Life Insurance FAQ

How is my Health Class and resulting rate determined?
Each insurance company uses their own criteria to determine which health class you will qualify for and your resulting life insurance rates. Some factors such as smoking can have an impact on determining your health class.

When will the policy begin?
The date that insurance goes into effect could be different from the date the company issues the policy. If you decide to purchase the policy, the insurance becomes will usually become effective when you have accepted the policy and the home office has received all necessary documents and premium required.

If I have a risky hobby, like sky diving, can I get life insurance?
Some insurance companies will not issue life insurance if you have a risky hobby.

If I have term life insurance and do not die within the term, will I get a refund of the premiums Iíve paid?
No, there is usually no premium refund if you outlive the term of the policy.

If I have an existing medical condition will I be able to get life insurance?
It will depend on the type and severity of the condition and how long youíve been treated. Other factors may also apply. Depending on the situation, you may either be ineligible or eligible, but with a higher premium.

Does life insurance pay benefits for any type of death?
Usually, individual life insurance pays a death benefit when an individual dies from natural causes or in an accident. There are certain exclusions that may apply. Be sure to check your policy.

I donít smoke anymore, but I did for several years. What do I put on my application?
Usually, you can list yourself as a non-smoker after one full year of abstaining from tobacco. Please contact your agent for more specific info; however.

Is it possible to change my life insurance policy if I already have one?
You can replace your current policy; however there are several issues to consider when determining to change coverage. One factor to consider is that new policies typically have high costs the first few years. If are interested in increasing your total life insurance, it may be better to keep your old policy and simply add a new one, or increase your specified face amount under the same life insurance policy.

Can anyone insure your life?
No. In order to purchase a life insurance policy on anyone, there must be an insurable interest; such as a relative who might suffer financial loss if you died or a debtor who may be at risk of repayment, a business partner, a spouse, son, daughter or parent.

Is a Medical Exam Required?
Most life insurance companies do require a medical examination. This process can be completed at your home or any other convenient location and will normally take half an hour or less. You are not normally charged for the medical exam. Typically, you can expect to have blood and urine testing, blood pressure reading, weight and height measurement and be asked questions about your medical history.

How long does this process take?
It depends on whether doctor records need to be ordered. If none are needed; generally 3-4 weeks. If records are needed, then about 4-7 weeks.

Do insurance companies treat all tobacco users the same?
It depends on how much you smoke and the companyís individual policy. The type of tobacco you use may also affect which category you fall under.

Does my age matter?
Many insurance companies will provide policies up to age 85 for term, second to die or Disclaimer insurance. Occasionally Disclaimer is available past 85.

When should I review my Life Insurance needs?
You should review your life insurance needs at the following events:

Marriage
Divorce
Birth or adoption of a child
Purchase of a new home
Starting or buying a business
Taking out a large loan
Starting a new higher paying job
Leaving a job and losing insurance benefits
Health problems
Just to be safe; every few years

Can I be denied life insurance for a preexisting illness or injury?
It depends on the severity of the illness or injury on whether or not you would be denied insurance. Most life insurance companies classify people who have cancer, AIDS and many other life threatening diseases as a high risk category. This doesnít necessarily mean that you will be denied coverage; but you might have to pay higher premiums because of it.

Why do I need life insurance?
Life insurance provides cash to your family after you die. These funds can be an important financial resource to help run the household, pay a mortgage and/or car notes, and generally ensure that your loved ones wonít be burdened with debt.

How do I purchase a policy?
The first step is that you will need to complete an application. You may also need to take a medical examination. Depending on the amount of insurance you want or your age, you may need to have an EKG.

Does my premium rate go up as I get older?
Traditional whole life premiums remain the same throughout the duration of the policy. Term life insurance premiums go up at the end of each term to reflect the change in the insured's age. This will only occur if the policyholder chooses to renew his/her policy for another term; however.

Are there any double indemnity (also known as accidental death benefit) clauses?
Some life insurance policies contain an accidental death benefit rider, which provides an additional amount of insurance if death occurs under certain stated conditions. If your policy contains this double indemnity rider the total benefit paid would be double the policy's face value.

Are there any exclusions on a policy's benefit payout?
Most life insurance policies contain restrictions that exclude certain types of risks from coverage. Examples would include hazardous or high risk hobbies or occupations, war, suicide and commission of a felony.

If I pay premiums for 5 years will my life insurance policy have a cash value?
With a term life insurance policy, no. If you have a whole life insurance policy then you would have generated cash value for your policy. For a universal life insurance policy your cash values would vary depending on interest gained and how often premium payments have been made.

How long do I have to keep paying premiums on my life insurance policy?
It depends on how your life insurance policy is set up. With a straight whole or term life insurance policy then you pay premiums for as long as you have the policy. With a limited pay whole life insurance plan then your premiums are limited to a certain period.

What is an annuity?
An annuity is a fixed or variable investment contract that is issued by an insurance company. It will provide income payments to beneficiary. You can choose to have it begin immediately or at a future date. You can also choose to have it paid for a specified number of years, or as a fixed amount until the funds are depleted.

What are the advantages and disadvantages of permanent insurance?
The advantages of permanent insurance include:
Protection is guaranteed for your entire life as long as the necessary premiums are paid.
Premium costs can be fixed or flexible to meet personal financial goals.
Policy accumulates a cash value that you can borrow against. Loans must be paid back with interest or there will be a reduced death benefit.
The policy's cash value can be surrendered - in total or in part - for cash or converted into an annuity.

Disadvantages:
It may be difficult to buy enough protection due to required premium levels.
It may be more expensive if you don't keep it long enough.

What are the advantages and disadvantages of term insurance?
The advantages of term insurance include:
Initial lower premiums. This can allow you to buy higher levels of coverage at a younger age.
This is a good type of insurance to purchase for covering specific needs that will disappear in time, such as mortgages and car loans.

Disadvantages:
Premiums will typically rise with age.
Coverage may terminate at the end of the term or may become too expensive to continue.
Usually, the policy doesn't offer cash value or paid-up insurance.

Are there different types of life insurance I should consider?
There are only two basic types of life insurance; although there are many different variations of these two basic forms. They are term and permanent. There is also a third type, known as universal life; which is a combination of term, permanent and various investment options.

Term insurance is exclusively death coverage. This means that policies are written for a specific length of time. Common terms are one year, five year and ten year, although longer terms may be available. If the insured dies during the term of the policy, the death benefit is paid to the beneficiaries. However, if at the end of the term the insured is still alive, the coverage ends and no benefits will be paid.

A permanent insurance policy (sometimes referred to as whole life) never terminates as long as the premiums are paid. It also builds cash values in the policy.

How much life insurance should I have?
When considering how much life insurance you need, keep in mind that there are many different needs that your survivors might have in the event of your death, depending on your situation. Factors that you should consider include:

1. Amount and type of income that is available other than salary

2. The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan

3. Whether or not the individual is married and, if so, the amount of money the spouse is capable of earning

4. The number of individuals who are financially dependent on the insured

5. Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.

6. Educational needs of children

What's the difference between life insurance and survivorship life insurance?
Individual life insurance is written on the life of one person while survivorship life insurance is written on the lives of two people. The benefits paid form a survivorship policy are generally paid through an irrevocable trust for such purposes as a charitable gift, caring for a handicapped child or paying taxes.

What are the financial ratings sometimes placed on life insurance companies? What do they mean to consumers?
Ratings have various meanings, depending on the criteria that is used to assign them. Not all companies will be rated by all services and each service usually has its own rating criteria. Usually, ratings reflect the service's evaluation of a companyís profitability, stability, and claims payment ability.

What does preferred life insurance mean, and who qualifies?
Individuals who are in excellent health with few or no risk factors will typically qualify for preferred rates. Some risk factors that could prevent you from qualifying for preferred life insurance include nicotine use, pre-existing health conditions, and weight problems.

Do I need life insurance if I'm single?
You might, depending on your situation. If you have loved ones who depend on your income (parents, etc.), you might very well need life insurance to protect them.

Do both I and my spouse need life insurance?
It's important to buy life insurance if your death or your spouse's death would create financial hardship for your family. One of the most important reasons is because many households rely on two incomes today. Your family will need protection to pay for day to day expenses, if you contribute an essential part of the household budget at the current time. You also need to think about expenses you must pay for in the event that a stay at home spouse dies, such as daycare.

What happens if a life insurance company finds out a policyholder withheld information on the application?
This is a very important matter because if you do not disclose significant information, the insurance company could change your premium or even deny your benefits.

If I have a policy from my employer, is that enough?
That depends on the type of policy and the amount of coverage your employer provides. If you leave that employer, consider whether you will be able to keep the policy or whether it will end.

How much insurance do I need?
There are many different ways to determine the coverage needed, but one of the best methods is to take into consideration the income that would be available if you were no longer alive such as Social Security and income from other assets. You also need to factor in inflation. Finally, think about how much money your loved ones would need to pay for the things you would want them to have in the event of your death and expenses that must be met that you wouldnít be able to fund through your salary.

What's the difference between whole life insurance and term life insurance?
With whole life insurance, you receive coverage until your death; no matter when that occurs. The policy will also build cash value. Premiums will remain stable throughout the life of a whole insurance policy. With a term life insurance policy, you only receive coverage for a specific period of time and no cash value is built.

What are universal and variable life insurance policies?
With a universal life insurance policy, if the companyís investments do not perform well it is possible that the amount of premium you pay would not be sufficient to carry the policy forward. A mutual fund type of investment is used with a variable life insurance police for cash value.

Will the annual premium change during the term of the policy?
With a level term life insurance policy, you will often receive a guarantee that the premium will not change for a specific period of time.

Should I purchase life insurance on my spouse and on children?
Depending on your situation you may want to purchase life insurance on your children. This should not take the place of purchasing life insurance for the members of your family that earn an income. In addition, you should consider purchasing life insurance on a spouse who stays at home for the purpose of replacing essential tasks such as household duties and childcare.

Should term insurance or cash value life insurance be purchased?
This normally depends on individual circumstances. For example, you should consider how much life insurance you need and what type of insurance you need. For example, if you need a rather large amount of life insurance; the most affordable option is usually through term insurance; which typically has a lower premium. If you can afford it, then either type of policy may be appropriate for you, depending on whether your need for life insurance is short term or long term.

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