Frequently Asked Questions

Not necessarily. If you have no children or dependents whom you support financially, you might not need a life insurance policy after all. Life insurance aims to provide a solution for those who seek income replacement, morgage protection, estate planning, leaving a legacy, or burial expenses. However, if someone you love is dependent on you financially, you need life insurance.

Buying a term life or a combination of term and permanent insurance may help you pay a lower premium. Buying a policy early in life is also a good way to ensure a lower premium.

The older you are, the higher the premiums, and the more risk you have of developing a health condition that could increase your premium even more or disqualify you from getting coverage at all. You can read more about saving on life insurance here.

Premium rates are typically based on factors such as age, gender, height, weight, health status (including whether or not you use tobacco), and if you participate in high-risk activities or occupations.

Permanent policies are typically the best option if you are looking for life-long protection, or an option to accumulate a tax-deferred cash value. A portion of the premium of a permanent policy is used to build up a cash value. The cash value can be used in several different ways, including allowing you to take out a loan against the cash value, or paying your premium after your policy is fully paid up.

“Fully paid up” means that you have paid enough premiums to cover the cost of the policy for the rest of your life, and the company will use the cash value to pay your premiums until you die.

Most policies have a 31-day grace period wherein you can pay the premium with no penalty or interest. If you have a term policy and do not make the payment within this grace period, the insurance company will usually terminate the policy. If you have a permanent policy, you can authorize the insurance company to draw your premium from your policy’s cash value.

Some term policies have a return of a premium feature that allows for a refund of part or all premiums you paid through the term of the insurance if no death benefit was paid. The premiums for policies with this feature tend to be higher, and you must be careful not to miss any payments throughout the term in order to take advantage of this feature.

Some policies have a provision that allows you to collect a significant portion of the death benefit while you are still alive should you become terminally ill. The money can be used at your discretion to pay for medical expenses or even to do specific things with your family and friends while you still can. The amount you take out early will be subtracted from the death benefit payment along with interest.

To determine how much life insurance you need, it’s best to look at your surviving family’s immediate, ongoing, and future financial obligations, and compare that with your financial resources. Below are examples of each type of need:

• Immediate: funeral costs, medical bills, taxes.
• Ongoing: mortgage payments, utilities, food.
• Future: college tuition, retirement funds.

Most plans do require medical testing and charge premiums based on the level of risk they assign to you based on the testing. However, even if you are not in top health or have a serious health condition, there are still some options available with guaranteed issue plans, although this comes at the cost of a higher monthly premium and a lower death benefit.

That depends on the insurance company and the type of coverage that you applied for. Generally speaking, the underwriting process for a traditional, fully underwritten process can take anywhere from two to eight weeks. A no-exam or final expense policy can be issued from a few minutes after submission to about two weeks. The delivery time is about a week after the policy’s approval.

A Life Insurance Beneficiary is an individual, entity, trustee, or estate named by the policy owner to collect the death benefit proceeds upon the insured’s death. There are two types of beneficiaries:

1. Primary beneficiary: The first one in line to collect the death benefit upon the insured’s death.
2. Contingent beneficiary: Also known as a secondary beneficiary, is the second one in line to collect the benefit if the primary beneficiary is deceased.

Life insurance’s primary purpose is to prevent financial hardship for your loved ones. Whether it's burial expenses or mortgage balance you worry about, a proper life insurance policy can help your beneficiaries avoid this misfortune. First, let us clarify two fundamental distinctions. A funeral is different than proper disposal of the body.

No one is entitled to a funeral (for those who say, “I don’t really care what happens when I die”), so if no one pays for your funeral service, guess what? The local government will take over and bury you in a potter’s field or cremate your body.

If, however, your loved one insists on having a proper burial and funeral service, they can pay for this themselves (which you may not want to burden them with) or use any assets you left behind to pay for it.

The person who signs the contract with the funeral home is legally obligated to pay for it. Hence, buying a policy isn’t really for you. It’s to prevent the extra headaches someone you love has to go through when they need to deal with all you left behind.

I get this question all the time, and I always respond with the same definitive “NO, you shouldn’t.” Since many people consider term life insurance as a total waste of money, insurance companies had to come up with an approach to lure you in.

What if you pay for 20 years and we will give you your money back? The problem is that you will spend two to three times as much in premiums, and if you outlive your term period, you will only get your money back without any additional interest, so your money just worked for free. Why don’t you just buy term life and invest the difference somewhere else, where you can have total control?

When you buy life insurance, don’t try to estimate when you will die so that you can pay the least in premiums. You obtain a policy to safeguard against financial catastrophe for your loved ones. You also want to have peace of mind that if it’s your time to go, the ones you love most can still live on with dignity.

Sure, provided there is an insurable interest a relationship and with the insured’s consent. Insurable interest is a reason to buy life insurance on someone else because you could undergo a financial disaster if they die. A relationship can be:

1. Husbands, wives, or children
2. A business owner can buy life insurance on his key employees
3. Creditors are allowed to take a policy on their borrowers

Thankfully, no. Life insurance prices are fixed by law and are subject to the insurance carrier and the state’s department of insurance approval. If that were the case, agents, and the insurance companies couldn’t compete ethically in the marketplace, and consumers would be even more baffled with life insurance.

As a client, you may choose to work with an Agent because he can shop all companies and offer you the best one for your situation. Besides, an Agent doesn’t charge a fee because he gets paid by the insurance carrier.

Sure, you can, provided there is a financial need for it. You may want to supplement your current policy from work or add another term life insurance because you just had a new addition to the family. The insurance company is more interested in the total death benefit amount you currently hold rather than in how many policies you have.

Your designated beneficiary will have to file a claim with the carrier. He will also need to supply the death certificate (not a copy) along with the deceased’s policy number, social security number or ITIN number and address.

In insurance lingo, Agents refer to this question as part of the financial underwriting process. The amount of coverage you can buy must reflect your economic value. There are a few ways to justify the requested face amount by calculating your assets and liabilities.

However, most companies follow this simple formula: the younger an applicant is, the more coverage he needs because the children are still young, the mortgage balance is still outstanding, so passing away in these critical times could devastate the beneficiaries.

Nevertheless, once the applicant is older and has fewer liabilities to protect (children are older, the mortgage is paid off), the less coverage he will qualify for.

Here is a basic formula to estimate the maximum coverage you can receive:

• Up to age 40: You can buy 35 times your yearly income.
• 41–50: You can buy 25 times your yearly income.
• 51–60: You can buy 20 times your yearly income.
• 61–70: You can buy 10 times your yearly income.
• 71–80: You can buy 5 times your yearly income.

First thing first: If you or someone you know is considering suicide, please talk to someone about your thoughts. The suicide provision states that, if you die within two years after buying the policy as a result of suicide, the carrier will contest your claim and will not pay your beneficiaries. After two years, an insurer can’t challenge the death claim and must pay the benefit.

You probably do. Most group coverages aren’t portable, which means if you lose or quit your job, you also let go of your insurance coverage. Most importantly, group coverage doesn’t offer sufficient protection and typically offers two or three times your yearly income, which by all accounts, isn’t enough. (The recommended amount is 10 times yearly income.) My advice is to get it through your job if it’s free or at a reasonable price and supplement it with life insurance outside your workplace.

That depends. You should ask yourself these questions first.

• What is the policy’s purpose? Burial, asset protection, or estate planning?
• Are you taking care of them?
• Will you suffer financial loss if they die?
• Do they have assets you can use to pay for burial expenses?

If you only need burial insurance for them and you have the money to cover it, or they have enough assets to pay for it, skip the policy and call it a day. You don’t need it. 

Universal Life Insurance, also called UL, is a permanent type of coverage that provides guaranteed death benefit payment to heirs, cash value accumulation on a tax-deferred basis, and the ultimate advantage of flexibility. A portion of your premium payment goes to cover the cost of insurance (COI), and the remainder is parked in a designated account to earn interest.

Most companies give you three to four different accounts from which to choose based on your comfort level and financial goals. Most coverages are rigid. In essence, term life offers great costs but short duration, whole life provides lifetime's protection but with astronomical prices. UL provides the flexibility to skip premium payments or to adjust the face value in the future (increase or decrease) should you want to.

Nice try! You probably know that smokers pay two to four times as much as non-smokers do, but this trick wouldn’t work. To get the best non-smoker rate, you must abstain from tobacco for three to five years (each company has a different underwriting guideline).

Some companies will give you a standard non-smoker rate after one year of abstinence. It’s worth mentioning that you should never lie about your smoking habits to the insurer.