Ten common life insurance questions!
One of the most important coverages you can carry, especially if you have a family is life coverage. Aside from obviously protecting your family from initial financial hardship if the worst were to happen, It can be used in a multitude of ways that most people don’t think or know about. Have you heard of life insurance as an investment? Most people probably haven’t. If they have, the probably don’t know much about it. My point here is for such an import coverage that everyone should carry most people actually know very little. Today we will discuss 10 of the most common questions out there that people have about life insurance in general. Remember, coverage isn’t something you can get after the fact. That is especially true about life insurance (obviously). So if the worst were to happen to leave your family high and dry, make sure they are covered today!
Do I really have to get a medical exam for this?
Almost always yes, There are very few instances of people not getting exams previous to getting their health insurance coverage. There are some coverages that are available without exams but those typically have low death benefits and cost more than if you had the exam anyways. Not to say there isn’t also a time and a place for exam free coverage to be beneficial as well. It obviously exist for a reason. But traditionally, Yes. You will always need to have a health exam to get your life coverage. These exams are carried out by a contracted 3rd party health care provider that is contracted by the insurance company. So don’t worry about it being a doctor in the pocket of the agency just looking to make you pay higher rates. Added bonus, Free physical. Cough cough
2. What is a death benefit?
This is basically the “face value” of your policy. This is the amount that your policy pays out to your beneficiary once they have claimed your policy. In the past this was always payed out as a tax free lump sum. Which is still typically the cause however some policies also allow the death benefit to be paid out as a tax free annuity for between 5-40 years, however this is not always available.
3. What is the difference between Term life and Whole life? Which is better?
The quick answer here is that Term life gives you coverage for a fixed period of time, let’s say for 20 years. Once those 20 years are up if you have not died then your policy is expired and you no longer have coverage which means your will have to pick up a new policy or no longer carry life insurance. Whole life is exactly what it sounds like, it covers you for your entire life and once your life ends your beneficiary collects on your policy. For more detailed information about the difference between term and whole CLICK HERE. As far as which is better, like most insurance coverage that varies. For one person one may be better for their current situation and for another person it maybe completely different. What is always true is that the best way to figure out what is best for YOU is to talk to an agent today and get a quote on both!
4. What are living benefits?
Living benefits are exactly what they sound like, benefits provided to you by your life insurance policy that you can take advantage of yourself while you are still alive! Some of these benefits may include, Early pay: This is a benefit for the insured who has been diagnosed with a terminal illness and helps cover medical costs and care. The percentage of the benefit is determined by your policy and company. Long-Term Care: If the insured becomes unable to provide their own basic care and will require assisted living, the long-term care benefit may allow them to use their life insurance policy to help pay for that care. Short-Term Care: If the insured is injured or has a temporary impairment, this benefit may help cover the short-term costs of care. It is important to remember that these are not available through every provider or every policy, there are also other benefits that may be available to you. What is important to remember is to ensure you have asked all the questions you have regarding your policy to your agent ahead of time. If you have questions regarding your current life policy or your current “living benefits” reach out to us for a free policy review today!
5. Will my death benefit increase will inflation?
This is a very important question to ask before you sign up for any policy. While 500,000 seems like a good chunk of money today in 60 years it will be worth the same as roughly 200,000 todays dollars. Inflation rises at roughly 3% a year so after 40 years your policy will be wroth exactly half of what it is worth today. Some policies come with a stipulation that the death benefit automatically adjusts with inflation. However what is more likely is that you will need to purchase this benefit as an additional rider or endorsement on the policy. This is one of the more important conversations you should be having with your agent previous to choosing a policy. A 20 year term policy may not make as much sense to purchase the endorsement on over a full life policy depending on your age and risk factors. However every person is different so make sure you are asking questions about his previous to choosing a policy!
6. What happens to my policy as I age?
Your fiscal needs will change as you age. Also the terms and conditions of your policy may change as well. Usually term policies will allow you to make the switch over to a whole life policy as you age, typically around age 70. Again this is a conversation for you and your agent, and the earlier the better. Some in their 40’s who is carrying a 1 million dollar policy can be paying up to 10x’s less a year for the same policy as someone in their 70’s. So do yourself the favor as early as possible and play as long a game as possible by making sure your terms are exactly how you want them now and later in life.
7. What happens to my policy if I become disabled?
Most the time you will need to ensure your current policy has a disability rider or that you have separate disability insurance. Though some policies do cover disability. What is more important that most people don’t think about is ensuring you know what your policy provider considers a disability. Every company will have a different definition of what “disabled means”. However one common thread to look for is whether or not you company will waive premiums in the event of a catastrophe and if they will assist in finding a policy with the appropriate riders to get you the proper coverage.
8. Does life insurance have cash value I can borrow against or cash out if I cancel my policy?
Yes some do, however it is important you and your agent talk about this in detail so you understand the ins and outs. You pay into your policy for potentially your entire life, some people use this as a safe place to invest money for future expenses such as home down payments, kids college or anything else that may arise. However this does not mean you can borrow against your death benefit. But any fees incurred for borrow the money early may come out of your death benefit. Does this still seem confusing? Thats because it is. The important things to know is YES, your policy may have cash value, YES you may be able to borrow against that cash value, YES you may get that cash value if you cancel your policy before you die. This does not mean that all polices have this benefit. If you want to know more about using life insurance as a possible investment in your future or just what safeguards you may have when canceling your policy early in regards to the cash value of the policy please reach out and ask us today!
9. Are there circumstances in which my policy could be canceled?
Yes, however these are not mysteries and are fairly common sense. Like nearly every other question you may have about any of your policies the best answers lay with your agent. If you are not currently with our agency feel free to send us your current policy and we will happily review it and let you know what these terms are!
10. Is there a period between when I get my policy and when it goes into effect?
There can be, again this depends on the policy and should be specifically outlined and discussed between you and your agent previous to buying your policy.
Life insurance is a must for anyone who has someone that depends on them, and even for some people who don’t. It can be leveraged in many ways to offer benefits to you while you are still alive and ensure that the people you care about most are able to carry on with their expectations of life after you’re gone. It can be a hard conversation to have, about the world once you’re no longer in it. But it’s one that you need to have before it’s too late for the people you care about most. Blauman insurance excels at making those uncomfortable conversations easier so if can be a “one and done” conversation. If you have any questions regarding a current or potential life policy please reach out to us today for a free policy review or a quote!!