Ten Most Frequently Asked Questions About Life Insurance
Purchasing a life insurance policy is not something many people think about until they get married. One of the main purposes of taking out a life insurance policy is to ensure that your spouse will be financially able to pay off an existing mortgage, any outstanding credit card bills and hopefully send any children to college. Life insurance gives you and your family peace of mind knowing that lives will not be financially devastated upon an unexpected death. The following are some brief answers to the top ten most frequently asked questions regarding life insurance:
1. When should I consider buying a life insurance policy?
As noted, most people only begin to consider buying a life insurance policy upon getting married. However, if you co-own a property or business with someone, it may also be wise to take out insurance to cover the balance you owe on the property. This will ensure that your partner is not left with extra debt. You will also be able to will your share of the property or business to someone upon payment of your share. Since life insurance premiums are less expensive when you are younger, many people opt to buy life insurance as soon as they begin accumulating bills of their own.
2. How does term life insurance differ from permanent life insurance?
People who purchase permanent life insurance are buying protection for their entire life. Initially, premiums for permanent insurance are usually more expensive than term insurance. Part of the permanent life insurance premium is used to build-up a cash value in the policy. Cash values are useful as they can be used in a number of different ways; such as allowing you to take out a loan against the cash value. Term life insurance provides protection only for a specified period of time (for example 10 or 20 years) and does not build up any cash value.
3. If I have an existing medical condition will I still be able to purchase life insurance?
Insurance carriers will require you to give them a complete health history and get a medical exam at no cost to you. If your condition is severe or is chronic you may not be eligible. There are several factors in determining your eligibility so it is best to fill out a health history and go from there. In some cases you may purchase a guaranteed policy, however, your premiums will be much higher than those who are healthy.
4. What if I participate in extreme sports?
Lifestyle is certainly a consideration when insurance carriers are considering coverage and setting premiums. Those who participate regularly in extreme sports such as skydiving, for example, or who work in hazardous occupations are subject to higher life insurance premiums.
5. What if I change my mind about a policy I have already purchased?
Most life insurance carriers have a money back guarantee on all policies purchased. Usually the time period is anywhere between 10 to 30 days to attain a full refund on all premiums paid.
6. Will the premiums due for my life insurance policy change over time?
Premiums vary depending upon what kind of life insurance you purchase. For example, term life insurance is purchased in blocks of time, 10, 20 or 30 years. Your premium will not increase for the period of time you selected. A couple of constants are that premiums usually do increase with age and often increase upon renewal.
7. Can an insurer cancel my life insurance policy?
A life insurance policy stays in force as long as you continue to pay the premiums. Carriers often give a grace period for missed payments. Your policy is still active during the grace period. Usually policies are only canceled by your carrier for non-payment past the grace period.
If your coverage is through a group plan, such as work, your coverage will terminate when you are no longer an eligible member of that group or no longer an employee of the company.
8. Will I need to take a medical exam to buy life insurance?
Unless you are buying “no medical exam life insurance,” then you will most likely be subject to a medical exam prior to approval of a life insurance policy. These exams are quick and simple and done from the comfort of your home or place of employment. Exams usually entail a blood and urine sample as well as some physical measurements.
There are a few companies that are willing to write up to
$250,000 of coverage without an exam. Those premiums are higher because the insurer takes into consideration people with medical conditions who would not normally qualify.
9. Does life insurance cover any kind of death?
Most companies pay out a benefit for accidental death or death by natural causes. It is common for companies not to cover suicides if they occur in the first two years of the policy. This period is called the incontestability period.
10. How much life insurance do I need to purchase?
Most financial advisors suggest purchasing between 10 to 15 times your annual salary. Other considerations would be the age of your youngest child, estimating how much it would cost to raise that child to adulthood as well as pay for a college education. People also consider existing bills such as a home mortgage and credit card debt when determining what kind of face value to purchase in insurance.
Author: Sharon Taylor is a veteran financial writer and frequent contributor to EQUOTE Life Insurance