You’ve just gotten married, or you’ve bought a home, maybe you have children or are thinking about planning a family. Now may be the time to think about life insurance. Life insurance is a responsibility. It ensures that your family will be able to continue the life they’re living and enjoy the plans you’ve made for the future. If you are shopping for a life insurance policy, you probably have a lot of questions. And you’re not alone. Life insurance can be an uncomfortable and intimidating topic for many, but by asking a few simple questions, you can better understand what you are getting and how you and your family may benefit from the protections you put in place.
Here are ten (10) critical questions to ask your insurance professional about life insurance. Keep in mind, these probably aren’t the only questions you’ll have, but they’re the ones you won’t want to leave without asking.
The group policy your employer provides may be affordable and easy to enroll in without a medical exam. However, group policies at work may only give you a limited amount of coverage equal to one or two years’ salary. That may not be enough to cover your family’s needs, like mortgage payments so that they can stay in the family home, education costs and living expenses. A work group policy is most often not portable. You can’t take it with you if you change jobs. Having a personal policy to supplement your employer-provided policy makes sense to ensure coverage.
The type and amount of insurance you need is an important decision and your insurance agent will help you clarify what responsibilities you have and how best to meet them.
Term policies are a good option for financial obligations that will end, like a mortgage or education costs. Term options are typically 10, 20, or 30 years in length. Premium rates for term policies are most often substantially lower than those for permanent life insurance, because they pay out infrequently.
Permanent policies are good for retirement planning, income replacement, and ongoing financial obligations like caring for a family member with a disability. They stay in force as long as you continue to pay the premium and many permanent policies accrue cash value. Most permanent insurance policies require a medical exam.
It’s logical to think that your spouse’s social security will help you replace your income if he or she were to die. The reality is that, in most situations, Social Security benefits are only paid out if a surviving spouse is over 60 years old, or has minor children under the age of 18. There may be a large gap between Social Security benefits and actual needs. You should consider life insurance to help make up the difference.
Most life insurance policies have a variety of optional benefits which may be available for an additional cost.
For term and permanent life policies, the premiums you pay each month are fixed and will not change for the duration of the policy. However, if your policy expires and you choose to either renew the policy or buy a new life insurance policy, your premiums on the new policy will likely be higher than what you have been paying, since you are older than when you bought the first policy.
Most companies require the policyholder to undergo a simple medical exam to get the lowest insurance rates. If you are in reasonably good health, it makes sense to take a brief medical exam and save money on your monthly premiums. There are policies that do not require a medical exam, but those policies generally are more expensive.
Every life insurance policy includes some exclusions, which are instances in which the insurance company would not have to pay death benefits. These vary widely by company. High risk activities such as scuba diving and mountain climbing may be excluded, and some people who have some chronic illnesses may be excluded or find coverage if they’re willing to pay a much higher premium. Almost all companies have a suicide exclusion for the first year or two that the policy is in force. Be sure you discuss and fully understand possible exclusions with your agent before you sign on the dotted line.
No matter how old you are, you will never be younger than you are today. Age is often the most significant factor in determining premiums. Many multi-line insurers offer special rates on either the life policy or the home or auto policy when you bundle your policies through one company, so ask if the company offers any incentives.
This is an important question to ask your life insurance professional. A $500,000 policy may sound like a lot of money, but that amount will only be worth about $200,500 in 30 years due to inflation. There are some policies that automatically adjust for inflation, but there is usually an extra charge for inflation adjustments.
Your life insurance need is determined by two primary factors: How much money your surviving loved ones will need to have financial security after you are gone, and how much money will be needed to pay off your current debts, such as a mortgage, car loans, and student loans. The amount of life insurance you need is a very individualized number that can only be determined by carefully examining your current and future financial situation. You should fully discuss your current life situation and your expectations for the future, so that your insurance agent can help you calculate the amount of life insurance that is appropriate to the standard of living you want to maintain for your dependents and/or survivors.
It is important that you understand your life insurance policies. Talk to an independent agent at Foundation Insurance Group to make sure you have the right coverages to ensure that both you and your dependents are taken care of both while you’re living and into the future. We are always happy to review your current policies and answer any questions you may have.