Life insurance is usually a low priority for most families, dubbed too expensive or unnecessary. This tends to be a result of a lack of education on all the wonderful things that 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 make the decision to purchase 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 that you owe. Having a life insurance policy will alleviate that stress from your loved ones at a time when they should be focused on mourning.
Even if you don’t have debt, you may want to think about the future of your family. If you have small 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 you are not satisfied with your policy, you will have what is called a “free look” period. This can be anywhere from the first 10 to 30 days from the start of your policy where you can cancel and receive a refund of premium.
However, if you pass the free look period and decide you no longer want the policy, you have options. You can cancel the policy, but that would result in a loss of protection and any accumulated cash value if it’s 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 used by insurance companies 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 a variety of circumstances, there are guaranteed issue plans that do not require underwriting. However, because life insurance companies are taking 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 the situation of your family and other factors like your income, debts, and future financial goals. A good rule of thumb is to have coverage that’s 5 to 10 times your annual income. This 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 is still left on your mortgage? Will your children be able to afford college without you? And it’s important to adjust your coverage as your life changes. Maybe that home will get paid off and you won’t need such a large policy. Or your children graduate college and that’s 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 provides protection for a certain period of time such as five or ten years. The death benefits are only paid out if the insured dies during the time period of the policy. Permanent life insurance, on the other hand, 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’s important to be educated about 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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