Life Insurance

10 Things You Should Know Before Purchasing Life Insurance

The Utah Life & Health Insurance Guaranty Association

Life insurance benefits are not guaranteed by any government agency. However, companies licensed to sell life insurance, health insurance, and annuities in Utah are required by law to be a member of the Utah Life & Health Insurance Guaranty Association (ULHIGA). If a company licensed in Utah becomes insolvent and is unable to pay claims, the law requires ULHIGA to pay some of the claims.

The benefits are for residents of Utah; if you move to another state, you may be eligible for benefits from that state’s guaranty association. The caps are $200,000 for net cash surrender value, $500,000 for death benefits, and $250,000 for annuities.

See the Notice that is required to accompany an insurance policy for specific details.

ULHIGA Contact: Ted Lewis — (801) 320-9955 or

What Type of Life Insurance Is Right For You?

All life insurance policies have one thing in common: They’re designed to pay money to “named beneficiaries” when you die. The beneficiaries can be one or more individuals or even an organization.

In most cases, policies are purchased by the person whose life is insured. However, life insurance policies can be taken out by spouses or anyone who is able to prove they have an insurable interest in the person. If you buy insurance on someone else’s life (a spouse, for example), the policy pays when that person dies.

Top Considerations

There are many different types of life insurance policies — you should choose a policy with features that fit your individual needs. Based on their unique characteristics, it is possible to identify several distinct types of life insurance coverages. However, they fall into two classes of life insurance products: term and cash value policies.

Term life insurance is a policy that is purchased for a period of time (a term). The policy pays money to the named beneficiaries if the insured dies during the term. Term life insurance is intended to provide lower-cost coverage for a specific period.

Term life policies may include a provision that allows coverage to continue (renew) at the end of the term, even if your health status has changed. However, those premiums may be higher than the original policy. Ask what the premiums will be before you renew. Also, ask if you lose the right to renew at a certain age. If the policy is non-renewable you will need to re-apply for coverage at the end of the term.

A cash value life insurance policy is different because you can keep it for as long as you need it. These policies also have savings or investment features, which make it possible for policy owners to get money from the policy while they’re still alive. Whole life, universal life, and variable life are types of cash value policies.

Everyone’s financial situation is different. First, decide if life insurance is even necessary. If it is, here are some questions to ask.

Ask yourself:

  • How much of the family income do I provide?
  • Will these financial obligations change over time?
  • Knowing that the risk of death increases each year, in how many years do you anticipate the need for death benefits?

Ask the agent:

  • Do I pay the premiums on a set schedule?
  • Does the policy have a cash value?
  • Do the policy values change from year to year?
  • What part of the premium or policy value isn’t guaranteed?
  • Are there guaranteed minimums on my policy?

How to Protect Yourself

If you already have life insurance, it’s important to compare your current policy with any new policy you might consider. Also, keep in mind that any changes in your health may affect your ability to get a new policy or the premium that you’ll pay. Don’t cancel a current policy until you get a new one.

Before you buy a life insurance policy, be sure you can afford the premium. The premiums for many life insurance policies are sensitive to changes in the company’s investment earnings, claim costs, and other expenses. Be sure to ask what the highest premium might be to keep your coverage.

Does your policy have a cash value? In some cash value policies, the values are low in the early years but build later. In other policies, the values build up gradually over time. Ask your insurance agent, financial advisor, or insurance company representative for an illustration showing future values and benefits. Most term policies have no cash value.

Things to Remember

  1. Make sure you understand how your policy works and that you clearly understand the payouts.
  2. It is important to tell the truth on the application. Insurance companies will check your answers, so review the application before you sign. As with any insurance product, any false statements on the application could reduce or cancel your coverage.
  3. Read your policy carefully to make sure your personal information is correct and that you included the Social Security or tax ID number of all beneficiaries.
  4. Insurance companies won’t pay a minor. Instead, consider leaving the money to an estate or trust.

Get More Information

For more in-depth information on life insurance see our Life Insurance Buyers’ Guide.

Facts of Life: Tips for Consumers

Although consumers widely recognize the importance of life insurance in financially protecting their families, most need significant help in determining the type and amount of coverage appropriate at different life stages, according to the National Association of Insurance Commissioners (NAIC), of which Utah is a member. Acknowledging September as Life Insurance Awareness Month, the NAIC has assembled useful information about the subject on its Consumer Education website ( opens in a new tab) to help educate consumers about if and when to purchase, increase or reduce their life insurance at different stages in their lives.

Consumer research conducted by the NAIC earlier this year indicates:

  • Only 35% of young singles have life insurance. Furthermore, few young singles (28%) express high levels of confidence in knowing the difference between the two basic types of life insurance, term and permanent, and a similar number (27%) are highly confident that buying life insurance when they are young will guarantee their coverage later in life.
  • Among young families, nearly two-thirds (64%) believe it’s very important for both spouses to have life insurance. Yet fewer than half (48%) say they actually have purchased life insurance for either spouse.
  • Across all life stages, a significant number of consumers (around 40%) fail to review their life insurance policies on an annual basis.

The Basics: What All Consumers Should Know About Life Insurance

There are three life insurance basics that all consumers should consider:

  1. Start by considering how many people are financially dependent on you, what their major expenses are likely to be and whether you’re likely to leave them with substantial debts or taxes to pay on your estate. Life insurance can help on all of those fronts.
  2. Evaluate the two main types of life insurance: term and permanent. As its name implies, term life insurance pays a death benefit if you pass away within a specified time period (typically a term of one to 20 years). In contrast, permanent life insurance (which comes in many varieties such as whole life, universal life, and variable life) includes both a death benefit and the ability to build up cash value over your entire lifetime.
    In general, term life insurance is much less expensive than permanent life. In fact, term life premiums have decreased markedly during the past decade due to the fact that Americans are living longer on average. Consumers who purchased their policies more than a few years ago should check out current rates. Also, consumers should ask whether the policy they are considering charges a surrender or cancellation fee if they decide to drop the policy or switch to another one.
  3. Understand the major factors that can affect life insurance premiums. Some are uncontrollable, like the age at which one purchases a policy or a serious pre-existing medical condition, like cancer or heart disease. Other factors are much more dependent on an individual’s behavior, like poor health habits (e.g., smoking and excessive drinking), driving record (e.g., accidents and Driving While Intoxicated citations), engaging in dangerous hobbies (e.g., skydiving, car racing or rock climbing) and even where one lives, since mortality rates in a geographic region may be used by life insurance companies to help establish premiums.

Life Insurance Tips for Each Life Stage

Following are tips to consumers focused on their likely needs in different life stages. For example:

  1. Young singles who want to be sure that they can get life insurance later in their lives when they may develop health problems should consider purchasing term life insurance that is guaranteed to be renewable. They may also want to consider a term policy with a conversion option, which enables them to switch, for a set fee, to a cash-value policy at a time when they have more money. Those serving in the military should consider Serviceman’s Group Life Insurance, low-cost term life insurance available to all those in active duty.
  2. Young families should consider purchasing life insurance for both spouses, even for a non-working spouse, to help pay for childcare and other domestic services. At this life stage, term insurance may be the most cost effective when their salaries are still relatively low and they’re paying off a mortgage. Some parents purchase small life insurance policies for their newborns to guarantee that they’ll have some insurance if they develop health problems.
  3. Established families should consider the probable costs of their children’s college education when determining how much life insurance they may need.
  4. Empty nesters/seniors should evaluate whether they can reduce their life insurance coverage based on such factors as whether their spouse is alive, their home is paid off, their children and/or grandchildren are financially independent, or if they anticipate high estate taxes that would be a burden on their heirs. Some older individuals with significant financial assets may choose to keep their life insurance in force because they view insurance as an estate planning tool that enables them to leave their loved one’s money that is exempt from income and estate taxes.

All consumers should remember to review their life insurance policy every year before paying their premiums and update it to reflect any major changes in their lives — like marriage, the birth of a child, divorce or the death of a spouse. Before signing up for any kind of insurance, consumers should check with our Health & Life Division to make sure the company offering the policy is legitimate, solvent, and authorized to do business in Utah.

Lost Life Insurance Policies

There is no national or state registry of insurance policies issued by life insurance companies. If you believe someone was insured but you are unable to locate the policy and don’t know the full name of the company, the department suggests the following:

  • Check with all family members and close friends to determine if a company was ever mentioned by the decedent.
  • Review all checking account and credit card records to see if premium was paid to a named life insurance company. We suggest that you review at least one year of records in the event the premium was paid on an annual mode.
  • Check with past employers, unions, and associations to determine if life insurance was purchased through them.
  • Check with the insurer that provided the homeowner and auto coverage to see if life insurance was also purchased.
  • If the decedent lived in a small community, check with the local insurance agent(s).
  • Using an Internet search engine, conduct a search for lost life insurance – to locate private companies that for a fee will contact insurance companies for you to see if the decedent was insured by the companies they contact. Because you will be charged a fee, be sure to ask what service will be provided and the cost.

The National Association of Insurance Commissioners has a Life Insurance Policy Locator Service that may be able to help in your search. Visit opens in a new tab for more information about the service.

Out-of-State Applications

It has recently come to our attention that some Utah producers have taken Utah residents across state lines into neighboring states to have them sign applications for insurance policies or annuity contracts that are not available in Utah, and which were not filed with the Department. Producers have reportedly informed some of the applicants that the policies or contracts are not available in Utah and therefore the application must be signed in a neighboring state in order to have a policy or contract be issued. In some instances, the insurance company then issued the policy or contract to the Utah resident on the neighboring state’s policy form which had not been filed in Utah.

Please be aware that per Utah Code Annotated (UCA) Section 31A-21-201 opens in a new tab, a form may not be used, sold, or offered for sale unless the form has been filed with the commissioner. Additionally, per UCA Section 31A-21-101 opens in a new tab, this requirement applies to all insurance policy and annuity contract forms, applications, and certificates that are: “(a) delivered or issued for delivery in this state; (b) on property ordinarily located in this state; (c) on persons residing in this state when the policy is issued; and (d) on business operations in this state”. Therefore, insurance companies and producers who use, sell, or offer for sale to persons residing in Utah, an insurance policy or contract that has not been filed in Utah, and is thus not available in Utah, do so in violation of Utah insurance law, even when the application was signed in another state.