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Life Insurance in Michigan

Life Insurance in Michigan

Life insurance in Michigan is an insurance type that caters to a person’s survivors upon their demise. It is considered an essential part of financial planning and necessary for a person who solely caters to his family’s financial needs. Upon your demise, your life insurance policy will provide money for your family and assist them in covering burial expenses, estate taxes, living expenses, children's tuition, and any outstanding bills and debts. Life insurance in Michigan provides financial protection. It helps to supplement the income of survivors or dependents and maintains their previous standard of living before the demise of the insured who was their sole provider.

Besides the death benefit, life insurance has many other uses while the insured individual is still alive. It can be used to save money, finance the retirement tax free, and even to invest into the stock-market, where (unlike the traditional retirement plans like 401K) your investments are protected in case if the market declines.

Michigan-licensed insurance companies offer four primary types of life insurance; term life, whole life, universal life, and final expense (FE) life insurance. Michigan also has additional coverage that can be specifically tailored to your life insurance needs by subscribing to policy riders. These policy riders provide other benefits that the primary insurance policy would not. Life insurance riders typically allow the insured to use the death benefit themselves, before dying for long-term care (LTC), chronic illness, waiver of premium, return of premium, accidental death benefit, accelerated death benefit, child protection riders, and many more.

How Does Life Insurance Work in Michigan?

Have you ever wondered how life insurance works? Life insurance in Michigan pays lump sums or scheduled payments, known as death benefits, to your chosen beneficiaries upon your death. It is a way of protecting and providing for your loved ones financially after you die. Everybody eventually dies, so the longer you wait to get the policy, the more you will end up paying.

A policy beneficiary is an individual or entity the insured party names in a life insurance policy to collect the death benefits from the insurance company upon their demise. When buying life insurance in Michigan, insureds can choose one or more beneficiaries. Your spouse, adult children, business partners, siblings, parents, trust fund, or charitable organizations are the most common options to consider as your beneficiaries.

Insureds in Michigan can also benefit from their life insurance policies while alive under certain policy types. These are known as living benefits. Living benefits enable an insured to tap into their death benefits before they die. In Michigan, once you purchase life insurance, you agree to pay the specified premium, which validates and keeps your contract in force. When buying a life insurance policy, consider the cost of premiums and the coverage you and your beneficiaries need. The amount of death benefit your dependents get primarily depends on the amount of coverage chosen.

In Michigan, life insurance policy beneficiaries can lay claim to death benefits anytime, but they are advised not to wait too long after the insured’s death. When the insured party dies, their beneficiaries should contact the insurance company and file a claim by submitting a claim form, a copy of the policy form, and a copy of the death certificate.

What Kind of Life Insurance is Available in Michigan?

There are four main types of life insurance in Michigan. They include:

  • Term life insurance
  • Universal life insurance
  • Whole life insurance
  • Variable life insurance

Term life insurance: Term life insurance pays out death benefits to policy beneficiaries if the insured person passes away within the duration of the policy. Michigan State government and other insurance providers offer different term life insurance coverage options for employee only, employee and spouse, and employee and children

Universal life insurance: Universal life insurance provides permanent (lifetime) coverage for an insured as long as premiums are continually paid. This life insurance type includes a cash value component whereby part of the money paid as premiums is invested by the company and can be made available as an interest-free loan to the insured during their lifetime. Universal life policies are adjustable and allow changes to the coverage type or premium amounts throughout the insured’s lifetime

Whole life insurance: Whole life insurance provides lifetime (permanent) coverage for an insured at a fixed premium and death benefit stated in the policy document. Whole life insurance policies also accumulate cash values and dividends over time which are tax-deferred and can be used in emergencies or other purposes by taking interest-free  loans against your policy

Variable life insurance: Variable life insurance is a type of life insurance with a cash value component that provides lifetime coverage for insureds. However, under this policy, cash values and death benefits vary and depend largely on the performance of investment options, which are controlled by the insured. Due to the much higher level of risk with Variable products, it can be sold only by Michigan life insurance agents who are also licensed by the Financial Industry Regulatory Authority (FINRA) to sell securities.

These life insurance options fall under two broad categories. These are cash value life (also known as permanent life), and term life insurance.


Cash value life insurance in Michigan offers coverage for an insured’s lifetime and also includes a savings option through a cash value component. The money from this cash value component can be used for many purposes, including borrowing against it for personal expenses or paying policy premiums. Typically, a life insurance type that includes a cash value component has higher premiums than other kinds of life insurance due to the cash value element. Most life insurance policies of this nature require a fixed-level premium payment, of which the companies allocate a portion to the insurance cost, and the remaining is deposited into the cash value account. It earns a modest interest rate, with taxes deferred on the accumulated interest on the policy. As a result, the cash value of the policy increases over time. The insurance company’s risk decreases as the cash value increases because the accumulated cash value offsets part of the insurer’s liability. This happens if the insured did not use up the cash value of the policy while alive, so the insurer keeps it and uses it to pay the death benefit.

TERM LIFE Insurance

Term life insurance in Michigan is a cost-effective option for many residents looking to protect against their untimely death within a specific period. Term life insurance coverage offers guaranteed death benefits and premiums for specific periods that could be as low as 2 years or as long as 40 years. There are different types of term life insurance, based on what happens to the death benefit and premium over the course of the policy.

Most common types of Term life insurance policies offered in Michigan are:

  • Level term - where the death benefit and premium remain constant throughout the policy term,
  • Decreasing term - where the death benet gets lower over time, thereby reducing the amount of premium it costs, and
  • Renewable term - where at the end of the term of the policy the insured is able to renew the coverage without a medical exam. (Note: The premium amount will increase at each renewal based on the age of the insured at the time of the renewal).

Another type of term insurance that can be found in Michigan is the Return of Premium Term Life which allows you to receive a refund of all or some part of the premiums you have paid into the policy IF you are still alive at the end of the policy term.

Business owners in Michigan can purchase various types of term life insurance coverages to provide coverage for the employees and the owners alike. Term life insurance for business can protect key or all personnel, or be used to secure a  business loan. Speak to a Michigan-licensed insurance agent for advice on the type of coverage that will suit your needs.

What Type of Life Insurance Does Not Require a Medical Exam?

Life insurance companies in Michigan typically require you to take a medical examination to determine if you qualify for coverage, the type of coverage required, and to determine the cost of premiums to charge you. On the other hand, no-exam life insurance can be purchased without a checkup. However, the insurer might require that you answer some medical questions or submit some health records. The no-exam coverage is available as a term or permanent insurance, including universal and whole-life policies. No exam coverage will almost always cost more than the coverage where you medically qualify for the best possible health condition tier.

Three types of life insurance policies that do not require a medical exam in Michigan are:

  • Simplified issue policies do not require a medical exam, but you will need to complete a questionnaire on your health and lifestyle. This questionnaire will include questions on income, current health conditions, family background, recent hospitalization, and if you engage in high-risk hobbies. This type of life policy has a maximum coverage of $100,000
  • Guaranteed issue life insurance bypasses medical exams and questionnaires. Approval is guaranteed if you meet the insurer's age requirements, usually between 50 and 80, and in some instances, this limit may be raised to 85. A guaranteed issue life insurance plan is a useful option if you are ineligible for standard life insurance policies due to old age or severe health issues. However, some insurance companies will deny terminally ill applicants
  • Accelerated underwriting assesses your health risk using algorithms or artificial intelligence instead of physical exams and medical questionnaires. Persons with sound health, good income, and no family history of severe medical conditions can get approval for up to $1 million coverage

No-exam life insurance only covers death due to natural causes. However, some insurers might allow interested persons to purchase accidental death coverage as riders or add-ons. This provides your beneficiaries financial protection if you die from a car accident, drowning, poisoning, or other mishaps. Each life insurance provider in Michigan has its own unique requirements for no-exam life insurance eligibility. These differences are seen in age limits requirements, while terminally ill patients may be denied coverage outright.

What Can You Do With Life Insurance?

Life insurance can be an essential part of financial planning. This is because you can use a life insurance policy to help secure a financial future for your loved ones after you pass away. Life insurance can help cover your final expenses or provide your family with financial support or serve as an inheritance for a loved one. Alternatively, you can use tax free cash value loans to supplement your retirement income without affecting your social security eligibility.

The following are some of the things you can do with life insurance in Michigan:

  • Paying final costs: Your family can use your life insurance policy benefits to pay for final expenses after you pass away. The costs may include funeral or cremation costs, medical bills not covered by health insurance, estate settlement costs, and other unpaid obligations
  • Pay off debts: Life insurance benefits can serve as income replacement in the household when you pass away - providing the needed financial stability. Any outstanding debts could be offset while it may pay your mortgage or children’s college tuition. It can also pay off debt, such as credit card bills or an outstanding car loan
  • Inheritance: Some people purchase life insurance policies, to serve as money that will be left as an inheritance to their loved ones. The death benefits could serve as a financial gift for your chosen beneficiaries.
  • Charitable contributions: You can purchase a life insurance policy with your favorite charity as the named beneficiary. It can help ensure you meet your philanthropic goals after you pass away.
  • Finance the retirement: Similar to a 401K, some life insurance policies allow you to invest the cash value account into a stock market index (like the S&P 500 and the likes), where unlike the 401K the insured’s bottom line is protected. For example, in an Indexed Universal Life, every year or so, the value of the cash value account is locked, establishing the “floor”, below which the investment cannot dip, no matter how the market performs. If the stock market tanks, the worst case scenario is that there is no gain compared to where the stock started. If the market does really well, the cash value can grow up to the limits listed in the policy.

You can find out more information on life insurance and your requirements in Michigan by contacting the Department of Insurance and Financial Services.

What is a Premium in Life Insurance?

A life insurance premium in Michigan is the sum paid to your life insurance company periodically in exchange for life insurance coverage. As long as you do not default on premiums, your coverage will remain in place for the duration of your policy. Typically, you pay life insurance premiums monthly, quarterly, or annually, depending on the agreement in the policy. The cost of a premium varies based on the insurance provider and the person to be insured. Before a policy is issued, the insurance company would evaluate your health and other factors to determine the amount of coverage to offer and the cost of premiums. Due to its limited and defined period of coverage, term policies usually cost less. Permanent life insurance typically includes a cash value component and costs more than term policies. Paying annually is almost always less expensive.

Are Life Insurance Premiums Tax Deductible?

Life insurance premiums are usually not tax deductible because the IRS considers it a personal expense. However, in some instances where it is purchased for business purposes, it might become tax deductible. Speak to a Michigan-licensed life insurance agent to know whether your life insurance type is tax deductible.

What Is a Death Benefit in Life Insurance?

A death benefit in life insurance is the money paid to your beneficiaries if you die while your life insurance policy is in effect.  While buying life insurance in Michigan, you must designate a beneficiary of the insurance policy. There can be more than one beneficiary at a time; alternatively, you could list an entity such as a charity, family trust, or even a business as a beneficiary. Death benefits are typically exempt from tax.

When is Death Benefit Payable?

In Michigan, life insurance companies pay death benefits when the insured dies. Beneficiaries can file a death benefits claim after the death of the insured by submitting a completed claims form alongside a certified copy of the insured’s death certificate. Beneficiaries must also provide proof of identity. In Michigan, life insurance companies have 60 days, after which they can pay out, deny, or ask for additional information concerning a claim. If a company denies your claim, they must include the reason. Most life insurance companies pay valid claims within 30 to 60 days of the date of filing the claim. There is no time frame for insurance companies to pay out benefits, but they are expected to pay out as soon as possible to avoid having to pay beneficiaries high-interest charges that may accrue due to delayed payments.

####Will Life Insurance Payout Affect SSI?

Being a beneficiary of a life insurance payout in Michigan may affect your right to Supplemental Security Income (SSI) benefits. This is because the program has strict asset restrictions and receiving payouts that exceed these limits may lead to a termination or reduction of your benefits. Taking loans against a life insurance policy that you own may also affect your access to SSI benefits.

Make sure to discuss your life insurance needs and SSI benefits with an experienced Michigan-licensed life insurance agent familiar with the subject.

What is a Living Benefit in Life Insurance?

Many people ask: Can life insurance be used while alive? The answer is yes, although primarily for cash value life policies. A living benefit in life insurance allows you to use the death benefit and withdraw or borrow against the cash value account while still alive. You can use the proceeds for any purpose. Some insurance brokers in Michigan call them living or accelerated death benefit riders and automatically include them in your insurance policy at no additional cost. In some instances, especially if you are ill, you may be able to access up to 80% of the insured sum as living benefits, but you will need to prove the severity of your illness to qualify. Note that using these living benefits will reduce the lump-sum payment intended for your beneficiaries.

Meanwhile, if you do not use up the cash value of the life insurance policy, this money is forfeited to the insurer, who will then use it to partially offset its losses when paying out the death benefit to your beneficiaries.

What is MEC in Life insurance policy?

MEC is an acronym for Modified Endowment Contract. A modified endowment contract (MEC) in life insurance refers to cash value policies under life insurance contracts that have exceeded legally permitted tax limits. Simply put, if the policy’s primary purpose appears to be investment and not the insurance of life in case of death, it gets marked as a MEC. Life insurance policies that are labeled as MECs by the Internal Revenue Service (IRS) lose the tax benefits of withdrawals. As such, any withdrawals made from an account that had been so designated will not be tax-free. You can lose these tax benefits if you pay too much in premiums into your life policy’s cash value component within a short period.

In the 1970s, many insurers tried to take advantage of the tax-free growth of cash value policies. They offered life insurance products with substantial cash value growth features. When insureds needed to access this cash value, they could tap the principal and interest of an active policy as a tax-free loan. It effectively allowed them to access significant tax-sheltered assets, and the government quickly caught on. In response, they introduced the MEC to counteract these limitless benefits.

For a life insurance policy to change into a MEC in Michigan, it must meet three criteria:

  1. You purchased the policy on or after June 20, 1988
  2. The MEC meets the definition of a life insurance policy
  3. The policy fails the "seven pay " test

Can You Borrow From Life Insurance?

Yes. If you own a permanent life insurance policy in Michigan, you can borrow against the cash value component of the policy. You will typically not be required to satisfy any special loan conditions and the money can be paid back at any time. However, if you fail to repay the loan, the borrowed amount will be deducted from the death benefit payout to your policy’s beneficiary when you pass away.

Note: Cash values are meant to be used up through loans and other uses while the insured is alive. Otherwise they become the property of the insurer. Ask your life insurance agent about all the ways you borrow from life insurance to maximize the tax free benefits and to stretch the cash value account to last you a lifetime.

What Is a Rider in Life Insurance?

A rider in life insurance is an optional coverage that may be added to your life insurance policy for additional benefits and coverage that may not be included in the original policy. A term rider can easily customize your life insurance policy by supplementing your primary policy with temporary coverage when you need it most. Life insurance companies, including those in Michigan, design these policy add-ons to cover you for a specified number of years, usually when you face additional financial obligations that would otherwise require short to medium-term assistance.

Why are Riders Important in Life Insurance?

Riders in life insurance provide extra cover and additional ways through which you can protect your interests and your loved ones even after your demise. A rider provides coverage options beyond the original policy. Depending on your needs, you can purchase different riders along with your life insurance policy. A rider not only enhances your policy but is also extremely helpful to you from a financial point of view. Hence, you should purchase a rider based on your needs. Some of the significant benefits of riders in Michigan life insurance are:

  • Allowance for policy customization
  • Making insurance more economical
  • Eliminating the need for an additional policy

What are the Top 8 Most Important Life Insurance Riders?

Common life insurance riders in Michigan include:

  1. Guaranteed Insurability Rider: This rider provides additional coverage within the stated period without a further medical examination. A guaranteed insurability rider is particularly useful to address periods of significant change in your life, such as relocation, marriage, or childbirth. Persons with this rider can apply for extra coverage during old age without providing any evidence of insurability
  2. Accidental Death Rider: An accidental death rider provides additional coverage  if the insured dies due to an accident. It is also referred to as a double indemnity policy. In most cases, the benefit paid under this rider is the same as the original policy, hence doubling the amount. Thus, if an accidental death occurs, beneficiaries of the insurance policy get twice the amount of the original policy
  3. Premium Waiver Rider: This rider permits life insurance companies to waive future premiums when the insured may be struggling to afford them. This occurs  if an insured suffers an accident or other mishap that results in a permanent disability or or loss of income due to injury or illness before a specified age. If any of these cases, the insurance company will suspend the payments of premiums until the insured is well and ready to work again
  4. Family Income Benefit Rider: This rider can provide a steady flow of income to the beneficiaries of an insured after death. You will need to specify the number of years your family will receive the benefit if you are adding it to your life policy
  5. Accelerated Death Benefit Rider: An accelerated death benefit rider enables an insured to access their policy’s death benefits if diagnosed with a terminal illness. With this rider, insurers will advance a percentage of the base policy’s death benefit to the insured. The used up amount will be deducted from the death benefit payout upon your death
  6. Child Term Rider: A child term rider provides extra coverage for a child if the child dies before a specified age. This rider can be converted into a permanent form of insurance after the child reaches an age of maturity as stipulated in the policy. This conversion could increase the policy limits to more than four times the original amount, and there will be no need for a medical exam
  7. Long-Term Care (LTC) Rider: This rider will provide payments for an insured requiring admission at a nursing home or receiving some other form of care. Note that this rider does not prevent you from purchasing long-term care insurance as a separate policy. However, combining a LTC rider with an existing life insurance policy will enable you to take care of any long-term care costs without purchasing another life policy
  8. Return of Premium Rider: A return of premium rider will ensure that the amounts paid as a premium under a particular term life insurance policy will be returned if an insured outlives the policy.

Is There a Deductible in Life Insurance?

No, life insurance does not have a deductible. Property insurance has deductibles, while liability insurance and life insurance do not.

How Do Life Insurance Companies Operate in Michigan?

In Michigan, life insurance companies provide coverage in exchange for the payment of premiums, and if you pass away, the company pays out a death benefit to the named beneficiaries of the policy. Insurance companies offer different coverages to cater to different persons. Some life insurance policies can offer both death and living benefits. A living benefit rider will allow you to tap into your policy's death benefit while you are still alive. You may also be able to tap into the accumulated funds on your policy by borrowing against the cash value portion if available.

Some life insurance companies may also provide riders or policy add-ons that allow insureds to withdraw from the funds in the cash value component or receive payments if events stated in the policy occur. When purchasing life insurance, it is important to consider:

  • The amount of coverage you need
  • The amount you are willing to pay for premiums
  • What type of policy would be suitable for you
  • The different quotes and discounts offered by various insurance companies
  • The required riders and add-on

Mutual vs. Stock Life Insurance Companies

A stock life insurance company in Michigan is an insurance corporation that is owned by its stockholders or shareholders. As a result, this type of company is run with the aim of making profits for its shareholders. Stock insurance companies may be privately or publicly held and may distribute excess funds as dividends to the shareholders, invest or apply them in settling debts. In Michigan, a life insurance company is required to have a certain minimum of capital and surplus to operate as a stock insurance company and obtain state regulators’ approval. 

On the other hand, mutual life insurance companies in Michigan are set up and run in a way that ensures funds are continually available to satisfy the needs of policyholders. They are owned jointly by the policyholders upon purchasing a policy, and as such, policyholders can have a say in the running of the company. These companies differ in size and include small local providers as well as large national and multinational insurance companies. Mutual life insurance companies also have to meet criteria set out by the state regulatory board and may resort to the protection offered by state guaranty funds in challenging times.

How Can Life Insurance Companies Afford to Pay Out the Claims?

Besides the profit that Michigan life insurance companies make on premium payments, they make money from safe investments using premiums received from insureds. While insurance companies may profit directly from dividends, the income from investing premium revenues is even more substantial. These multiple sources of revenue enable them to pay out claims as they arise. Life insurance companies usually invest in government bonds and other financial products. Claims can also be paid using income from lapsed policies and expired term policies. This is because, after a life insurance policy expires, the insurance company is not required to make any payments to the insured. The other main source of cash infusion is from the forfeited cash values from the permanent life policies where it wasn’t used by the insured while they were still alive. What did not get used is now the insurance company’s property.

How Do Life Insurance Companies Make Money If Everyone Dies?

Life insurance companies in Michigan make money in two major ways: income from premium payments and the revenues generated from investing these premiums. Deciding the amount to charge for premiums is of great importance and insurance companies adopt different procedures, including using the services of actuaries specializing in statistics and probability. They calculate the financial costs of insurance companies’ risks. Using their adopted methods, insurance companies can decide the amount it needs to charge insureds to ensure that liabilities are covered while still making substantial profits. Life insurance companies also make money from expired policies and forfeited cash values.

What Does Life Insurance Cover in Michigan?

Life insurance in Michigan covers most causes of death. However, if you commit suicide within the first two years of the policy, the insurance company might refuse to pay out. A life insurance policy is a good way to ensure funds are available to satisfy any financial obligations you may leave behind after death. These obligations may include rent, car loans, credit card payment, or mortgage Additionally, life insurance can cover the insured’s funeral and burial expenses when they die. Life insurance payouts can also be used to settle personal debts, student loans, and supplement the lost income.

Who Should Buy Life Insurance?

Life insurance is important for everyone in Michigan who can afford premiums. It does more than just provide death benefits for chosen beneficiaries; it can also be used as a source of interest free loans in your lifetime (living benefit). People who need life insurance in Michigan include:

  • Young adults: When you are young, life insurance is at its cheapest point in your life. The older you get, the more drastic the price increase becomes. Get a permanent life policy early in life, so it is very cheap to get. Then use it for the retirement savings option throughout your life, similar to a 401K.
  • Parents: Parents can purchase life insurance to provide financial support for their kids, paying for housing, college tuition, and other expenses in the event of demise
  • Spouses or domestic partners: Having a life insurance policy is a good way to ensure that your partner is not left with a heavy responsibility if you die unexpectedly
  • High-net-worth individuals: High-net-worth individuals typically have large estates that need to be settled after their death. This could result in similarly large taxes left behind for your beneficiaries to handle. A life insurance policy can be used to settle these estate taxes and reduce the burden on their families.
  • Retirees without extensive savings: Considering that 46% of Americans die with savings of less than $10,000, recent retirees and elderly seniors who either do not have significant savings or expect to run out before they die, can benefit from life insurance coverage to help pay for their final expenses.

Can I Buy a Life Insurance Policy on Anyone?

You can purchase a life insurance policy for someone else in Michigan if you have an "insurable interest" in the person to be covered by the policy. It means you may experience a loss if the insured person dies, which could be emotional or financial. The insured person will also need to consent before you can purchase the policy. Most people purchase a policy to ensure that the final and funeral expenses are covered while also leaving designated beneficiaries with a financial cushion. Occasionally, someone may want to buy a life insurance policy for someone other than themselves. While options are available to do this, you must follow regulatory guidelines before purchasing a life policy for someone other than yourself.

Who Can You Not Buy Life Insurance On?

Life insurance companies in Michigan will not allow you to buy a life policy on another adult without their knowledge. Hence, you cannot purchase life insurance for someone who has not given their consent for you to do so. For instance, you cannot buy a life insurance policy for a mere acquaintance or stranger.

Who Is the Owner of a Life Insurance Policy in Michigan?

The owner of a life insurance policy in Michigan is the person or a business that purchases the insurance policy and is protected by it. In some instances, the buyer of the policy might be different from the insured. The owner of the policy is the one who is in control of the policy and has the right to make any changes to the policy. The owner of the policy can do a variety of things, such as changing the beneficiaries, selling, or surrendering the policy.

For assistance in determining ownership of your policy or other advice, you can contact the Michigan Department of Insurance and Financial Services. A person’s spouse, business partners, adult children, and revocable and irrevocable trusts are common owners of life policies in Michigan.

Who Is a Beneficiary in Life Insurance?

A beneficiary in life insurance is a person or entity that you legally designate to receive the death benefits of your life insurance policy after your death. In Michigan, you can designate an individual or a corporation as a beneficiary.

The two main types of life insurance beneficiaries are the primary and the contingent beneficiaries. A primary beneficiary is first in line to receive the death benefit of a life insurance policy, typically your spouse, children, or other family members. On the other hand, you can forestall situations where a primary beneficiary dies before you by naming a backup beneficiary. This beneficiary is referred to as a “secondary” or “contingent” beneficiary. However, if you name more than one primary beneficiary and there is still a surviving primary beneficiary, the secondary beneficiaries are not entitled to the death benefit. Only after the death of all primary beneficiaries can the secondary beneficiaries receive the death benefit.

How to Choose a Beneficiary for Life Insurance?

There is no standard or straightforward rule to follow when selecting the primary beneficiary of your life insurance policy in Michigan. The essential thing is for your choice to reflect your specific needs. Your choice of beneficiary may be influenced by marriage, childbirth, adoption, or relocation, among others.

Who Chooses The Beneficiary?

Policyholders/insureds are responsible for choosing beneficiaries for their life insurance policies in Michigan except for when commercial interests are involved. For example:

  • In a Key Person life insurance policy (also known as Keyman life), a business is the policy owner and the beneficiary if the insured employee dies.
  • If the life insurance is purchased as part of the process to secure a loan, the insured must list the lender as the prime beneficiary. This makes sure that the remaining loan gets repaid before any other beneficiary can receive the death benefit.  

How to Change a Beneficiary?

In Michigan, only an insured can change the beneficiaries of their life insurance policies. Divorce, marriage, or the death of a loved one are all instances that may cause you to reconsider your beneficiaries. You can change your beneficiaries at any time as long as you still own your policy and it is still in force.

Sometimes, you may have to get the current beneficiary’s consent before naming a new beneficiary. For instance, you may need approval if the terms of your divorce dictate specific stipulations or if you have an “irrevocable” designation. In such situations, it is best to seek the help of a Michigan-licensed life insurance agent.

Who Should I Name as My Life Insurance Beneficiary?

Your life insurance policy beneficiaries should be persons you decide to protect or provide for upon your death. You should ensure that the beneficiary you name is someone that will adequately protect your interests and apply the funds as you so desire. Beneficiaries could include your immediate family, close friends, or trustworthy trustees and caretakers. If you want to name a child who is a minor as your beneficiary, ensure there is a trustworthy adult who can manage the funds until they are of age. If you name an underaged person as a beneficiary without making adequate arrangements, the courts will appoint a legal guardian to administer the benefits until the child comes of age.

Ideally, your life policy beneficiary should be the person that will be most affected by your death or a person you wish to reward. There are two options when designating a beneficiary. These are:

  • Revocable beneficiary: You can change a revocable beneficiary at any time within the duration of your policy
  • Irrevocable beneficiary: A beneficiary appointed as irrevocable cannot be removed without  their consent or notifying them

Who You Should Never Name as Your Beneficiary

In Michigan, you should never name the following as your life insurance policy beneficiary:

  • A child who is a minor- Naming a minor as your life policy beneficiary may complicate matters. This is because where a minor is a beneficiary of a death benefit, the court appoints a legal guardian to administer the benefits until the minor attains the age of maturity
  • Your estate - Naming your estate as your beneficiary might result in the reduction of the available sum due to taxes and other levies that the benefits might be subject to

How Can Life Insurance Work As an Investment in Michigan

Generally, a life insurance policy in Michigan can serve as an investment because it provides financial assistance to your chosen beneficiaries in the event of your death. Several types of permanent life insurance cover individuals for the rest of their lives and also include a cash value component. The money accumulated through your cash value account can then be borrowed tax-free and used for other investments and purposes. For example, the Indexed Universal Life insurance allows you to tie the cash value component of your policy with a stock index fund chosen by you.

Is Life Insurance an Investment Vehicle?

Although you can use your life insurance policy as a form of investment in Michigan, this is not its primary purpose. Certain policy types with a cash value component are particularly useful as a source of tax-free money that could be used for investments. Such policy types are similar to savings accounts, and you can build your cash value over time and borrow from it when needed while you are alive. In other cases, you can also enjoy the accumulated interests and dividends accrued to your insurance policy

What is Credit Life Insurance?

Credit life insurance in Michigan is an insurance policy designed to help you pay off any outstanding loans in the event of an untimely death. It is a useful way of ensuring that your loved ones are not burdened by any debts you might leave behind in the event of your death.

Credit life insurance is an insurance policy taken out by the borrower for the lender’s benefit. Typically, the premiums under this form of insurance cost more than other forms of life insurance, and the maximum coverage for a policy in Michigan is $100,000.

What is an Assignment in Life Insurance?

An assignment in life insurance occurs when an insured transfers ownership of a policy to another party, Which may be in whole or in part. Assignments can be made for different reasons, such as security against a loan or even as a gift to another person. Only a policyholder/insured can assign a life policy and the assignment may be for the entire policy or for specific rights under the policy.

What Are the Two Types Of Assignment in Life Insurance?

The two types of assignments in life insurance are:

  • Conditional assignment: This occurs when the insured wishes to pass benefits of the policy to another person subject to specified conditions. Once the stated conditions are fulfilled, the policyholder gets back their rights
  • Absolute assignment: Firms do this as a part of the consideration for loans in favor of lender/bank/lending institutions. In such an assignment, the insured loses their rights to the policy, and the absolute assignee can manage the policy independently An absolute assignment surrenders the entire rights under the policy as well as the duty of paying premiums and deciding who the beneficiaries of the policy are

When Does Life Insurance Mature?

Life insurance matures upon the death of the insured or the expiry of the policy. When a life insurance policy in Michigan matures, the insurance company pays out the “maturity value” of the policy to the beneficiaries and coverage ends. Maturity dates are based on the insured person’s age and vary depending on when the policy was issued. Typically, life insurance companies specify the maturity value to be paid in insurance contracts.

What Life Insurance Policy Never Expires?

Permanent life insurance policies do not expire. These policies last until the death of the policy holder unless there is a lapse in coverage due to the non-payment of premiums. Some types of permanent life insurance policies in Michigan include whole life, universal life and final expense life insurance.

How Much is Life Insurance?

The cost of your life insurance in Michigan depends on the amount of coverage you want as well as the type of insurance you decide to purchase. When you want to know how much life insurance is, first you need to answer the question: How much life insurance do I need to cover all of my insurance needs? To get an answer based on your actual needs and to get life insurance quotes - speak with a state-licensed life insurance agent who has access to multiple competing insurance companies. The agent will access your family life insurance needs and will provide multiple options to choose from.

The average cost of premiums for life insurance in Michigan is between $50 to $100 a month.

How Much is a Million Dollar Life Insurance Policy?

Purchasing a million dollar life insurance policy in Michigan is not as expensive as you might think. This coverage is typically available as a term life insurance policy and you can purchase coverage for a 10 year or 20 year period. You can purchase a life insurance policy with a coverage of a million dollars for as low as $264 per annum rising to as high as $2,700 per annum. The cost is mostly determined by your sex, age, health history, smoking or non-smoking status, and duration of coverage.

Speak with a state-licensed life insurance agent to get a life insurance quote or several, so you see which one gives you a million dollar death benefit at the lowest price

Can I Get Free Life Insurance?

You might be able to get a free life insurance policy as part of your employment benefits in Michigan. Some academic institutions like universities also provide certain levels of life insurance coverage for students and staff.

Does Life Insurance Cover Suicide in Michigan?

In Michigan, suicide is not covered within the first two years of a life insurance policy. However, after this period, the life insurance policy will pay out a death benefit to the policy’s beneficiaries. While beneficiaries are not entitled to death benefits if a suicide occurs during a policy’s first two years, they may receive a refund of premiums paid by the insured before death.

Cryonics and Life Insurance

You can use life insurance to get a possible second chance at life in Michigan when you die through cryogenics. To achieve this, purchase a life insurance policy of a sufficient amount to cover the costs of cryopreservation and miscellaneous expenses and designate any cryonics organization or cryonics trust as the beneficiary. When you die, and cryopreservation occurs, the cryonics trustee or organization will have access to the funds left in your policy to pay for your cryonic suspension and regular maintenance. Due to the high cost of this procedure, your life insurance policy must have enough death benefit to cover these costs for however long you want to be preserved.

Is Life Insurance a Good Investment?

Life insurance is not primarily intended as an investment. However, permanent life insurance policies have a cash value component and this may be useful as an investment vehicle in Michigan. Whole life insurance and other types of permanent life insurance come with a cash value component from which you can borrow for investment purposes and to grow your wealth over time.

Conventional investment account types such as education accounts, brokerage accounts, and retirement savings like IRAs and 401(k)s have an uncapped return on investment, which can be quite high during some good years. At the same time, those retirement accounts will not protect the investment from losing the money that you have been putting in there when the market eventually tanks.

Meanwhile, life insurance will. Indexed Universal Life has a baseline, below which the investment cannot fall, regardless of how bad the market performs. The floor gets reset every year or two to the current level at that time. With a policy like IUL you get to keep all the gains (up to the cap established by the policy), and do not sustain the losses, when the market eventually starts moving down - as you do with 401K and the IRAs.

In addition to the retirement savings with zero-loss protection, you can use the options available such as the cash value loan to make investments while maintaining the life insurance coverage. Insuring your life and getting knowledge about life insurance is critical, and you should only discuss your life insurance needs with a licensed life insurance professional.

Why is Life Insurance is an Investment?

Life insurance is an investment because it provides future protection for your named beneficiaries in the event of your demise. The cash value components of permanent life insurance policies in Michigan can also be used for investment purposes while the tax benefits associated with a life policy also help to increase the value of owning a policy.

How to Get a Life Insurance Policy?

Buying life insurance can be done by contacting a state-licensed life insurance professional. An experienced agent with access to multiple life insurance companies licensed to sell insurance in Michigan can help you assess your life insurance needs and provide several competing quotes of coverage to choose from.