Last month I wrote an article regarding the current state of insurance in California that pertained to the Property and Casualty market. There’s no doubt that the insurance industry is definitely going through some serious growing pains and major adjustments have been implemented with companies increasing rates and tightening their underwriting belts to try and bring back profitability in the Auto, Home, and Commercial Insurance Industry. Your insurance agent’s main job is to PROTECT YOUR ASSETS. With that said, there’s no bigger asset to protect than YOU via Life Insurance.
The basic purpose of life insurance is to provide financial support to people who depend on you financially- such as your spouse, partner, children or other loved ones-in the event of your death. Many types of life insurance are available. Here are eight critical questions to ask your agent about life insurance. Keep in mind, these probably aren’t the only questions you have, but they’re the ones you won’t want to leave without asking.
1. My employer provides life insurance. Why should I buy more?
The group policy your employer provides may be affordable and easy to enroll in without a medical exam. However, group policies may only pay an amount equal to one or two years’ salary, or a similarly limited amount. That may not be enough to cover your family’s needs (mortgage payments, education costs, living expenses) if you pass. Also, you may not be able to take it with you if you change jobs. Having a personal policy to supplement your employer-provided policy makes sense to ensure coverage during all the ups and downs in your life.
2. Does term or permanent life insurance make more sense for me?
Premium rates for term policies are typically lower than those for permanent ones (if applying for the same coverage), but there are tradeoffs. For one, premiums on term policies typically go up substantially at the end of the initial term – usually 10, 20 or 30 years. And, if you stop paying premiums for any reason, you are no longer eligible to receive death proceeds and your family’s financial future could be at risk.
Term policies are good for financial obligations that end, like a home mortgage or education costs.
On the other hand, permanent policies are good for retirement planning, income replacement, and ongoing financial obligations like caring for a family member with a disability. Permanent policies can accrue cash value and stay in force as long as you pay the premium. They may require a medical exam but usually have fixed premiums that won’t go up even if your health takes a turn for the worse.
It’s an important decision to make and an important question to discuss with your agent.
3. Will my survivors receive Social Security benefits?
If you’ll need to replace your income for your loved ones if you were to die, you may be counting on Social Security to cover some of the burden. The reality is that, in most situations, Social Security benefits are only paid out if a surviving spouse is over 60 years old or has children under the age of 18. If that doesn’t describe your situation, you should consider life insurance to help make up the difference.
4. Will I be covered if I become disabled?
Most life insurance policies have a variety of optional benefits, called riders, which may be available for an additional cost.
Disability riders may cover paying your policy premiums while you’re disabled and may supplement your lost income.
An accelerated death benefit rider lets you collect a portion of the policy’s death benefit if you become terminally ill with a short life expectancy, such as one year.
A critical illness rider pays a lump sum if you’re diagnosed with one of the critical illnesses specified in the insurance policy, such as cancer, heart attack, stroke, kidney failure and others. Instead of reimbursing you for medical expenses, the way health insurance does, a critical illness rider provides money to use for any purpose during the course of treatment.
Every insurer has their own selection of riders, so be sure to ask what’s available with your policy.
5. Will my premiums increase?
It depends on whether you have term or permanent insurance. With term life coverage, your premiums start out lower than comparable permanent coverage and stay fixed for the initial term. If you choose to keep your policy in force past the initial term, the premiums will likely go up. With permanent life insurance coverage, though, as long as you don’t let your policy lapse, your premiums are guaranteed not to increase for the rest of the owner’s life.
6. Do I need to get a medical exam?
Maybe not. Many companies now offer no-medical-exam life insurance policies for qualified applicants. You answer a few medical questions during a simplified application process and the application may be reviewed in less than 24 hours. The older you are, the more health issues you have, or the higher the face value of your policy, the more likely you are to be subject to a medical exam.
7. Are there any exclusions?
This is an important question because life insurance has no standard policy. Policy terms, prices, and exclusions may vary widely by company. But in general, insurance companies are in the business of offering coverage to as many customers as possible, not turning business away. Many activities such as scuba diving and mountain climbing that might have been excluded in the past are often accepted for an additional premium. Even people who have some chronic illnesses may find coverage if they’re willing to pay more. Most companies have a suicide exclusion, though, for the first year or two the policy is in force.
8. How can I save money without sacrificing coverage?
Short answer: by buying now. No matter how old you are, you will never be younger than you are today. Age can be a significant factor in determining premiums. Many multi-line insurers offer special rates on either the life policy or the home or auto policy when you bundle your policies with one company, so ask if the company offers any incentives. Paying premiums annually can also save money on the fees often associated with monthly installments. Lastly, on certain products, going paperless on your payment modes may help you save, if you chose to pay with a bank check plan.
Craig Davis is an agent for Farmers Insurance and the owner of Craig Davis Family Insurance located at 27645 Jefferson, Suite 113, in Temecula. He may be reached at (951) 699-1776. Email: davisfamilyinsurance@gmail.com
Website: craigdavisfamilyinsurance.com
