Life Insurance FAQs
Why should I purchase life insurance?
The primary reason for life insurance is to provide income for your dependents if you or another family income provider should die prematurely.
How much life insurance should I purchase?
If you have a family, many experts suggest that you need an amount equal to 5 to 10 times your annual salary. However, many people own higher coverages to provide more income for their family.
When does my coverage start?
Most companies provide temporary or conditional coverage during the application process (assuming the conditions are met), but such coverage is limited in time and amount. The availability, amount and conditions vary from company to company. If you are replacing existing coverage, you should not drop your existing coverage until your new policy has been approved, and your first premium has been paid.
Is a medical exam necessary to qualify?
In most cases, an exam is required. If so, the insurance company will pay the costs and have it done at a time and place convenient for you — usually right in your home. The exam is usually conducted by a licensed paramedic or medical doctor, and generally involves a blood test, urine specimen, blood pressure reading, height and weight measurement, and a series of questions about your health history. The whole process usually takes about 20 to 30 minutes.
When I send in my application, should a check be included?
If you send the first premium check along with your application, most insurance companies will provide limited temporary or conditional coverage during the application/underwriting process. Although most people do, there is no requirement that you submit a check with your application. The premium can be paid once the policy has been approved.
What’s the difference between standard and preferred rates, and how do I qualify for preferred rates?
Most often, you must be in excellent overall health. There are strict limits on height, weight, cholesterol, and blood pressure. And you must not have a family history of any significant health impairments. You also cannot use tobacco in any form. You must have no history of drug or alcohol abuse, and you cannot be engaged in any hazardous activities.
Should I get coverage on my spouse and/or children?
Often, families have coverage on both spouses. Beyond the obvious final expenses, the financial strain on a family after the loss of a spouse can be significant, even if the deceased spouse wasn’t working. Often the surviving spouse will take time off work, or change jobs in order to spend more time with the children. Coverage for children is also available to cover final expenses and/or to guarantee eligibility to be insured in the child’s future.
Will my policy ever be canceled for health reasons?
As long as you keep your premiums current, your policy will never be canceled because of a change in your health, and you will not be asked to provide evidence of good health in order to renew your policy each year. However, you have the right to cancel your policy at anytime.
Does smoking cigarettes affect my rate?
Rates for smokers are higher than for non-smokers.
What happens if I become disabled?
Many policies include a rider which provides a “waiver of premium” for total disability. In the event you become totally disabled for a certain period (typically six months or longer) then the insurance company will pay your premium for you until you are no longer disabled. This rider is optional and available at an extra cost, and must be chosen at the time of your application. The rider is not available for purchase after age 55 (60 in some cases) and, even if elected, will automatically be removed from most policies at age 60 (65 in some cases).
After the initial period of guaranteed premiums, what will my term insurance cost?
Whole Life insurance policies typically have a level premium for life. However, term insurance policies typically only guarantee the premium for a limited number of years.
Each renewable term policy has a contractually guaranteed maximum renewal premium which can be illustrated, and which is shown in the policy. This amount is the most you’ll have to pay to renew the coverage.
Insurers also illustrate current renewal rates, which represent the expected future renewal rates, which are lower than the maximum renewal rates. These rates are not guaranteed, and can be higher or lower than expected, but never higher than the guaranteed maximum renewal premium.
After the initial guarantee period ends, you can re-apply for new coverage and, if you qualify, you can begin a new period of guaranteed rates (in effect, a new policy), which will generally cost less than your current or maximum renewal rates. This process is referred to as ‘re-entering,’ or ‘re-entry.’ Since your future good health is not guaranteed, the ability to ‘re-enter’ is not guaranteed.
Is there a money-back guarantee or free look period?
If, at any time during the life insurance application process, you change your mind for any reason, you will receive a full refund of premiums, no questions asked. This guarantee continues until ten full days (up to 30 days in some states) after your policy is delivered to you.