Life Insurance Frequently Asked Questions.
Ask the important questions so you can find the right life insurance policy for you.
Here are some answers to common life insurance questions you may have as you explore your policy options.
What are the two main types of life insurance?
The two principal types are Term Life Insurance and Permanent Life Insurance.
Term Life Insurance works by insuring the policyholder for a predetermined amount of time (or term), such as 5, 10, 20 or 30 years. With a Term Life Insurance policy, your beneficiaries only receive a payment if you die within the policy’s term. Term Life Insurance is a good option for people who only need protection for a limited amount of time and want an affordable premium. Term Life Insurance premiums tend to be less than Permanent Life Insurance premiums.
Permanent Life Insurance works by insuring the policyholder for a lifetime as long as the premiums are paid on time. Your beneficiaries will receive a payment if you die while your policy is still active. Permanent Life Insurance premiums tend to be more expensive than Term Life Insurance premiums, and they accrue tax-deferred cash value over time.
Which type of life insurance is right for me?
The type of life insurance plan that is right for you will depend on a number of personal factors, including how long you need coverage, how much coverage you need and your budget.
Generally, people who are looking to provide for their loved ones until they will be able to support themselves should consider a Term Life Insurance policy. If you buy a policy while you are young and healthy, premiums may be more affordable, even for plans with larger death benefits.
If you have a larger budget and want to ensure your beneficiaries will receive a benefit no matter what, a Permanent Life Insurance policy might be right for you. Some people also use Permanent Life Insurance policies for their tax benefits as part of a larger estate planning strategy.
Who needs life insurance?
Anyone with dependents or who is financially responsible for the livelihood of another person should consider a life insurance policy.
If you pass away unexpectedly, your loved ones may still need your financial support. Life insurance is intended to help provide such financial support so your loved ones can afford what they need when you’re gone.
How long should I have a policy?
As a general rule, you want to have a life insurance policy in place for long enough to ensure your dependents will have enough money until they can support themselves.
For example, if you have a three-year-old child who you want to be able to support all the way through college, you may need to purchase a policy for at least 20 years. If you just bought a home and have 30 years left on your mortgage, you’ll want to purchase a policy for at least that long so your beneficiaries can afford all of the payments.
If you think your beneficiaries will always need some type of protection, you should consider a permanent policy that will last for your entire life.
How much do I need?
You should purchase enough life insurance to help support your dependents until they can support themselves.
To decide how much you need, take into account all of your debts, monthly expenses and future financial commitments (like a child’s college tuition or spouse’s retirement fund). If you have significant savings, you can factor those in as well; the more you have saved, the less you’ll need in life insurance. Once you’ve calculated exactly what you spend each month and factored in what you plan on spending in the future, multiply that amount by the number of years you want to be covered.
If you have no idea where to start, you can try multiplying your income by the number of years until your dependents will no longer rely on you for financial support and go from there.
What are some common life insurance terms?
Beneficiary – The person, people or organization that receives the death benefit when the insured person dies. Keep in mind that the beneficiary will not receive a payout if you have term life insurance and outlive the term of the policy.
Death benefit – Sometimes called "face amount," the death benefit is the amount of money paid to the beneficiaries after the insured dies.
Premium – This is what you pay for an insurance policy. Premiums are often paid monthly, but can also be paid quarterly, semi-annually or annually.
Insured – The person covered under a life insurance policy. The insured may be the owner of the policy, but it can also be someone else.
Policy owner – The person or entity who purchased the life insurance policy. This does not have to be the same person as the insured.
Underwriting – The process used by insurance companies to determine if they will accept a life insurance applicant and how much they will charge for the policy. It is generally based on medical history and may include a physical exam, lab results and questionnaire.
What does the medical exam entail?
Medical exams are used to help determine how much of a risk you pose to life insurance companies. They are administered in-person and may include a medical questionnaire and physical tests. A qualified medical professional will check your measurements (like height, weight and blood pressure) and take samples of your blood and urine.
The tests are simple enough to do in your own home. A medical professional will come to your house and administer the exam. The whole process generally takes less than an hour.
The results of your exam will affect how much a company is willing to charge you for a policy — or if they’ll issue a policy at all. Usually, the healthier you are, the lower your premiums will be each month.
How can I save money on a policy?
The best way to save money on a life insurance policy is to buy a policy early. In general, the younger and healthier you are when you purchase a life insurance policy, the lower your monthly premiums will be.
How can I speak to a licensed life insurance agent?
You can speak to one of our licensed insurance agents by calling 1-855-303-4640 or you can request a call online.