Wednesday, May 1, 2002

Does your life insurance pay off only if you're 'totaled out'?

Would you want auto insurance that pays for losses only if your car is totally demolished? Probably not. We want auto insurance that covers virtually all possible losses minor fender-benders, broken glass, theft, liability for injury to others, all the way to total demolition, or, as they say, "totaled out."

But many people buy life insurance that pays a benefit only if they are totaled out upon their death. It's traditional term life insurance, the kind people say that you have to die to beat. Now, there is a new generation of life insurance that actually is life insurance, a type that offers benefits for living, rather than just when you die.

Patrick M. Foley, CLU, ChFC, president and CEO of Allianz Marketing, points out that with advances in healthcare, we now survive illness and disease that once meant certain death. In times past, people expected to die at a relatively early age, and were concerned about protecting their family. Today, the economic risks of living a long life have become a greater concern. According to Foley, there is now a new generation of life insurance, often called "multi-benefit" life insurance, which addresses the new needs of today's consumers, rather than the needs of the past.

We now survive serious illnesses like cancer, stroke, kidney disease and others. Unfortunately, survival also carries an economic impact, for example, lost income, unplanned medical costs and individual family needs. There's the mortgage, childcare, car payments, tuition and all the usual living expenses. No one plans for a serious illness or disability, but if one comes along, most people will have to cope with the financial consequences that survival often brings.

Protection against the economic cost of surviving a critical or chronic illness forms the cornerstone of multi-benefit life insurance. Specific policy benefits, conditions and limitations may apply, but typically conditions covered include several such illnesses. Examples include some forms of cancer, major and minor heart attack, stroke, paralysis, kidney failure, organ transplant and others.

Subject to certain limits, these policies typically offer lump-sum payments upon diagnosis (prior to any course of treatment) of a covered critical illness in the form of an acceleration of the policy death benefit. With these policies, some portion of the policy amount (the death benefit) will be available in the event of a critical illness. The death benefit may be reduced by the amount paid to you, but all policy benefits remain in effect. For a chronic illness a disabling illness or injury these policies usually offer monthly benefit payments until you recover. Many policies allow you to use the money for any purpose. No bills or receipts are required, and the benefit payments do not have to be repaid.

Some versions of these new policies will offer the opportunity to accumulate cash value, tax deferred, that could be converted to monthly payments at retirement; the payments would be guaranteed for life. Some even may offer an option to link the cash value buildup to one or more stock market indexes. As with all life insurance policies, the policy death benefit passes to the beneficiary income-tax free.

Multi-benefit life insurance is now available from just a few companies, and product availability and benefits may vary by state. It is anticipated, however, to be offered by nearly all life insurance companies and become a popular choice of consumers in the years ahead.

For information about life insurance, visit the American Council of Life Insurers at www.acli.org. For information about Allianz Life policies, specific provisions, limitations, charges and conditions, contact Allianz Life at (800) 950-5872, or visit www.allianzlife.com. Allianz Marketing is a division of Minneapolis-based Allianz Life Insurance Company of North America.

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