Kiplinger Personal Finance: Don’t Fall For This Life Insurance Ad On TV | Business News

People see an advertisement for life insurance on TV, but when they ask for more details, the policy is not what they expected.

“The fine print on these ads goes so quickly that when people call for more information, the conditions are very different from what they had in mind,” says Boinger, of Rice Agency in Hagerstown, Maryland.

On the surface, life insurance seems simple enough that all products follow the same general setup: You pay premiums, and if you die, the insurance company pays your heirs death compensation. But there are different types of life insurance, and it’s not always explained how products differ in a 30-second commercial.

Kelly Maxwell, owner of insurance brokerage Seniors Mutual in Pflugerville, Texas, says the most popular television ads are for life insurance policies with a guaranteed issue. Since there is no medical exam or health insurance for these policies, anyone can easily qualify for them. “Insurers can probably put a policy in place in five minutes over the phone,” Maxwell says, with lifetime coverage.

If you are in good health and would like to have a check-up, there are cheaper options. In fact, even applicants with mild health conditions, such as high cholesterol, may qualify for a lower rate after a health exam.

Guaranteed release policies are often used to cover funeral costs because the amount of coverage you can purchase is limited, usually a maximum of $25,000, while policies that include a medical exam can insure you for six or even seven figures.

There are other drawbacks. Guaranteed release policies do not pay death benefits for the first few years. For example, a policy might state that if you die from any cause within three years after you purchased it, your heirs will only receive the premiums plus interest refunded, not the death benefit listed.

“Insurance ads tend to cover up these downsides,” says Rafael Rubio, president of Stable Retirement Planners in Southfield, Michigan. “While there is room for a foolproof case when applicants don’t qualify for other policies, people who can meet the health standards for life insurance do. They will get a better view by applying with a medical examination.”

Life insurance that requires a health check usually falls into two categories: deferred or permanent. Duration is temporary life insurance.

It lasts anywhere from 1 to 40 years depending on the term, with only the quoted price guaranteed for that term. If the term is exceeded, coverage ends. Depending on the contract, you may be able to renew, but the premiums will cost more because you’re reapplying at an older age where you may have more health conditions as well.

However, permanent life insurance does not expire as long as you continue to pay the premiums. The flip side is that because these policies are more likely to pay death benefits, they initially charge more than a life insurance policy, roughly five to 15 times as much initially. As a result, only small amounts of coverage may be affordable.