Department of Business Regulation
Insurance Division
1511 Pontiac Avenue, Bldg. 69-2
Cranston, Rhode Island 02920
Insurance Bulletin Number 2021-4
Forms for compliance with 230-RICR-20-25-3
The following form is designated for use in compliance with 230-RICR-20-25-3 – Life Insurance
Disclosure:
Life Insurance Buyer’s Guide
Before You Buy Life Insurance
Understand What Life Insurance Is
Life insurance pays a death benefit if you die
while the policy is in effect, in exchange for premi-
ums you pay before your death. You can use the
death benefit to protect against financial hard-
ships such as loss of your income, funeral
expenses, medical or nursing care expenses,
debt repayments, and child care costs after your
death. You can get information from the NAIC
InsureU Life Insurance website -- www.insureu-
online.org/insureu_type_life.htm
If You Need Life Insurance, Decide
How Much Coverage to Buy
How much life insurance to buy depends on the
financial needs that will continue after your death.
Examples include supporting your family, paying
for child(ren)’s education, and paying off a mort-
gage. Some questions you may want to ask
about your own needs include:
• Does anyone depend on me financially?
• How much of the family income do I provide?
• How will my family pay my final expenses and
repay debts after my
death?
• Do I want to leave money to charity or family?
• If I have life insurance through my employer, is
it enough to meet my financial obligations?
The answers to these questions can help you
decide how much coverage you need. An insur-
ance agent, financial advisor, or insurance com-
pany representative can help you evaluate your
insurance needs and give you information about
available policies.
If You Already Have Life Insur-
ance, Assess Your Current Life
Insurance Policy
It’s important to compare your current policy with
any new policy you might buy. Keep in mind that
you may be able to change your current policy to
get benefits you want. Also, know that any chang-
es in your health may impact your ability to get a
new policy or the premium you’ll pay. Don’t
cancel your current policy until you get the new
one.
Also, while you may have free or low-cost life
insurance through your employer, the death
benefit usually is less than you need. And if you
leave the employer, you may not be able to take
this coverage with you.
Compare the Different Types of
Insurance Policies
There are many types of life insurance policies.
You should choose a policy with features that fit
your individual needs. Some things to consider
are:
• Term Insurance vs. Cash Value Insurance.
Term insurance is intended to provide lower-cost
coverage for a specific period of time (“a term”). If
you want coverage for a longer period of time,
such as for your lifetime, cash value insurance
may be more cost effective. Most term policies
don’t build up cash values that you can use in the
future.
• Renewable Term vs. Non-renewable Term.
Most term life insurance coverage can be contin-
ued (“renewed”) at the end of the term, even if
your health has changed. If you renew a term
policy, the new premiums are higher. Ask what
the premiums will be before you renew the policy.
Also ask if you’ll lose the right to renew the policy
at a certain age. A Non-renewable term policy
can’t be continued. You’ll have to apply for a new
policy if you still want coverage.
• Whole Life vs. Universal Life. Whole life and
universal life insurance are two types of cash
value insurance. A key difference between the
two is how you pay for the coverage. You typically
pay premiums for whole life insurance according
to a set schedule. In a universal life policy, you
can choose a flexible premium payment pattern
as long as you pay enough to keep your policy in
force.
• Variable Life vs. Non-variable Life. The
investments you will choose (such as stock and
bond funds) in a variable life policy directly impact
your cash value. These policies have the greatest
potential to build cash value but also the greatest
risk of losing cash value. Non-variable life policies
often have guaranteed minimums for some
features (interest or cash value, for example) but
not all. Non-variable life policies also have less
potential to build cash value than variable life
policies.
Be Sure You Can Afford the
Premium
Before you buy a life insurance policy, be sure
you can pay the premiums. Can you afford the
initial premium? If the premium increases later,
will you still be able to afford it? The premiums for
many life insurance policies are sensitive to
changes in the company’s investment earnings,
claims costs, and other expenses. If those are
worse than expected, you may have to pay a
much higher premium. Ask what might be the
highest premium you’d have to pay to keep your
coverage.
Understand the Application
Process
You can apply for life insurance through life
insurance agents, the mail, and online. In ad-
dition to basic information, such as your name,
address, employer, job title, and date of birth,
you’ll be asked for more personal information.
Depending on the type of policy, the insurer may
require you to see a doctor, answer health-related
questions, or have a medical professional come
to your home or office to assess your health.
Usually a policy that doesn’t require detailed
health information will cost more and provide less
coverage than one that does.
It’s important to tell the truth on the application.
The insurance company will check your answers
so review the application before you sign. If the
insurance company discovers false statements
on your application after it issues your policy, it
could reduce or cancel your coverage.
Choose a Beneficiary
A beneficiary is the person(s) or organization(s)
you name to receive your life insurance policy’s
death benefit. You’ll need to know the Social
Security or tax identification number for all benefi-
ciaries. Experts advise you not to name a minor
child as a beneficiary. Insurance companies won’t
pay a minor. Instead, consider leaving the money
to your estate or trust.
Evaluate the Future of Your Policy
Does your policy have a cash value? In some
cash value policies, the values are low in the
early years but build later on. In other policies the
values build up gradually over the years. Most
term policies have no cash value. Ask your insur-
ance agent, financial advisor, or an insurance
company representative for an illustration show-
ing future values and benefits.
After You Buy Life Insurance
Read Your Policy Carefully
After you carefully read your policy, you should be
able to answer the following important questions:
• Is your personal information correct?
• Do premiums or policy values vary from year to
year?
• What part of the premium or policy value isn’t
guaranteed?
• How will the timing of money paid and received
affect any interest the policy might earn?
Your insurance agent, financial advisor, or an
insurance company representative can help you
understand anything that isn’t clear.
If you’re not satisfied with your new policy, you
can return it for a full refund within a certain
period, usually 10 days after you receive it. The
review period usually is stated on the first page of
the policy.
Review Your Life Insurance
Program Every Few Years
Review your policy with your insurance agent,
financial advisor, or an insurance company repre-
sentative every few years to keep up with chang-
es in your policy and your needs.
• Have the premiums or benefits changed since
your policy was issued?
• Do the death benefits still meet your needs?
• Do you need more or less coverage after life
events, such as birth, adoption, marriage, job
change, death, or divorce?
The insurance company can provide policy state-
ments and illustrations to help with this review. As
the policy owner, you can change beneficiaries at
no cost. Be sure to review your beneficiaries
every few years, especially after major life events
that affect your life insurance needs.
