Life insurance can be a good investment to provide a financial umbrella for your family should you pass away unexpectedly. The last thing you want your loved ones to worry about is bills and debt collectors when they should be grieving. An important part of getting life insurance is knowing what to ask your agent so that you are fully educated on what you are signing up for.
Here are the top questions you should ask your life insurance agent or broker.
- Why should I buy additional life insurance when it is already provided by my employer?
The policy offered by your employer is usually affordable (and sometimes even free) but it is limited on how much your benefit can be. Group policies typically only offer coverages worth up to a year’s salary. Some may offer up to several years’ salary for an additional cost. Depending on your career field this coverage amount may not be enough to take care of your family. Life insurance is a good way to provide coverage for expenses like rent or a mortgage, debt, education expenses, or continuation of current or improved lifestyle for your family. Purchasing additional coverage, especially coverage outside of what is offered by your employer offers several benefits. You can purchase a larger coverage amount allowed by your employer and you don’t have to worry about losing coverage should you change employers or career field.
- What kind of life insurance do I need?
Life insurance is offered as Term or Permanent. Term life insurance only last for a specific amount of time, usually 10, 20, or 30 years. Once the set time passes, the insurance expires. Term life insurance policies do not usually require the insurer to have a medical exam. These policies have lower premium rates than a permanent policy of equal coverage and these premiums increase as the length of the term passes (so you will be paying more as you go). Also, if you do not make a payment on a premium, you lose coverage. Term life insurance policies are a great way to allow beneficiaries to pay off a mortgage, large amount of debt, or cover the cost of education.
Permanent policies on the other hand have fixed insurance rates and do not expire after a specified amount of years. Permanent life insurance policies stay in effect for as long as you pay the premium and they accrue cash value that can be withdrawn according to plan guidelines. Because of this, many will require a medical exam prior to approving the insurance policy. Permanent life insurance policies are ideal for income replacement, retirement planning, or continued care for an ill or disabled family member.
- Is a term policy renewable?
Upon the closing of a term, an insurance company may notify the insurer of the chance to renew the policy for another term without having to get a medical exam. This can be beneficial as some policies require a medical exam once the insurer reaches a certain age.
- How much insurance should I get?
When considering life insurance, it is important to consider the costs your intended beneficiary will have to take on with the loss of your income; rent or mortgage payments, credit card debt, car payments, other loads, or education expenses for dependents. Selecting an amount to help lessen or cover these costs is the intent of life insurance policies.
- Will I need to take a medical exam?
It will depend on the type or even amount of coverage you select. Many companies offer “no exam needed” policies and only require a simple medical questionnaire to be completed. Others may base the requirement on age; younger applicants are less likely to have medical issues and may not be required to undergo a medical evaluation.
- Will my premium ever increase or will the benefit ever decrease?
Term life insurance policies commonly increase the premium as time goes on. Some term policies also decrease in value as time passes as well. They are intended more for young to middle aged individuals to provide a financial umbrella for their dependents/beneficiaries.
- Will the insurance pay out if I ever become disabled?
Insurance companies have add-on policies, called “riders”, that add extended coverage in specific scenarios. Some riders include:
- Critical Illness: This rider policy pays out a specified lump sum if the insurer is diagnosed with a terminal illness stated in the policy. Cancer, strokes, and heart attacks are common critical illnesses listed in these types of policies; other illnesses may be included as well. If a lump sum is paid and the insurer passes away, the policy does not pay again. The lump sum can be used for any reason.
- Disability: Disability riders may waive the monthly premiums if you have a qualifying disability and some may even provide disability payments to supplement lost income.
- Accelerated Death: If an insurer is diagnosed with a terminal illness (where they are given a year or less to live), they can qualify to receive a lump sum benefit under this type of rider.
- Does the policy have any living benefits?
Permanent life insurance policies offer cash withdrawals but there are specifications on borrowing against your life insurance policy. Review these specifications with your insurance agent or broker. Outside of riders, term life insurance policies do not have any living benefits.
- Are there any exclusions or waiting periods to the policy?
All life insurance policies have exclusions where the plan specifies in which circumstances the policy would not have to pay in the event of a death. Review these exclusions in detail with your insurance agent or broker and be sure that you fully comprehend them.
- Does the policy take inflation into account if it were to ever pay out?
It can vary with your policy, so check with your insurance agent to verify whether the plans you are interested in offer consideration for inflation.
- I don’t want to have to pay a lot for my monthly premium, I have enough bills already. Is there a way to get good coverage without paying too much?
As time passes and you age, the cost for life insurance goes up. You are also at risk for not qualifying for many life insurance plans if you wait to enroll because many carriers will require a medical exam when the insurer is at or above a particular age. If you do not have a clean bill of health, this exam can put you at risk for having your application for life insurance denied. The best time to get life insurance is now. You are looking into purchasing life insurance for a reason and you should not shrug off your responsibility to take care of you loved ones. Discuss all of your life insurance options and premiums with your insurance agent. They will help you find a plan that best suits you and your family’s needs and budget.