Imagine buying a house without asking a single question about the process or choosing a random car off the lot and not knowing any of its specs. It would be crazy! Big purchases and investments, like life insurance, require careful consideration.
A part of that thought process should be asking important questions of not only yourself but also your life insurance agent. They can provide valuable guidance, but asking the right questions will ensure you make an informed decision.
Continue reading to learn five critical questions you should ask your life insurance agent before signing on the dotted line.
Question 1: What Type of Life Insurance is Right for Me?
Choosing the right type of life insurance depends on your current circumstances, financial goals, and long-term needs. There are two main policy types: term life insurance and permanent life insurance. Term life insurance is a life insurance policy that provides coverage for a set term, usually 10, 20, or 30 years. If you were to pass away within the term limit, your beneficiary would receive the death benefit. Due to its shorter coverage period, it is a more affordable option, but you will not see cash value accumulation. On the other hand, permanent life insurance, which includes whole and universal, provides coverage for your entire life. Usually, it features a cash value component that can grow over time.
Depending on your current station, either of these policy types would make a good option. If you are raising small children or paying off a home, a term policy would be better to provide financial protection for your children or mortgage, in case you pass. A permanent life insurance policy would be best for those looking for lifetime coverage, cash value accumulation, or to leave a legacy.
Question 2: How Much Coverage Do I Need?
Similar to the type of life insurance, the amount of coverage you need depends on several factors. Maybe you are the primary earner for your family, and all the financial responsibility falls on your shoulders, or perhaps you have goals to send your children to college fully funded. Whatever the circumstances, you’ll need to decide with your agent how much coverage is right for you.
A common approach to choosing coverage involves aiming for a policy that is 10 to 15 times your salary. However, you should also include outstanding debts you have accrued (mortgage, student loans, credit card balances, etc.) and any future expenses you would have had to cover: college tuition or retirement for your spouse.
Your life insurance should be able to provide financial security to your loved ones if you’re no longer able to support them. Working with your agent can help you pinpoint the perfect number.
See the Life Happens Life Insurance Needs Calculator to help determine your ideal coverage.
Question 3: What Does My Policy Include?
This question is critical because understanding what your policy includes will ensure that it meets your needs. A typical policy always details the death benefit, which is the amount paid to your beneficiaries upon your passing. However, it can also specify any living benefits, like access to the death benefit in case of terminal illness or the case of permanent policies, borrowing from the cash value accumulation.
Additionally, if you want to customize your policy, you can add riders, which are optional add-ons that can enhance your coverage. Review your policy with your agent to ensure it includes everything necessary to meet your needs.
Question 4: How Do Premiums Work?
Premiums are the monthly payments you make to keep your life insurance policy active. Now, the amount you are required to pay depends on the type of policy you choose, the coverage amount, your age, health, lifestyle, etc. For term life insurance, premiums usually remain the same throughout the life of the policy. However, for permanent life insurance, they can vary. This is especially true if your policy has a cash value component since part of your payments will go towards building that value.
Ultimately, it’s important to understand your premium structure and whether it can change so that you can budget accordingly.
Question 5: What Happens If I Miss a Premium Payment?
Just like when you miss a payment for anything else, there are some consequences to missing a premium payment. However, it all depends on the policy type and how long the payment is overdue. For term life insurance, a missing payment usually results in a grace period of about 30 days. If the payment is not made within that time frame, you do run the risk of lapsing your policy. If you have accumulated cash value in your permanent life insurance, that should be enough to cover the missing payment to keep the policy active. But in doing so, you are reducing your cash value, and continuously missing payments could result in a lapse of policy.
You should always contact your agent first and foremost if you know you will miss a payment so they can explore other options and prevent you from losing the coverage.
Life Insurance Questions?
We hope that this information on questions to ask your life insurance agent is useful to you.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage at (888) 539-1633 to speak to one of our Life and Annuity experts or leave a comment down below.
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