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). Also, you may not be able to take it with you if you change jobs.
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. Premiums on term policies typically go up substantially at the end of the initial term—usually 10, 20 or 30 years. 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.
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.
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.
5. Will my premiums increase?
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 past the initial term, the premiums will likely go up. With permanent life insurance coverage, 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.
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. Even people who have some chronic illnesses may find coverage if they’re willing to pay more.
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. Craig Davis is an agent for Farmers Insurance and the owner of Craig Davis Family Insurance located at 27625 Jefferson Ave Ste. 100, in Temecula. He may be reached at (951) 699-1776.
Website: craigdavisfamilyinsurance.com
