Life insurance is usually a low priority for most families, dubbed too expensive or unnecessary. This situation tends to result from a lack of education on all the wonderful things life insurance can do. A life insurance policy promises to ensure the security of a family’s future. Because of its importance, we have gathered the five most common questions about life insurance we are asked and answered them so you can be in the know.
1. Do I Need Life Insurance?
The answer to this question can almost seem subjective; it’s up to each person to decide on purchasing a life insurance policy. However, the objective truth is that if you have debt when you die, your immediate family is responsible for the money you owe. Having a life insurance policy will alleviate that stress from your loved ones at a time when they should focus on mourning.
Even if you don’t have debt, you may want to think about your family’s future of your family. If you have young children, a life insurance policy could mean the difference between accruing student loans or a fully stocked college fund. Similarly, if your income would result in a drastic loss for your family, the death benefit from a life policy could make all the difference.
2. What If I Don’t Want the Policy Anymore or Want to Change It?
If unsatisfied with your policy, you will have a free-look period. This time can last from the first 10 to 30 days from the start of your policy, where you may cancel and receive a premium refund.
However, if you pass the free-look period and decide you no longer want the policy, you have other options. You can cancel the policy, but that would result in a loss of protection and any accumulated cash value if it is a permanent policy. You could also adjust your coverage. If your needs change, you could lower the coverage amount or switch to a different type of policy. Your insurance agent could help you navigate these changes.
3. What is Underwriting?
Underwriting is a process insurance companies use to determine how much it will cost them to provide you coverage. It includes getting information about your age, gender, health habits, family health history, and whether or not you have a dangerous job or hobbies. They look at the risks you post, price out those risks, and will decide whether or not to offer you coverage based on that assessment.
If you are concerned about being rejected due to numerous circumstances, there are guaranteed issue plans that do not require underwriting. However, because life insurance companies take on more risks, you will see higher premiums and a smaller death benefit.
4. How Much Life Insurance Do I Need?
Figuring out how much life insurance you need depends entirely on your family situation and other factors like your income, debts, and future financial goals. A good rule of thumb is to have coverage that is 5 to 10 times your annual income. This provision can give your family the cushion needed to regroup after losing a significant portion of the household income.
Life insurance is all about looking to the future. How would your family cover all their expenses if you were to pass away? How much remains on your mortgage? Will your children be able to afford college without you? And it is important to adjust your coverage as your life changes. Maybe that home will get paid off, and you will not need such a large policy. Or your children graduate college, and those costs are no longer a concern.
5. What Are the Main Types of Life Insurance Available?
There are two types of life insurance: term and permanent. Term life insurance protects for a certain period, such as five or ten years. The death benefits pay out only if the insured dies during the policy period. On the other hand, permanent life insurance can provide death benefit protection for your lifetime. Permanent life insurance is also an umbrella that covers different types of policies like whole life, universal life, and variable universal life.
It is important to know what policies exist and what best fits your needs. Hopefully, answering these five most common questions about life insurance gives you the peace of mind to bring your family peace of mind with financial protection. Check out these five tips for first-time life insurance buyers.
Life Insurance Questions?
We hope that this information on questions about life insurance 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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This article was updated on 10/18/2024.
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