GENERAL INSURANCE DESCRIPTION

No one likes to think about the misfortunes that might come our way. But whether you're single or married, a parent or grandparent, the fact is you need insurance coverage to help ensure financial security for you and your loved ones.

Insurance is not just for your peace of mind, it's the key to safeguarding the future of your family.

Employer-provided insurance plans rarely provide enough protection, which is why supplemental plans (like the UnionSecure programs described on this site) can be so essential:

• Life
• Accident and Accidental Death and Dismemberment (AD&D)
• Disability
• Hospital and at-home recovery

Insurance plans that do not come directly from your employer also help you maintain coverage if you transfer jobs or if you're ever out of work.

When you purchase insurance, you should check to see if it pays benefits in addition to any other coverage you may have. (UnionSecure affordable supplemental insurance provides benefits in addition to your employer's plan or other individual insurance.) 

With so many types of insurance, deciding which works best for you can be confusing. So read below to learn more about what types of supplemental insurance are available and whether or not the types of coverage fit your needs.

Life insurance - and the difference between term and whole life coverage

Life Insurance

Do you have bills, a car loan, mortgage, dependents? If you were to die suddenly, what kind of financial hardship would result? Would your spouse or children be left without basic support? Would your burial costs impose undue financial hardship on others? As uncomfortable as it is to think about these questions, they are at the core of sound life insurance decisions. If there are people who can't afford to lose you, you can't afford not to buy life insurance.

Life insurance provides a certain amount of money (called the "death benefit") upon your death to someone you select as your beneficiary. In return for this protection, you pay the insurance company periodic payments, known as "premiums." The premium amount generally depends on factors such as the amount of coverage you selected (how much money your dependents should receive), your age, gender, medical history and whether you intend to build up cash value in your policy.* Some policies may require a medical exam.

Two of the most common types of supplemental life insurance are term life and whole life. Depending on you, and your family's needs, term life and whole life can provide the financial security you need.

Term Life

Term life is a popular choice because it provides the highest benefit at the lowest cost. You pay a premium for coverage over a specific period of time (a term) of one, five or ten years - or to a specific age, such as 70.   At the end of your term, your policy ends. Death benefits are paid only if you die within that term of years.   

Typically, you may renew your policy at the end of each term (your beginning age will determine how much your premiums will be each month). These term insurance policies are "renewable" for one or more additional terms even if your health has changed. Each time you renew the policy for a new term, premiums will be higher due to your new age.  

Some term insurance policies are also "convertible." This means that before the end of the term period, you may trade the term policy for a whole life policy even if you are not in good health. Premiums for the new policy will be quite a bit higher than you have been paying for the term insurance.

Because the premiums for term insurance can be low, but the payout is typically high, young and middle-aged people benefit greatly from term life's economical coverage. Term life is also an excellent supplement to other policies for those in need of additional protection - such as families with young children, mortgages, college tuition costs and other large bills. 

Whole Life

Whole life insurance provides lifelong coverage - to age 95, 100 and even beyond. The most common type is called "ordinary life" insurance. You pay the same premiums for as long as you live. For this reason, premiums are typically higher than term life premiums for the same amount of coverage. But your premium rates remain the same for the duration of your policy; rates do not increase and may be smaller than the premiums you would eventually pay if you were to keep renewing a term insurance policy until your later years.  

In addition to providing life insurance protection, whole life also builds cash value - a savings account within the policy increases over time on a tax-deferred basis. The cash value belongs to you even if you stop paying premiums.  Technically speaking, these values are called "non-forfeiture benefits." This refers to benefits you do not lose (or "forfeit") when you stop paying premiums. The amount of these benefits depends on the kind of policy you have, its size, and how long you have owned it.  

A policy with cash values may also be used as collateral for a loan. If you borrow from your life insurance policy, the rate of interest is shown in your policy. Any money which you owe on a policy loan would be deducted from the benefits if you were to die, or from the cash value if you were to stop paying premiums.  

* UnionSecure insurance premiums are not based on gender or occupation.

Accident and Accidental Death and Dismemberment insurance plans 

The two most common types of accident insurance are:Accidental Death or Accidental Death and Dismemberment (AD&D); these types of coverage provide a benefit if you die as a result of an accident. It is guaranteed to be issued - that is, it is not based on underwriting (as life insurance is).  AD&D also includes dismemberment benefits when an accident results in the loss of limbs, eyesight or hearing without resulting in death.

Accident insurance coverage typically costs less than life insurance (term or whole life) because it pays on accidents only - not illness.

Accident insurance is important because it can help close the coverage gaps left by other insurance coverage programs - life, health, workers' compensation and disability. It can cover expenses other plans may not. Accident insurance can also provide "living benefits" or payments that the insured can receive while he/she is still alive, such as payments for dismemberment.

Be sure to compare your coverage when you're selecting a plan and determine exactly what types of accidents are covered. Your employer may provide accident insurance - but you typically need accident protection off-the-job, where most fatal accidents occur. In fact, nearly 9 out of 10 deaths and about two thirds of disabling injuries suffered by American workers occur off-the-job.² 

² Based on 2002-2003 data from Injury Facts®, 2003 Edition

Disability insurance 

The odds are you or your spouse will be out of work for an extended time because of debilitating injury or illness.  In fact, 50% of all Americans will experience a long-term disability - 90 days or longer - at least once in their lives.¹

How will you pay those bills that keep coming without drawing your regular paycheck? Disability income insurance can help you meet your financial obligations while you're on the mend from an injury. Such policies typically replace 50-70% of your income and give you the peace of mind of knowing you will have cash coming in if you find yourself ever unable to work and earn a paycheck.  Disability policies pay benefits based on two general definitions of disability: 1) your inability to perform your own occupation or, 2) your inability to perform any occupation.

Disability coverage provides a monthly check to help replace income lost because you cannot work.  Many policies also include rehabilitation benefits, money to cover home, vehicle or workplace modifications to accommodate a disability, or job training or partial benefit to supplement returning to work on a part-time basis.

Some disability policies provide coverage for both accidents and illness; others cover accidents only. The latter coverage typically is far less expensive and can provide an economical alternative.  

¹Benefit News Advisor, November 13, 2002.

Hospital and at-home recovery insurance

Hospital and at-home recovery insurance provides cash for the time you're in the hospital and recovering at home. It not only helps you cope with the extra, unexpected expenses that accompany a hospital stay - such as health insurance deductibles - but also the expenses you face during at-home recovery, when the additional costs can really begin to add up for emergency child care, meals and more.

It's important to remember that while health insurance might cover the majority of hospitalization costs, it doesn't cover them all, and it doesn't help pay the mortgage and your day-to-day bills outside the hospital. With this insurance, you receive cash to use however you deem appropriate.

In addition, with hospital stays becoming increasingly shorter, it's more likely you'll still be in recovery when you return home, unable to work and in need of receiving some sort of home health care. Yet most home health care - as provided by a nurse, therapist, or other medical assistant coming to your home - is often an "out-of-network" expense and many carriers will impose "caps" and "benefit limits" on these expenses.

Also, many health insurance carriers will not cover the expenses for any modifications you might need to make in your home during recovery - like a ramp, a bathroom railing or other device to help you in your basic daily needs.

The bottom line is that hospital and at-home recovery insurance provides protection from the gaps left by traditional insurance and the move from hospital to at-home recovery.

What does underwriting mean? Why is it important?

Before providing you with a life insurance policy, the insurance company may engage in a process called underwriting - it's a review of your medical history used to determine the insurance company's risk in offering you coverage. This process often affects price and eligibility.

Note that underwriting is NOT used for policies covering accidents only.  These are called "guaranteed issue" coverages.

Underwriting can refer to a simple review of 2 or 3 questions on an insurance enrollment form - or it can include your height and weight. Sometimes additional underwriting is necessary after evaluating the information you provide on the application. Some companies may ask you directly for additional medical history or with your permission, the underwriter may request a review of your medical records and reports from your doctor.   In addition, a medical exam may be required, paid for by the company, which consists of a blood pressure check, height and weight measurement, and questions about medical history along with a blood and urine specimen. 

These underwriting requests are routine for higher amounts of coverage.  They can also help clarify your situation.   You still may be approved for coverage even if you have had many medical problems, although you might pay more than someone with no such history.