Most people hate life insurance. But the most of the most purchase some type of life insurance when they reflect on their dependents’ future. It is the most easily available option they can finally think of and get.
LIMRA, an industry watchdog, identifies lack of information to be the biggest reason for people’s not buying life insurance.
This is why we have complied a list of 21 life insurance faqs for you so that you have answers to the most important questions in brief.
1. Do I Really Need Life Insurance?
This is perhaps the most important life insurance faq people ask. Although life insurance can be an important part of financial planning, many people are not aware of why they need life insurance. This is why we have put this question on top of all.
Answer: Life insurance is a tool to reimburse your lost income. When you have dependents and there are possibilities that they will be in trouble if you suddenly die, you need it. So, whether you need it or not depends on what situation you are in. If the dependents are to remain financially secure when you die, there is no need for you to buy life insurance. You may also use life insurance as a tool to leave legacy to your heirs.
2. What does term insurance mean?
Some people feel confused as to what term life insurance stands for. They find the ‘term’ in term insurance quite confusing. This is why we have the question in our life insurance faqs list.
Answer: Life insurance policies provide protection in two ways: for a specific year or a set of years and for your entire life. Term insurance provides you temporary protection for a certain year or a set of years. So, this insurance comes in formats like 1, 10, 20, 30 years. The time you buy the policy to work for you is called term. So, if you buy a 30-year term insurance, your heir will be protected for those 30 years. Thus, insurance products that provide temporary or time-bound protection are term insurance policies.
3. What Is Whole Life Insurance?
Whole life insurance works in a complicated way. Many find it hard to understand. As a result, some people buy this policy only to send it to lapse in the very first year. An estimated 12% of whole life insurance goes into lapse the very first year.
Answer: Whole life insurance is designed to provide you protection for the whole of your existence. Besides lifetime protection, it also works as a savings tool. Whole life plans are a useful way to leave a legacy to your heirs. Another important aspect of whole insurance is the cash value aspect that allows you borrow cash from the policy.
So, whole life insurance is a combination of lifelong protection and savings tool with borrowability.
4. What Is the Best Age to Buy Life Insurance?
This is one of the questions that fall in the life insurance faqs. Many people keep waiting until they discover their financial planning has not worked the way the wanted it to work. And when they wait too long, they pay higher costs. Sometimes they also become uninsurable. This is why you need to know the right age to buy life insurance.
Answer: Doing the right thing has no right time. The moment you think you should buy life insurance is the best age you should buy your policy. You have not bought insurance in your 20s does not mean you should not buy it in your 50s.
However, you need to remember, the older you are, the costlier the life insurance policy will be for you. Also, the older might mean, the more uninsurable you may be. This is why most will suggest that you buy your policy when you are in your late 20s to early 30s.
5. How Much Life Insurance Should I Buy?
This is one of the most important questions that you should know the answers to. As there is no Solomon’s psalm you can count on for how much insurance you need, it can create the trickiest situation for you.
Answer: The right coverage is a relative issue. You need to do a budget-like math to find out the right coverage for you. Take into consideration how much money your dependents will require if you die. You should not exclude your financial liabilities.
6. What Type of Life Insurance Should I Buy?
This is often one of the most important life insurance faqs that buyers often seek answers to. As life insurance products come with different functionalities, it is often confusing for the buyers to decide the right policy.
Answer: The answer to this life insurance faqs depends on what you want your life insurance plan to do for you. There are two mother policies out there: term insurance and whole insurance. Term insurance provides you protection for a specified time. If you die within the time, your beneficiaries should get the contracted amount of money from the insurer. On the other hand, a whole life plan’s protection extends till your death. Unlike term insurance, it serves as a savings tool. So, deciding the purpose of the policy is important for you. Obviously, term insurance is best for you when you need temporary protection and whole is your bet when you need permanent protection with savings machinery.
7. Which Is the Best Life Insurance Company?
There are more than 800 life insurance companies in the USA. Finding the right company for you can be quite a battle of brain. Most people’s asking this question puts it in the life insurance faqs category.
Answer: It is an accepted fact that companies with best ratings and reviews are the most reliable. And knowing which company is the best needs some time. Spending some time visiting some of the well-known company sites or checking the best life insurance companies’ list will be of real help for you
8. Do I Need an Agent to Buy Life Insurance?
Many customers have a negative attitude toward life insurance brokers and agents. So, we have put this question in the life insurance faqs list.
Answer: If you already have a trusted life insurance company in your mind or you have the necessary ideas needed to buy your insurance, you do not need an agent or broker. Otherwise, it is a wise decision to go through an agent. Independent agents can find you the best policy easily because they know how the different companies work.
9. Can I Buy Multiple Policies?
Sometimes people want to buy a second or third life insurance policy. It becomes essential especially when one finds that the coverage of the first policy or policies is not enough.
Answer: The answer can be both ‘yes’ or ‘no’. Buying more than one policy is possible. But whether you will get approval or not depends on how much coverage you already have on your policy. You cannot exceed a certain amount of money for coverage. Typically, the coverage can be up to 30 times your annual salary maximum. Also, your age, psycho-physical status as well as height and weight decide how much coverage you can buy.
So, depending on your situation, you may or may not buy more than one life insurance policy.
10. How Can I Lower My Cost?
Life insurance policies do not come with price tags. Costs often vary from one company to another. This means you can lower your costs. Knowing how you can avail the opportunity is important. This is why we have put this question in our faq list.
Answer: Life insurance is no investment. Term life is a waster (but very useful) when you outlive the term. When your term is over, you fall out of protection. So, paying higher cost is no wise decision. You can lower your costs if you shop around. You will be surprised to know that the same death value sells in different costs by different insurers.
11. What If I Miss a Premium?
For various reasons, people fail to pay their premiums in time. As a result, policies go into lapse. You need to know how you can bring back your policy.
Answer: Usually there is a 30-day grace period when you miss a premium. But you should not be waiting for the grace period because if you keep your premium due and die, the death benefit will not convert. However, you can pay the premium within the grace period or according as (or if) the company notifies you. Sometimes insurers offer extended period to revive lapsed policie
12. Can I Surrender My Term Insurance Policy?
Whether term insurance policies can be surrendered or not is one of the faqs. Some people want to quit their insurance after they have spent some of their hard-earned money in insurance. They want to know if they can surrender their term policies and get back some or whole of the cash.
Answer: Every life insurance policy comes with a 20 or 30-day free look period. This is the time that allows you to go through the policy contract and decide if you want to continue it or not. You can change your mind within this period. Beyond this period, you cannot surrender your policy. The only exception is the return of premium insurance. Even then you typically cannot surrender unless you paid for 15 years.
13. Can I Have More than One Beneficiaries?
Beneficiaries are people who you want to protect through insurance. You may have concerns for several people who will need protection behind your death. You need to know if you can have multiple beneficiaries.
Answer: Yes, you can and you should. As per rule, you can choose only one primary or main beneficiary to your policy. But if you do have at least another beneficiary other than the primary beneficiary, there will be none to receive the benefit if the only one beneficiary dies.
14. Can I Change My Beneficiary?
Answer: Depending on changes in your life situation, you may need to change your beneficiary. For example, the death or loss of fitness of the primary beneficiary, remarriage, birth of a new child may ask you change your beneficiary. So, it is essential that buyers know if they can change their beneficiaries. With a view to enlightening you, we have put this question in the life insurance faq list.
Answer: Yes, you can. In fact, you need to revise your policy according to changes in your life situation.
15. Isn’t My Employer’s Insurance Enough for Me?
Some people ignore life insurance under false notion that they will not need life insurance because they have insurance from their employers. While employer-sponsored insurance may be useful, avoiding personal insurance is often a wrong decision on that ground.
Answer: Employer-sponsored life insurance has its limitations. The death benefit does not come up if you do not have an on-the-spot or on-the-job death. That means if you die off-duty, on leave or in the nursing home during sick leave, your family members will not get the death benefit. Also, the benefit is pretty small and will not cover the need of your heirs.
This is why employer-sponsored insurance is not something you can count much on.
16. Should I Buy Riders?
When you shop life insurance, agents keep telling you about the different riders that they have for you. They act like sub-policies within the policy that you buy. There are different riders and you can buy one or several of them. They are designed in a way that you may feel tempted to buy almost all the riders. On one hand, often the riders are not necessary. On the other hand, they will raise your cost of insurance. This is why we have put this question in our life insurance faqs list.
Answer: Riders raise the cost of your insurance. And one of the reasons life insurance policies lapse is the raised costs. So, we would recommend that you think carefully before buying any rider. For example, if you are an office worker, you probably do not require an accidental benefit rider. Conversely, if you are a fire-fighter, you had better not ignore it.
17. Do I Need Final Expense Insurance with My Regular Policy?
We have put this life insurance frequently asked question because more than half of the U.S. population are worried about final expense and buy final expense insurance.
Answer: The average cost of final expense is $10,000. If you have not saved the money, you had better be thinking about final expense life insurance. But if you are already covered, there is no need for you to buy final expense insurance.
18. How Long Does It Take for the Beneficiaries to Get the Death Benefit?
Many people’s asking this question makes this question one of the life insurance frequently asked questions.
Answer: When the insured passes on, you need to submit the death certificate and a number documents to the claims department of the company. Depending on how fast you can do it, the benefit should come to you from 2 weeks to 2 months maximum
19. Is Life Insurance Death Benefit Tax-free?
We have enlisted this question in our life insurance faqs because many want to know the answer from us.
Answer: Yes, as a general rule, life insurance death benefit is tax-advantaged.
20. Is life insurance an investment?
Answer: Life insurance is a protective measure that works to shield your dependents if you die unprepared. While there are campaigns all around telling you that whole life insurance is a good investment tool, the fact is not so. Insurers add some interest to part of your premiums. That makes whole insurance a savings tool rather than an investment vehicle
21. Can I Sell My Life Insurance Policy?
Some people do not want to continue their life insurance policy after they have paid several hundred dollars. Leaving the policy half way translates itself into huge loss of your hard-earned money. That you need to know if you can sell your insurance to others is important. This is why we have included this question in our life insurance faqs list.
Answer: Yes, you can sell your life insurance policy if you no longer want to continue it. You can sell your policy through life insurance settlement.
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