Life Insurance FAQ's

People tell me that life insurance is a scam. Is there any good reason that I should worry about it?

If you are a breadwinner in your family, there is very little that can be done for your loved ones if something were to happen to you. Life insurance is the assurance that your family will be protected no matter what happens to you. Life insurance can seem like an expensive luxury with no benefits as long as you do not have a need for it. The emergencies of life, however, do not happen on a schedule. The second that you need life insurance is the second that it is too late if you do not have it.

There is also an often-overlooked advantage to life insurance policies. The extra income stream can actually benefit the policyholder while he or she is alive by adding to net worth and even giving the opportunity for new lines of credit for business ventures. There is no better benefit, however, than the peace of mind that you obtain through the right life insurance policy.

How much life insurance should I get?

Although there is no hard and fast rule for the amount of life insurance that you need, most experts agree on the baseline of no less than 10 times the annual income of the breadwinner. Other considerations include the outstanding balance on a mortgage payment.

It is actually quite frequently that people mistake life insurance for mortgage insurance because of the importance that covering the mortgage payment takes within the life insurance package. If you do not have a personal financial advisor that you trust, there are many online tools that are completely free to use that can help you determine the amount of life insurance that is viable. Online life insurance calculators that are now free contain tools and metrics that were only available to professional life insurance agents in the past. Make judicious use of these tools.

When it comes to life insurance, what are my choices?

The details of life insurance policies have become so precise that there are literally thousands of different plans that you can obtain for yourself. In general, though, the majority of life insurance policies fall under one of two categories: term life insurance and whole life insurance.

Term life insurance

Term life insurance is so named because it only covers a policyholder for a set period of time. Usually, term life insurance policies are created in five-year segments, from five-year policies all the way up to 30-year policies. Term life insurance policies cover a limited amount of benefits and have fewer features than whole life insurance policies. In turn, they are usually less expensive than whole life insurance policies. In the long term, however, term life insurance can actually be more expensive overall.

Whole life insurance

This type of insurance is also referred to as permanent insurance or cash value insurance. The policies so named because it builds a real cash value as it is paid into. It also covers an individual for the entirety of that person's life. The premiums in a whole life insurance policy are usually set at the beginning of the term and do not increase over the life of the policy. This is a major advantage for those who can afford to keep up payments. Whole life insurance policies can also be redeemed while the policyholder is still alive to guarantee an income after retirement.

What are the characteristics of a reputable life insurance company?

You want to make sure that you purchase life insurance from a company that will be around when it is time for you to collect. Though you definitely want to compare prices between companies, the viability of the company is much more important than saving a few dollars in the short term.

A.M. Best Company is a watchdog company for the insurance industry that rates life insurance businesses. Look for companies that have an excellent rating from A.M. Best Company.

Are there advantages to term life insurance policies?

Term life insurance policies have recently become quite popular with the general population because of the historically low premiums that are currently commonplace in the market. This is definitely an advantage along with the relative simplicity of the policy when compared to whole life insurance.

Premiums are guaranteed not to go up during the term that is agreed upon in a term life insurance policy. There is also no legal standing for an insurance company to cancel your policy as long as your premiums are paid on time. If you were to die during the term period of the policy, then all of the death benefits will go to the beneficiary that you name without a great deal of bureaucracy.

How can I tell if I can afford term life insurance?

There is a great deal of flexibility in the payment structures of many term life insurance programs. Whether you are the person who likes to get the entire premium out of the way for the year, or you have to break up payments into semi annual or monthly installments, there are plenty of options for you. With all of these options available, it is much easier to afford term life insurance today than it ever was.Get a free quote now to see if there’s a term life insurance policy that’s right for your budget.

What are the characteristics that I should look for a term life policy?

The market baseline is for term life policy companies to offer guaranteed renewable options for a policyholder. This means that you can continue your policy once the term ends without subjecting yourself to another medical exam. As you age, the option for this automatic turnover can become quite important. You may be uninsurable otherwise.

How long should my term be?

Most experts agree that initially, a person who is looking for term life insurance should simply match the initial term of coverage to the available rate guarantee period. The amount of money that you have left to pay a mortgage will also determine the length of time that your term is. The closer that you are to paying off your home, the shorter that your term can be without under insuring yourself.

Consider a 20 to 30-year policy if you still have children in the house and large mortgage payments. Consider a 10-year term if your children are out of the house and you are near the end of your payments on your mortgage.

How often should I reassess my need for life insurance?

There is no hard and fast rule about the perfect time to reassess your needs for life insurance. However, most experts agree that any major life event warrants a reassessment. If you are married or divorced, if you lose a job, if you retire, if your children are no longer dependent or if you receive a large windfall are just a few of the cases in which you should look into changing some details on your life insurance policy.

If none of these things happen, most experts will tell you that reassessing once every five years is sufficient.

What coverage can I expect from term life insurance?

The market baseline for term life insurance policies is coverage of death at any time or place during the term. Insurance companies will ask you about the more serious health conditions in your family such as cancer and heart disease before deciding on coverage packages for you. No insurance policy will cover suicide within the first few years of obtaining the policy.

Who can benefit from my term life insurance policy?

You must name beneficiaries that have some sort of financial dependence upon you in your day-to-day life. It is much easier to name family members as beneficiaries than it is acquaintances and friends, although this is not unheard of for impossible. Those acquaintances, however, must have a detailed financial interest in you. If you have a history of getting to a certain charity, you can also name that charity as a beneficiary of your policy.

How is the value of a life insurance policy taxed?

There are many income streams that are eligible for taxes under current federal law such as the dividends and cash value that is withdrawn from the policy. Depending on how you utilize the value of the policy while you are alive and how you pass on the resources when you are dead, you may be taxed more or less. State laws vary between municipalities, so be sure to have a good attorney on your side that understands local tax laws. There are also many ways to avoid federal taxes on a life insurance policy depending on how the money is managed. Consult a reputable tax attorney and a trusted accountant.

How is a death claim filed?

The paperwork required for a death claim includes the insurance policy itself, a copy of the death certificate and the official information that details the cause of death. You may also need to provide the past medical history of the policyholder, including the treatments that person received and who gave them. There is an industry of professionals who are equipped to make this process easier.

How can I get a life insurance quote online?

You’ve come to the right place. LifeInsurancePlans.com is a leading consumer resource for researching the topic of life insurance and receiving free quotes. You can fill out some basic info on our simple online form to compare rates from some of the nation’s top life insurance providers. It’s fast, free, and there’s no obligation whatsoever.