Insurance
Protecting Your Family and Property in San Francisco

Once you have decided to relocate to San Francisco, it is essential not to forget the importance of insurance, which is often an overlooked task for many newcomers. It is understandable that making the journey from one city to another means attending to other fundamental issues first that enable you to establish your new residence, but it is equally important to protect your belongings, financial interests and family from unforeseen events once you do get settled. It is especially important to address your insurance needs if you are moving to a new state. Often the insurance requirements and options vary greatly from place to place.

The information in this chapter largely is provided by the California Department of Insurance (CDI). The CDI’s Consumer Information Insurance Guides and other tools can offer additional valuable information on all types of insurance, including homeowners, auto and health. Visit www.insurance.ca.gov to access these complete resources.

HOMEOWNERS INSURANCE
For most people, their home is their largest financial investment; therefore, shopping for homeowners insurance is essential in protecting this valuable asset. Start by planning to conduct a thorough search of the insurance marketplace to find residential insurance from a provider that meets your specific needs. Whether you are interested in purchasing homeowners (including fire only), renters, condominium unit owners or mobile home insurance, it is important to shop and compare insurance products just like you would when shopping for any other important major purchase. No matter which policy you choose, make sure you read the exclusions in the contract so you know what is and is not covered.

What Is Covered by Homeowners Insurance?
A homeowners policy in California contains two sections. Section I (A, B, C and D) provides property coverages while Section II (E and F) provides liability coverages. A brief description of the individual coverages follows.
  • Coverage A–Dwelling provides major property coverage that protects your house and attached structures if it is damaged by a covered peril.
  • Coverage B–Other Structures provides protections to other structures on your residence premises that are not attached to the main dwelling. Items covered include buildings, such as detached garages and tool sheds. This coverage normally is limited to 10 percent of the Coverage A limit; however, you can purchase more coverage for an additional premium.
  • Coverage C–Personal Property provides protection for the contents of your home and other personal belongings owned by you and other family members who live with you. This coverage normally is 50 percent of Coverage A or is subject to an established amount agreed upon by you and the insurance company. This coverage is limited on certain types of property that are particularly susceptible to loss, such as jewelry, furs, fine art, silverware, antiques, collectibles, firearms and money. Additional amounts of insurance may be purchased, and you may want to consider scheduling these items separately. Ask your agent for specifics.
  • Coverage D–Loss of Use is coverage will help with additional living expenses if your home is damaged by a peril insured against to the extent that you cannot live in your home. These expenses include, but are not limited to, housing, meals and warehouse storage. Coverage D is normally limited to 20 percent of Coverage A.
  • Coverage E–Personal Liability will provide coverage in the event you or a resident of your household are legally responsible for injury to others. This coverage normally provides a defense and will pay damages as the insurance company deems appropriate. There are some exceptions; the liability coverage will not protect you in all situations, such as an intentional act of destruction or violence. All exclusions and specific language can be found in your policy.
  • Coverage F–Medical Payments to Others pays for reasonable medical expenses for persons accidentally injured on your property. For example, if a neighbor’s child is injured while playing in your home, the medical payments portion of your homeowners policy may pay for necessary medical expenses. Medical payments coverage does not apply to your own injuries or injuries of those who reside in your household. Business activities are also excluded, and it is not a substitute for health insurance. All exclusions and specific language can be found in your policy.

Earthquake Insurance
In California, when an insurer writes your homeowners coverage, he or she legally is obligated to offer you earthquake coverage for an additional premium. Earthquakes although not frequent are very much a part of the possible natural disasters that can befall the San Francisco area. The earthquake coverage may be written directly by the homeowners insurer, by a separate insurer or through the California Earthquake Authority (CEA).

Additional Residential Coverage
Flood, mold, earth movement and “wear and tear” are some of the perils that usually excluded from regular homeowners insurance coverage. Homeowners can elect to buy specialized coverage that provides additional protection for the dwelling and contents beyond the standard coverage limitations in most homeowners policies. Ask your insurance agent or broker about available endorsements to extend the coverage. Extra endorsements to your coverage, such as building code upgrade, can add a lot to your protection in a loss.

Remember that licensed insurance companies come in many shapes and sizes. Whether large, medium or small, licensed insurance companies are required to follow the insurance laws and regulations in California. To help you further in shopping for homeowners insurance that best fits your needs for service, coverage and price, the CDI provides a list of the current licensed insurance companies in California at www.insurance.ca.gov. From there, you can contact the companies directly for quotes or more information.

Factors That Affect Your Premium
Your premium will be based on several factors that you can control based on what you want or need from your homeowners insurance coverage. The main factors include the following:
  • Where you live
  • Level of fire protection available in the area
  • Construction type of your home (e.g., brick, frame)
  • Type of policy you purchase
  • Amount of coverage you buy

Ask About Discounts
Companies may offer premium discounts if you take steps to reduce the chances of a loss. Each company sets the amount of discounts it offers. Following are some of the more common homeowners insurance discounts available:
  • Impact resistant roof
  • Noncombustible rood
  • Burglar, fire and smoke alarm systems
  • Automatic sprinkler systems
  • Fire extinguishers on the premises
  • Premises in good condition (companies set their own standards)
  • Age of house (companies set their own standards)
  • Marking personal property with an identifying number (inspection required)
  • Good claims experience for three consecutive years
  • Other policies with the same company or group
  • House insured to full replacement cost
  • Senior citizens discount

California FAIR Plan Alternative
The California FAIR Plan is an association located in Los Angeles that comprises all insurers authorized to transact basic property insurance in California. Coverage is available to all California property owners, provided that basic underwriting guidelines are met. The California FAIR Plan does not estimate the cost to rebuild your home or the cost of labor and materials in your (or any other) area or determine the appropriateness of the coverage you request. When going this route for insurance, those are your responsibilities. The California FAIR Plan issues insurance as a last resort and should be used only after a diligent effort to obtain coverage in the voluntary market has been made. The CDI recommends that all California FAIR Plan policyholders shop for a different insurer at least annually to search for coverage that is more comprehensive than that offered by the California FAIR Plan.

AUTOMOBILE INSURANCE
Now that you’ve relocated to the Bay Area, it’s a good opportunity to familiarize yourself with auto insurance requirements in California. It’s also important to know exactly what your auto insurance covers and in what circumstances the insurance provider will not cover damages.

The responsibilities of owning and driving an automobile include following the financial responsibility laws under the vehicle code. All California drivers and owners must have at least the statutory limits of minimum liability insurance or an approved alternative way to pay for injury or property damage they may cause. Penalties are very severe for noncompliance with this section of the vehicle code.

In California, there are four ways to accomplish financial responsibility:
  • Coverage by a motor vehicle or automobile liability insurance policy
  • Cash deposit of $35,000 with the Department of Motor Vehicles (DMV)
  • Certificate of self-insurance issued by he DMV to owners of fleets of more than 25 vehicles
  • Surety bond for $35,000 obtained from an insurance company licensed to do business in California

The most common way to satisfy the financial responsibility for operating an automobile in California is by purchasing automobile liability insurance. Automobile insurance is simply a contract that helps pay for certain types of financial losses or obligations resulting from the use or ownership of an automobile. To obtain an insurance policy, you pay a premium, in return for which the insurance company agrees to pay certain expenses and legal liabilities depending on the terms of the policy. Having the right insurance coverage may prevent you from suffering a large financial loss in the event of an automobile accident.

If you choose to meet your financial responsibility by purchasing liability insurance, the DMV outlines minimum limits that you must purchase under Section 16451 of the Vehicle Code. When your car is in an accident for which you are found legally liable, bodily injury liability covers your liability to others for injuries to them. Property damage (PD) liability covers your liability for damage to someone else’s property. Residents must have a bodily injury liability minimum of $15,000 for death or injury of any one person or any one accident and $30,000 for all persons in any one accident. Residents also must have a property damage liability minimum of $5,000 for any one accident. Comprehensive coverage (other than collision), uninsured motorist, medical payments and collision insurance are not required by law in California.

— What Other Coverages Are Available?
Insurance companies must offer the following coverage with every automobile policy, but they are not required by law to be purchased by the insurance holder.

Uninsured/Underinsured Motorist provides liability insurance when the party at fault does not have the state-required minimum liability coverage or the minimum liability coverage is insufficient to cover the injuries sustained in the accident. Likewise, uninsured motorist property damage covers possible reimbursement for damages your car sustains.

Most insurance companies also will offer the following optional coverages.

Medical Payments provides for the payment of medical and similar expenses without regard for liability when injuries are incurred in a car accident.

Physical Damage (Collision and Comprehensive) do not cover mechanical breakdown or normal wear and tear. Collision covers damage to your vehicle caused by the collision of your car with another vehicle or with any other object, regardless of fault. It also covers vehicle upset (overturn), but it does not cover bodily injury or property damage liability. Comprehensive coverage covers damage to your car caused by reason other than collision, such as fire, theft, windstorm, flood or vandalism.

Endorsements/Riders can be purchased to insure any special equipment (e.g., aftermarket additions like premium stereos and tires) that has been added to the original vehicle, towing and rental reimbursement.

— What Information Do I Need to Have Ready When I Get a Quote?
When you are ready to ask for an insurance quote, you first need to know what coverages you want, what limits of liability you require and what deductibles you desire. Also, you need to have the following basic information available on all drivers in your household:
  • Names, ages, sex and marital status for all drivers
  • Driving records (accidents and moving violations) for all drivers
  • Annual mileage of the car
  • Full vehicle identification number (VIN)
  • Year of vehicle
  • Cost of vehicle
  • Any special equipment added to the vehicle

HEALTH INSURANCE
If you’re like other newcomers, a top priority is finding a new physician for you and your family. So, how do you learn about your health care options and find a family doctor? Of course, your employer should be your first stop. Your company’s human resources office usually can provide you with brochures about hospitals and doctors that will accept the company’s insurance. Following are a few general resources in the Bay Area:
  • San Francisco Medical Society (SFMS) was established in 1868 to improve the health of all San Franciscans by uniting and supporting the local physician community. With more than 1,500 members—including practicing physicians, residents and medical students—SFMS is a nonprofit organization that advocates for physician and patient rights, unites physicians of all specialties to create a solid local medical community and works to improve the health of all San Franciscans by providing support and education to physicians and patients. The SFMS is affiliated with the California Medical Association (CMA). Visit www.sfms.org for health-care information in the Bay Area and to use the Physician Finder tool.
  • DoctorFinder provides basic professional information on virtually every licensed physician in the United States. The database includes more than 814,000 doctors. AMA-member physicians are offered an expanded listing that contains additional information, such as office hours, accepted insurance providers, education history and other helpful information. Visit http://webapps.ama-assn.org for more information.
  • California Medical Association provides information on California Medical Association members only. Call (800) 786-4262 or visit www.cmanet.org.
  • Medical Board of California can help you find public information about a medical doctor, physician assistant, acupuncturist or surgical assistant licensed by the state of California. Information available for consumers includes the professional’s name, license number, licensure status, disciplinary status, honors and awards and malpractice history. Call (800) 248-4062 or visit www.mbc.ca.gov.
  • American Board of Medical Specialties lists all doctors that are board certified. Be sure the doctor you select is board certified by visiting www.abms.org or calling (866) 272-2267.

— Healthy San Francisco
The Bay Area has a program called Healthy San Francisco, which is designed to subsidize medical care for certain uninsured residents of San Francisco. Launched in 2007, the program’s objective is to bring universal health care to the city, but eligibility and services are limited, and the program website states that insurance “is always a better choice.” The program is open to city residents ages 18–64, regardless of citizenship, immigration, employment or health status, whose income and net worth are low but do not qualify them for other public coverage and who have had no insurance for at least 90 days. The program covers a range of services, but only pays providers within San Francisco.

— Shopping for Health Insurance
Be sure you understand the full extent of the coverage that is included in any health plan you are considering. If you have more than one option, choose the plan with the highest level of coverage you can afford. The higher a plan’s deductibles, co-pays and coinsurance are, the more you can save on premiums.

Also consider factors other than cost. A carrier’s financial rating and history of consumer complaints are important considerations. Ask your friends, family and physician for recommendations. Be sure you learn the answers to the following questions about any health plan you are considering:
  • Does the plan cover your choice of physicians and hospitals?
  • Are there limits on medicines, referrals to specialists or the types of treatment or surgery that is available?
  • Are there benefit limits per person, family, illness, treatment and/or hospital stay?
  • What is the procedure for out-of-network emergency care?
  • Does the plan have yearly or lifetime maximums?

— Health Plan Basics
Health-care plans pay for most, and sometimes all, of the treatment costs for illnesses and injuries. They generally can be classified as either fee-for-service or managed care. Many people obtain health coverage as part of a group, through an employer, professional association or other organization, that offers health coverage to its employees or members. Others may buy individual health coverage directly from an agent or insurer. The type of plan you have and how you obtained it usually determines the benefits included, how you access and receive medical care and what you’ll have to pay out of pocket.

— Fee-for-Service Health Plans
Fee-for-service plans, often called “indemnity plans,” are sold by traditional insurance companies. With a fee-for-service plan, you can go to any doctor or provider you want, and you don’t need a referral to see specialists. A fee-for-service plan generally will pay for most but not all of the costs to treat medical conditions covered by the policy.

Often your provider will bill your insurance company directly for its share of your health-care costs. In some cases, you may have to pay the bill up front and then file a claim with your insurance company for reimbursement. California law requires companies to pay claims promptly, but it could take several weeks for you to receive your reimbursement.

With a fee-for-service plan, you will pay the following:
  • Premiums. This is a fee you have to pay to participate in the plan as long as you have coverage. If you have a plan through your work, your premium likely will be deducted from your paycheck. Employers who offer health plans usually contribute toward some or all the premium costs, but they aren’t required to do so.
  • Deductibles. This is an amount you must pay out of your own pocket before your plan will begin to pay. If you have a family plan, the deductible may apply to your entire family, or each individual may have a separate deductible. You usually will have to meet your deductible each year. Many insurance companies offer high-deductible options for plans. In general, the higher your deductible is, the lower your premium will be.
  • Coinsurance. Once you’ve met your deductible, most fee-for-service plans will pay a percentage of the remaining cost for covered health services and require you to pay the rest. This cost sharing is called coinsurance. The coinsurance varies by plan. For instance, some plans may pay 80 percent of the cost, leaving you to pay 20 percent, while others may pay 70 percent, leaving you to pay 30 percent. In California, health plans must pay at least 40 percent of the cost of covered services after the deductible has been met, but most companies cover up to 100 percent. As with deductibles, the higher the amount you pay in coinsurance, the lower your premium will be.

Most fee-for-service plans will pay only up to a maximum amount, such as $1 million, during your lifetime toward your total medical expenses or for certain medical conditions. This is called a “lifetime maximum.”

— Managed-Care Health Plans
Managed-care plans use “networks” of doctors, hospitals, clinics and other health-care providers that have contracted with the plan to provide health services to the plan’s members. Some managed-care plans require you to use providers within the plan’s network for all routine care. Others pay for care from any provider but offer financial incentives for you to use providers within the network.

In general, the tradeoff for managed care is reduced choice for increased affordability. Managed-care plans typically are more affordable than fee-for-service plans that offer comparable levels of coverage. Managed-care networks provide a built-in clientele for network providers, allowing them to charge lower rates. In addition, managed-care plans control costs by emphasizing preventive care in an attempt to avoid serious medical conditions that later would require more expensive treatment.

Managed-care plans will pay only for services deemed to be “medically necessary.” If the plan covers prescription drugs, it may have a list called a “formulary” that specifies the drugs it will cover.

There are three types of managed-care plans, each with a different level of provider choice:
  • Health maintenance organizations (HMOs) generally require you to receive health care only from providers within the HMO’s network. There are exceptions for medical emergencies and when medically necessary services are not available within the network. With an HMO, you’ll choose a primary-care physician from a list of doctors in the network. Your primary-care physician oversees all of your medical care and provides referrals to specialists and other providers. HMOs may pay primary-care physicians a set monthly fee for each member, regardless of the amount of covered services performed.
  • Point-of-Service (POS) option for HMO members allows them to use providers outside the HMO’s network without first having to receive a referral. However, if you use providers outside the network, you’ll have to pay more for your health care. A POS plan may exclude the option for out-of-network care for certain medical conditions. POS coverage usually is offered as a “rider,” or an add-on to the contract, for an additional fee.
  • Preferred provider organization (PPO) plans allow you to go to any provider you choose. However, you’ll pay less if you use providers in the PPO’s network. You don’t have to select a primary-care physician to oversee your care in a PPO plan.

With a managed-care plan you will pay the following:
  • Premiums. This is the fee you pay to participate in the plan.
  • Deductibles. This is the amount you must pay out of your own pocket before your plan will begin to pay.
  • Copayments. These are the amounts you pay each time you go to the doctor, fill a prescription or receive a covered health service. Most managed-care plans usually have a maximum out-of-pocket amount that you’ll have to pay in copays and deductibles during a certain period, usually a year. When you reach this amount, your plan will pay 100 percent of all further costs.
  • Coinsurance. This is a percentage of the cost for health-care services that you must pay after you’ve met your deductible. Coinsurance applies to network and out-of-network care in PPO and POS plans.

The HMO must have a procedure to resolve complaints from members and a procedure for the member to appeal the decision if not satisfied with the resolution of the complaint. HMOs may not cancel or retaliate against a group contract holder (employer), a doctor or a patient who files a complaint against an HMO or appeals an HMO’s decisions.

HMOs may not prohibit doctors from talking to you about your medical condition, treatment options and terms and requirements of your health-care plan, including how to appeal an HMO’s decision. An HMO also may not provide financial rewards to doctors for withholding necessary care.

California HMOs are required to cover medically necessary emergency services even when outside of their coverage area. All HMOs in California are regulated by the Department of Managed Health Care (DMHC). If you have a complaint with an HMO, contact the member services department of your HMO. HMOs are required to have an internal complaint or grievance process in place. If you file a grievance and it has not been resolved within 30 days or there is some question as to the HMO’s decision, you may contact the DMHC for assistance.

— Federally Mandated Benefits
In addition to benefits required by state law, health plans must abide by federal law and offer maternity and newborn coverage and mastectomy benefits.

Maternity and Newborn Coverage
If maternity benefits are covered, a group health plan with more than 15 employees must provide for a minimum hospital stay of 48 hours after an uncomplicated vaginal delivery and a minimum stay of 96 hours after an uncomplicated cesarean birth. A carrier may not deny benefits on the grounds that a pregnancy is a “pre-existing condition.”

Plans that have maternity benefits automatically must extend coverage to the newborn for 31 days. To continue coverage beyond 31 days, you must notify your plan administrator during this period and pay any additional required premiums to add the child to your insurance.

A carrier may not exclude or limit initial coverage of a newborn child because of premature birth, accident, illness or congenital medical conditions. This includes providing reconstructive surgery for craniofacial abnormalities for a child younger than 18 who has been covered continually by a health plan.

A benefit covering “complications of pregnancy” may help if your plan does not include a maternity benefit. Miscarriages or nonelective cesarean births are considered complications. In most cases, management of a difficult birth is not considered a complication and only is covered by plans with maternity benefits.

Mastectomy Coverage
Plans that offer mastectomy coverage also must provide for reconstructive surgery of the breast on which the operation was performed as well as the other breast if needed for a symmetrical appearance. This coverage may be subject to deductibles, copayments and coinsurance that are consistent with other benefits under the plan. The benefit also must cover prosthesis and treatment of complications at all stages of mastectomy, including lymphedemas.

— Health Savings Account
As of January 1, 2004, health-care consumers had a new way to help manage their own health care. Health Savings Accounts (HSAs) provide consumers with added insurance coverage and control. Flexibility is the key component of an HSA. Anyone with a high-deductible health plan can set up a health savings account to save money on medical care now or save for future medical expenses. You may use HSA funds to pay for expenses that must be met before your deductible, to pay for services not covered by your health care plan (such as alternative therapies or out-of-network providers) or to pay for insurance coverage during periods of unemployment.

Even if you purchase your insurance plan or your health savings account through your employer, you still own your account. You make the decisions on how much to contribute to your account and which medical expenses you will use to pay the funds. When you change jobs or move, the account remains intact. Any unspent balances remain in your account earning interest until you spend them on medical care.

An HSA can be a comforting safety net if you have a high deductible plan (remember, your plan won’t begin paying out until your financial responsibility is met). In the event that you lose a job, must seek uncovered medical services or just want to exercise your right to seek a specialist not contracted with your insurance plan, the funds in an HSA may one day be your saving grace. If you are a consumer who desires security and values freedom, an HSA is an option you should research.

— Self-Directed Health Plans (SDHP)
SDHPs also can be called consumer directed health plans, and they are a way to organize, purchase and finance health-care services. These plans succeed in providing consumers with a method by which they can design and implement their own health-care plans that can be customized to their specific needs, health-care philosophies and circumstances.

Since January 1, 2002, insurers have offered plans that give patients and their physicians the autonomy to make decisions about what medical services they want and who they want to administer these services. Familiar elements of managed care, including gatekeepers (administrators who define what is “medically necessary” and thus covered by their plans), preauthorization processes and network provider limitations, are replaced with SDHPs that make consumers the controllers of their own destinies. Patients and their doctors decide how insurance funds should be spent.

SDHPs represent a new direction in health care that utilizes the new technologies of today’s world. With SDHPs you keep your medical records on special software and research medical services, medical providers and fees using the Internet. SDHPS are a different solution for those with the time and the desire to manage their own health care and tailor it to their own health-care needs and philosophies.

— Application Process
When you apply for coverage, fill out the application accurately and completely. If you knowingly provide incorrect, incomplete or misleading information, especially about a pre-existing condition, your coverage could be canceled or your benefits could be denied.

When purchasing an individual plan, never sign a blank policy application, and verify any information filled in by an agent. Make payments by check or money order payable directly to the insurance company or HMO (not the agent), and insist on a signed receipt on the carrier’s letterhead. Make sure you have the full name, address and phone number for both your agent and your carrier.

Never pay more than two month’s premiums until you have received a copy of your policy, HMO certificate or group membership certificate. California state law requires that you have a 10-day “free look” to evaluate any individual coverage policy. During this time you can change your mind and receive a refund. If you return a policy, send it by certified mail and request a return receipt.

DENTAL INSURANCE

Dental insurance differs from other types of insurance. Oral health care is fairly routine and predictable, which characteristically does not describe what insurance is intended to cover. The term “dental plan” more accurately describes what most would call dental insurance. With the help of dental predictability, consumers are able to make calculated decisions about dental plans that suit them best.

The most commonly utilized types of managed dental plans are direct reimbursement (DR), preferred provider organization (PPO), dental health maintenance organization (DHMO) and discount or referral.

Direct reimbursement (DR) plans are designed for its members to have the freedom to choose any dentist and for employers to offer a plan customized to their budget by deciding what percentage to reimburse at each level of cost. Employees choose a dentist, pay for the treatment and are reimbursed a certain percentage of the dollar amount. Some plans also establish “flex” accounts into which employees pay their share on a before-tax basis.

Preferred provider organization (PPO) plans require a monthly payment that entitles the member to a network of dentists who have agreed to discount their fees. Nonparticipating dentists usually still can be visited for a higher deductible and copayment.

Dental health maintenance organization (DHMO) plans pay contracted dentists a fixed amount (usually on a monthly basis) per enrolled family or individual, regardless of utilization. In return, the dentists agree to provide specific types of treatment to the patient. The patient may be required to pay a copayment. Theoretically, the DHMO rewards dentists who keep patients in good health, thereby keeping costs low.

Discount or referral options
are arrangements in which a limited number of providers who have agreed to discount their normal fees in exchange for the expectation of a larger patient pool. There is no reimbursement to the patient or to the provider. Many individuals and families that do not receive dental insurance from their employers turn to discount dental plans to reduce their out-of-pocket expenses.

The California Dental Association and its 25,000 member dentists can provide information that will be most useful as you make decisions about which dentist to see, what preventive care you should take and what other matters that affect your dental health and that of your family are important to consider. Visit www.cda.org for more information or to locate a dentist in your new area.

LIFE INSURANCE
In the event of your death, life-insurance coverage provides financial compensation to your family. Life-insurance policy payouts are not subject to federal income tax, which provides the assurance that a surviving family will receive full benefit of the proceeds. In 2009, about 9.4 million individual life-insurance policies were bought. Life-insurance products for groups are different from those sold to individuals. The following information focuses on life-insurance policies sold to individuals. There are two major types of life insurance: term and whole life.

Term insurance is the simplest form of life insurance. It pays only if death occurs during the term of the policy, which is usually from one to 30 years. Most term policies have no other benefit provisions. There are two basic types of term life insurance policies: level term and decreasing term.
  • Level term means that the death benefit stays the same throughout the duration of the policy.
  • Decreasing term means that the death benefit drops, usually in one-year increments, during the policy’s term.

In 2007, virtually all (97 percent) of the term life insurance bought was level term.

Whole-life insurance is sometimes called permanent life insurance, and it encompasses several subcategories. There are three major insurance types of whole-life or permanent insurance: traditional whole life, universal life and variable universal life. There are variations within each type. Whole-life or permanent insurance pays a death benefit whenever you die—even if you live past 100.

In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives beyond 80. The insurance company could charge a premium that increases each year, but that would make it very hard for most people to afford life insurance at advanced ages. The company keeps the premium level by charging a premium that, in the early years, is higher than what’s needed to pay claims, investing that money then using it to supplement the level premium to help pay the cost of life insurance for older people.

By law, when these overpayments reach a certain amount, they must be available to the policy owner as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy.

In the 1970s and 1980s, life insurance companies introduced two variations on the traditional whole life product:
universal life insurance and variable universal life insurance.

Before signing any application for insurance coverage, you should verify that the company and the agent you are dealing with are licensed in California. Having the proper and adequate insurance, whether for your home, automobile or health, can mean the difference between financial security and bankruptcy. Know what you need and how to get it.
 
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