, the policy’s life insurance
$2,000 for home care. Some policies may pay the same death benefit is often similar to the amount paid for
monthly amount for care, regardless of where you the policy. On the other hand, if long-term care is
receive the care.
needed, the amount of money available can exceed the
When you receive payments from an ADB policy death benefit, often several times over. In order to take
while you are alive, the amount you receive is advantage of the long term care benefit that exceeds
subtracted from the amount that will be paid to the death benefit, you must be sure to purchase
your beneficiaries when you die. additional riders that include this additional coverage.

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OTHER BENEFITS OF HYBRID POLICIES: Things to consider:
You can lock in the premium. Not every hybrid is created equal.
• Premiums can be locked in from the initial • Several insurance companies offer hybrid products
purchase date and don’t increase. Unfortunately, with varying features and price points. The
this has not been the case with traditional selection process depends in part on how much
long-term care policies, causing financial strain of a death benefit a person needs and how much
for some people as premiums can increase of a long-term-care benefit a person might need.
significantly during the policy’s life.
• Policies also vary with respect to the kind of care
There is a substantial return of premium. that is covered—home, facility or both—the
monthly benefit, the daily benefit and whether
• The death benefit protects people who end up not
needing long-term care. While data indicate there inflation protection is included. Inflation protection
is a high likelihood long-term care will be needed, can be important because policy benefits won’t be
a policy owner can rest assured that money spent worth as much in the future as they are today.
for long-term care insurance will not be wasted. In Be mindful of whether the policy includes an
most cases, a policy’s death benefit will pay back elimination period.
most, if not all, of the premium dollars spent.
• If it does not have an elimination period, once a
doctor declares the policyholder eligible for care,
he or she can receive benefits right away—but
some do, so that is something to note. It’s also
important to consider how many years of care the
policy covers, how the benefits get paid out and
to whom, and the carrier’s rating, a key factor in
determining an insurer’s strength and reliability.
Cost can vary widely.
• Premiums can vary greatly based on factors such
as the insurer, how often and for how long the
premium is paid and the specifics of the policy.
You may not leave a death benefit for survivors.
• If you want to leave an inheritance, you should
consider whether using your life insurance death
benefit to pay for long-term care services is the
right option. If you use the ADB feature for
long-term care services, there may be little or
no death benefit remaining for your survivors.
There can be downsides to hybrid policies, as well. The As with any insurance, there are considerations to
cost of combination products can be hefty, putting be mindful of. Most importantly, the insurance
them out of reach for many consumers. In some cases, company must have the long-term financial strength
the benefit period in years may be shorter for some to remain in business for decades into the future
hybrid policies than for stand-alone long-term-care and pay claims. Additionally, some people may not
policies. And from a pricing perspective, these products like the idea of giving up control of funds that were
in some cases can cost more than traditional long-term- earmarked for long-term care by instead purchasing
care insurance because of the death-benefit component. an insurance policy.

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 CREDIT INSURANCE

Financial institutions, such as banks, loan finance companies and credit card companies, offer credit insurance
that pays for the credit holder’s debt in case of disability or death. Credit insurance can be of two basic types:
credit life and credit disability. Credit life pays if you die and credit disability pays if you become disabled.
When you obtain and sign for a loan, the financial institution will likely offer you credit life and/or disability
protection. If your transaction takes place primarily by telephone, the insurance company or agent has 30 days to
provide you with a written copy of the disclosures. Once you receive the copy, you then have 30 days to change
your mind and cancel the policy. Make sure you shop around before purchasing this type of coverage, so you get
the best buy.
More and more lending institutions require that you purchase life or disability insurance to obtain a loan from
them. If you already have an existing policy, you may be able to assign a portion of your existing life or disability
coverage to repay the loan in the event of your death or disability. For example, if you buy a car and finance it,
the lender may offer you credit life insurance. If you already have a life insurance policy and the lender requires
insurance protection before granting the loan, you don’t have to buy it from the lender. You could assign some of
your current policy’s benefits to cover the value of the loan.
When you receive a disclosure form, read it carefully or take it home with you to review more closely before you
sign it. This will give you time to decide if you want to buy the policy.

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DEBIT LIFE INSURANCE
Beginning July 1, 2021, these types of policies can
no longer be sold in Florida. CONSUMER BEWARE
These types of policies differ from ordinary life
Debit life, also commonly known
policies in several ways:
as “industrial life,” “street” or
• The cost is very expensive for the value. “home service” insurance, almost
• Death benefits may not pay funeral expenses. always costs more than the
• Policies build very little cash value. benefits are worth. (Industrial
• Unlicensed agents are allowed to sell and life insurance is referred to as
service these policies. “debit life” in this section.)
• Companies often don’t send a regular Do not give cash to a company
statement of your policy benefits. representative without obtaining
Debit life policies are primarily marketed and sold a clearly written receipt with date,
to low-income families, minorities and the elderly. agent and company identification.
Insurance companies originally offered such policies
to low-income laborers in industrial areas at the
beginning of the 20th century. Agents sold the
product through door-to-door visits as a “way to
cover burial expenses.”
Today, however, the actual coverage for a debit life
policy seldom exceeds $2,000, while funeral expenses
often exceed $5,000, not including the cost of a
cemetery plot. Although debit life sales are on the
decline, there are nearly three dozen companies that
still have policyholders in Florida. If you own a debit life
policy or know someone who does, please follow these
steps, or encourage him or her to do so, as a precaution:
• Request a written statement from the insurer
that includes the policy’s date of issue, amount
of premiums paid during its entire history, total
cash value and dollar amount payable upon
death. You should also check with the insurer at
least once a year to obtain updated information.
• Once you obtain your statement, ask for help
if you don’t understand the information or
need to make an informed decision. Pay close
attention to the cash value of the policy when
compared to the amount payable upon death.
• Don’t buy any additional insurance until
you complete your review. If you need
help or have questions, call the Florida
Department of Financial Services
Insurance Consumer Helpline toll-free at
1-877-MY-FL-CFO (1-877-693-5236).

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 HOW TO SELECT AN INSURANCE AGENT

When selecting an agent, choose one who is licensed to sell insurance in Florida. Some agents have professional
insurance designations such as the following:

CEBS Certified Employee Benefits Specialist

CFP Certified Financial Planner
ChFC Chartered Financial Consultant
CIC Certified Insurance Counselor
CLU Chartered Life Underwriter
CPCU Chartered Property and Casualty Underwriter
LUTCF Life Underwriting Training Council Fellow
RHU Registered Health Underwriter
Make sure you select an agent with whom you feel comfortable and who will be available to answer your
questions. Remember: An agent may represent more than one company. Agents earn a commission on your
business and should do more for you than just sell you a life insurance policy or annuity contract. They should
assess your individual needs, answer your insurance questions, and help you establish your goals. To verify
whether an agent is licensed, call the Florida Department of Financial Services Insurance Consumer
Helpline toll-free at 1-877-MY-FL-CFO (1-877-693-5236). You can also go to www.MyFloridaCFO.com
and click on the “Verify Agent’s License” button to search for licensing information.

HOW TO SELECT AN INSURANCE COMPANY

When selecting an insurance company, it is wise to know that company’s rating. Several organizations
publish insurance company ratings, available in your local library and on the Internet. These organizations
include: AM Best Company, Standard & Poor’s, Weiss Ratings, Moody’s Investors Service and Duff &
Phelps. Companies are rated on a number of elements, such as financial data (including assets and liabilities),
management operations and the company’s history.
Before buying insurance, verify whether a company is licensed to sell insurance in Florida by calling the
Department of Financial Services Insurance Consumer Helpline toll-free at 1-877-MY-FL-CFO
(1-877-693-5236). Be sure to have the full, legal name of the insurance company when you call. You can
also go to Florida Office of Insurance Regulation’s website at www.FLOIR.com/CompanySearch to
search for licensing information. There are many life insurance companies that sell life insurance in the US,
but many are members of groups of companies and so aren’t really competitors with each other. Having
separate companies enables a group to offer its products through separate distribution channels, to more
efficiently meet the regulatory requirements of particular states, or to achieve other organizational goals.
There are several of these company groups. Not every group has a company licensed to operate in each state.
As a general rule, you should buy from a company licensed in your state, because then you can rely on your
state insurance department to help if there’s a problem. And if the insurance company becomes insolvent,
your state’s life insurance guaranty fund will help only policyholders of companies it has licensed.

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 LIFE INSURANCE CONSUMER TIPS

• Shop around. Compare plans from more than one

company. Don’t feel pressured to make a quick
decision. Life insurance is a long-term contract.

• Make sure the company is licensed to conduct

business in Florida. Owners of life insurance • Know what you have purchased. The main purpose
policies and annuities issued by companies licensed of a life insurance policy is to provide coverage
in Florida are covered against an insurer’s default, for your family upon your death. If you prefer a
caused by financial impairment or insolvency, retirement plan, you should consider other options,
through the Florida Life and Health Insurance such as buying an annuity. Make sure it specifies
Guaranty Association (FLHIGA). The cash the premiums, guaranteed interest rate, investment
surrender value of your policy up to $100,000, or period, payout period and surrender fees. When
death and annuity benefits up to $300,000, are you receive your new policy, review it carefully
protected by FLHIGA. with the agent to verify the terms. Question any
differences or unclear terms.
• Ask questions. Your life insurance policy represents
a considerable investment in your family’s future. • Be sure that the premiums are within your ability
Do not buy a policy that you don’t understand. to pay. Don’t just look at the initial premium
but consider any later premium increases. Your
• Before signing the application, read it carefully agent should disclose the premiums applicable
because you are responsible for all information throughout the life of the policy.
contained in it. If there are misstatements on the
application your coverage could be jeopardized. Be • Discuss your purchase with your family members,
sure to answer the application questions fully and financial or legal advisors or other people you trust.
accurately. Follow along with a blank application
while the agent completes the form. The insurance
• Be aware that a life insurance policy will have the words
company uses this information to underwrite the
“life insurance policy” somewhere in the contract.
policy and determine the premium. Depending
on the company’s underwriting criteria, a medical
examination may be required. • Don’t buy life insurance unless you intend to
maintain the policy. It can be very costly if you stop
paying premiums during the early years of the policy.
• Read and understand your contract. Make sure your
premium dollars are doing what you want them to
do. Be aware of the limitations and conditions of • Understand the cash value. With many policies,
your policy. You should have a 14-day free look the cash value that accumulates is generally very
period that starts once the policy is in your hands. low in the first years the policy is in force. This
Obtain the agent’s signature and date on the policy cash value may be exposed to surrender fees.
once you receive it, to document the delivery date
or write the receipt date on the envelope if it was • Know the difference between the
mailed to you. The dated signature or date on the “guaranteed” rate and the “projected” rate.
envelope is proof of the beginning of the minimum The guaranteed rate is the minimum rate at
14-day free look period. which your cash value will accumulate.

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 LIFE INSURANCE CONSUMER TIPS

• In making a sale, an agent may highlight a

much higher projected rate based on current
and/or anticipated interest rates. The company
does not guarantee, however, that the policy
will achieve the higher rate of return.
• Ask your agent and tax professional about
any potential tax consequences.
• Make sure you receive a copy of all written
communications used in the presentation before
your meeting with the agent ends and save
disclosure statements and comparison indexes
you received from your agent. Be sure your
agent provides you with a “Cost Index” and
a “Buyer’s Guide to Life Insurance” with any
contract issued. This information will fully
explain the use of cost and payment indexes.
• Beware of high initial interest rates. Although
initial interest rates may be high, some companies
lower the interest rates on a policy after the
first year. Many companies also charge high
surrender fees for early withdrawal of funds.
• Ask your agent for the company’s history
on crediting its interest rates and check
to see how credited interest rates vary
between new issues and renewal years.
• Make sure you compare the rates and
charges. These include guaranteed interest
rates for all years, the surrender charges
for the length of years applicable and the
severity of the surrender charges.
• Obtain a receipt for any payment you give the
agent. Never pay cash and always make your
check payable to the insurance company.
• Review your life insurance program with your NOTE: This guide is intended to address
agent or company every few years to keep abreast some of the more common issues faced by
of changes in your income and your needs. consumers when making life insurance decisions.
However, it does not address all the issues which
• Never be pressured or intimidated by an agent. may affect someone intending to purchase,
replace, or change a life insurance policy.
• Keep your policy or contract in a safe place.

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 YOUR LIFE INSURANCE RIGHTS AND RESPONSIBILITIES

You have the right to receive a policy summary You are responsible for finding out the
that includes a “Cost Index” and a “Buyer’s licensure status of an insurance or securities
Guide to Life Insurance” from a company agent and company. To verify a license, call the
or agent. Both publications fully explain the Florida Department of Financial Services
use of cost and payment indexes. This does Insurance Consumer Helpline toll-free at
not apply to variable life insurance policies. 1-877-MY-FL-CFO (1-877-693-5236). You
can also go to www.MyFloridaCFO.com
You have the right to receive either a policy and click on the “Verify Agent’s License “
summary or a “free look” period of at least 14 button to search for licensing information.
days, to decide whether to keep a policy or
contract. You may still receive a full refund if you You are responsible for reading your
have paid a premium and decide to return the policy or contract and making sure
policy during this period. You should return the you understand what it covers.
policy to the company by certified mail (return
You are responsible for keeping your policies
receipt requested) within the specified period.
and records at home. Keep copies in a safe
You have the right to a 30-day grace deposit box or with a friend or attorney.
period during which you may pay You are responsible for telling your
overdue premiums. Your policy remains beneficiaries about the contracts you own
in force during this grace period. and where the policies are located.
You are responsible for evaluating your needs You are responsible for reviewing
and making sure the insurance company your coverage periodically to be
and policy contract you choose can fit those sure it meets your needs.
needs. You are responsible for shopping
around and comparing costs and services. You are responsible for filling out your
application truthfully and disclosing
You are responsible for reviewing and all pertinent information. An incorrect
understanding the surrender charges that may answer on an application could
be imposed if the policy is surrendered. result in a claim being denied.

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 INSURANCE DISCRIMINATION AGAINST VICTIMS OF ABUSE

Florida law prevents insurance companies from discriminating against victims of domestic violence or abuse.
If you are denied insurance, if your rates are raised, or if the insurer refuses to pay a claim, demand in writing
that the insurer explain in writing why it took this act ion. If you believe you have been discriminated against,
call the Florida Domestic Violence Hotline at 1-800-500-1119 or the Battered Women’s Justice Project
at 1-800-903-0111. You can also file a complaint through the Florida Department of Financial Services
Insurance Consumer Helpline toll­free at 1-877-MY-FL-CFO (1-877-693-5236).

PROTECTING YOUR PRIVACY

YOUR INSURERS AND FINANCIAL INSTITUTIONS

Under federal law, some banks and insurance companies may have the right to share sensitive and personal
information about you with other entities and business interests without your permission. As the policyholder,
you must take the lead in protecting your personal information.
Many companies will send you a privacy notice that will give you the opportunity to tell them that you want
your personal information kept confidential. Unless you complete and return these forms, your personal
financial and medical information may be shared with other companies. You may have to complete these
forms on an annual basis.
When you receive a privacy notice form, read it carefully before signing it to avoid unintentionally giving
the company permission to share information about you. If you have questions or concerns about these
forms, call the Florida Department of Financial Services Insurance Consumer Helpline toll-free at
1-877-MY-FL-CFO (1-877-693-5236).

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 MEDICAL PRIVACY AND THE MEDICAL INFORMATION BUREAU

The Medical Information Bureau (MIB) is a data bank of medical and nonmedical information on millions of
Americans, collected from the MIB’s insurance company members.
The companies send the MIB information you have written on applications, enrollment forms, and requests
for upgrading coverage for health, life or disability insurance. The MIB also records information from medical
exams, blood and lab tests, and hospital reports, when such information is legally obtainable.
If you have been denied life or disability insurance and wonder why, your file at the MIB may be the answer.
You have the right to make sure the information in your MIB file is correct. Call the MIB at (866) 692-6901
and ask for a copy of your records or visit www.mib.com to request your consumer file.

INSURANCE FRAUD COSTS US ALL!

In 2019, the Coalition Against Insurance Fraud estimated that at least $80 billion in fraudulent claims are made
annually in the United States. This includes all lines of insurance. It’s also a conservative figure because much
insurance fraud goes undetected and unreported. Insurance companies generally pass the costs of bogus claims
– and fighting fraud – onto its policyholders. This includes the money you pay for life, auto, health, homeowners
and other types of insurance. You can protect your personal and family pocketbook by learning about the many
different types of fraud schemes and scams. Some common examples include:

Failure to forward premiums - An insurance agent Understatement of risk or “clean sheeting” - An

convinces a consumer to pay each premium by a check agent omits pertinent health information from a
written directly to the agent or in cash. The agent then consumer’s application to make a sale that might
pockets these payments, leaving the consumer without not otherwise meet the insurance company’s risk-
coverage. management requirements.
Rogue agent commits churning or twisting - An
Deceptive claims - A financially strapped consumer
agent tricks an unknowing consumer into draining the
files false claims on credit disability and health
cash value of one policy to buy a new policy with the
same insurer. insurance policies after staging an accident and
exaggerating a pre-existing injury.
Applicant fraud - An applicant deliberately provides
false information to a life insurance company in If you suspect insurance fraud, call the Florida
hopes of obtaining a lower premium or to prevent the Department of Financial Services’ toll-free Fraud
applicant’s rejection. Hotline at 1-800-378-0445.

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 FREQUENTLY USED TERMS

Accelerated Death Benefit Benefit Disappearing (or Vanishing)

Allows the owner to receive a The payment made by Premiums
percentage of the face amount the insurance company in A provision that enables the
of a policy if the insured is accordance with your policy. policyholder to use excess
diagnosed as “terminally ill” cash deposits to allow for the
or confined to a nursing home Cash Value discontinuance or disappearance
and wants to use proceeds of (or Cash Surrender Value) of premium payments at some
the policy for immediate needs. The money available to borrow future date. It offers no guarantees,
(Terminally ill usually means that as a life insurance policy loan however, as to when you will
a person is expected to live for a or withdraw upon surrender of have enough excess deposits to
short period of time. Individual the policy before maturity. allow for this occurrence. The
policies will have their own rate of return on the policy affects
definition of “terminally ill.”) Certificate its ability to pay for itself.
Accidental Death Benefit A document provided to a person Dividend
Also known as a “double insured under a group insurance Money paid annually to
indemnity,” this policy provision policy that provides evidence a policyholder as a partial
pays an additional amount should that the coverage exists. return on the paid premium.
the insured’s death occur by Many times, you may use the
accident. In some circumstances, Churning dividends to increase cash
policies will pay up to three times A fraudulent practice in which values and death benefits.
the face amount should death occur insurance agents mislead
by a specific type of travel accident, consumers into giving up the cash Endorsement
such as a plane crash. Some pay a value of, or taking loans against, An addition to a policy
partial benefit for dismemberment, current life policies to buy new that modifies its benefits.
i.e., loss of an eye or limb. coverage with the same company. (see Amendment)
These schemes usually include the Evidence of lnsurability
Amendment
An attachment that modifies misrepresentation or omission of A signed health questionnaire or a
certain policy benefits. pertinent information about the physical examination, depending
(see Endorsement) consumer’s existing policy and how on a company’s requirement.
it will be affected by the use of
Automatic Premium Loan its value to fund the new policy. Excess Interest
An optional provision that allows Interest credited beyond the
for the automatic payment of Cost Index contractual guarantee. Please
unpaid premiums by a policy loan. A system for comparing the note that this can change at
You may only obtain such a loan costs of similar life insurance the company’s discretion.
if your life insurance policy has plans. A policy with a smaller Extended Term Insurance
sufficient cash value. This feature index number is usually a better A nonforfeiture option where
acts as a safeguard if you forget or buy than a comparable policy the cash value is used to buy
cannot make a particular payment.
with a larger index number. term insurance equal to the face
Beneficiary amount of the original policy
The person or entity who Death Benefit for as long a period of time
receives the insurance money The amount of money your as the cash value will provide
when the insured dies. beneficiary receives when you die. (see nonforfeiture options)

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 FREQUENTLY USED TERMS

Face Amount (Face Value) Loan Value No-Lapse Guarantee

The dollar amount stated on the The amount which can be A feature of flexible premium
specification page of a policy borrowed by the policyowner (universal) life contracts that sets
and paid by the company upon from the company using the a minimum premium requirement
policy maturity or death. It value of the policy as collateral. for guaranteed death benefits.
does not include dividends or Usually the interest rate payable
Nonforfeiture Options
additional amounts payable on the loan varies based on an
A provision in the policy that
under special provisions, such index defined in the policy.
allows the policyowner to
as an accidental death.
Lapsed Policy choose how the cash value of the
Free Look A policy terminated for policy will be used if the policy
A 14-day or longer period that nonpayment of premium is surrendered or lapses due to
allows you to decide whether to following the grace period. nonpayment of premium.
keep a life insurance policy. You
Level Premium Insurance Nonparticipating Insurance
can receive a full refund if you
A policy with a fixed payment Insurance on which you
change your mind during this
plan over a specified period. are paid no dividends.
period. Be sure to return the policy
by certified mail (return receipt Loading Ownership
requested) within the free look Administrative fees you pay All rights, benefits, and privileges
period to obtain the refund. when buying life insurance. under a policy controlled by the
owner, who is usually the insured.
Grace Period Maturity Ownership may be transferred or
A 30-day period in which you may The period when the insurance assigned to someone else by written
pay an overdue premium while contract becomes payable request of the current owner.
keeping your policy in force. to the policyholder.
Paid-Up Insurance
Guaranteed lnsurability Mode of Premium Payment A life insurance policy where
An option that allows you to The frequency of premium all premiums have already
buy additional life insurance payments during the policy year. been paid, with no further
at specified times without Premium payments can usually be premium payment due.
evidence of insurability, such as a made on an annual, semi-annual,
questionnaire or physical exam. quarterly, or monthly mode. Participating Insurance
Insurance that entitles the
Illustration Mortality Charge policyholder to share in the
A document used in life insurance The fee the insurance company company’s surplus earnings.
sales presentations showing year- charges you to provide you
by-year numbers indicating how a with a lifetime income, and Policy
policy will work. Usually it assumes your beneficiaries with a death The printed document issued to the
that amounts being paid today benefit should you die during policyowner by the company stating
will continue in all future years. the accumulation phase. the terms of the insurance contract.
Insured Mortality Table Policy Loan
The person whose life is covered A statistical table showing The amount that you can
by a life insurance policy; the the death rate (probability borrow against a life insurance
policyowner; the policyholder. of death) for each age. policy’s cash value.

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 FREQUENTLY USED TERMS

Policy Year Rated Policy Stock Life Insurance Company

A one-year period starting on A policy issued with an additional A publicly traded company whose
the day and the month the policy premium to cover the extra risk board of directors is elected
was issued. The first policy involved if an insured has impaired by its stockholders. A stock
year starts on the date of issue health, a hazardous occupation company’s policies may or may
and ends on the day before the or hobby, or is a private pilot. not pay dividends, depending
policy’s first anniversary date. on the terms of the contract.
Reduced Paid-Up Insurance
A nonforfeiture option where Suicide Clause
Premium
the cash value is used to buy a A policy provision which reduces
The amount of money, usually
reduced amount of insurance or eliminates the amount to be paid
in installments, a policyholder
with no further premiums while if the insured dies from suicide
pays for an insurance policy. continuing coverage for the same within the first two policy years.
Payment plans vary depending length of time as the original
on the type of policy or annuity. policy. This is required in every Standard Risk
cash value policy issued in Florida. The classification of an applicant
Premium Waiver Provision for a life insurance policy who
A contract provision that takes Reinstatement fulfills the physical, occupational
effect if the named insured (or The restoration of a lapsed and other requirements on which
in some policies, the person policy to its original premium- most of the company’s policies
paying the premiums) becomes paying status after you pay past- are issued. Someone whose
disabled. The disabled party will due premiums and interest. characteristics are more favorable
not have to pay premiums for may be classified as a “Preferred
Rider
the duration of the disability, Risk.” When the characteristics
An attachment to an insurance
even for a lifelong one. policy that adds benefits are less favorable, the applicant
to the original contract may be characterized as “Rated”
Prospectus or refused coverage altogether.
A statement about a security (such for an additional cost.
as most variable insurance plans) Settlement Option Stock Mutual Life Insurance
disclosing extensive information The manner in which the insured Company
about a company’s investments or beneficiary may choose to A life insurance company owned
and investment strategies. have the policy proceeds paid. by its policyholders, who elect a
board of directors. Policyholders
usually receive dividends from
the company’s surplus earnings.
Surrender
To voluntarily terminate or cancel
a policy or the act of getting out
of your annuity for its cash value
or other nonforfeiture options.
Usually a fee is applied if you
surrender your insurance policy
or annuity within the first seven
or eight years of owning it.

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 FREQUENTLY USED TERMS

Surrender Charge
A charge you pay if you cash in
your policy. Certain annuities NOTES
and life insurance policies are
subject to surrender charges
upon cash surrender.
Twisting
A fraudulent practice in which
insurance agents mislead
consumers into giving up the cash
value of current life policies to
buy new coverage with a different
company. Like churning, these
schemes usually involve the
misrepresentation or omission
of pertinent information about
the consumer’s existing policy.
Underwriting
The process of evaluating applicants
for insurance and classifying
them fairly, so the appropriate
premium rate may be charged.
This may involve a physical
examination of the applicant.
Waiver of Premium
A rider added to policy that will
waive the premium payments
required by an insured during the
total disability of the insured.

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