Life Insurance
FAQs
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frequently asked questions
Life insurance is a financial product that pays a designated beneficiary a sum of money upon the insured person’s death. It is designed to provide financial protection for loved ones, covering expenses like funeral costs, debts, and ongoing living expenses.
- The two primary types are term life insurance, which provides coverage for a specific period (typically 10, 20, or 30 years), and permanent life insurance, which includes whole life and universal life policies that offer lifelong coverage and a cash value component.
To calculate your coverage needs, consider your financial obligations, such as outstanding debts, mortgage, future education costs for children, and income replacement for dependents. A common guideline is to aim for 10-15 times your annual income, but personal circumstances will vary.
- Several factors influence premiums, including age, health history, lifestyle choices (such as smoking), occupation, and the type and amount of coverage. Generally, younger and healthier individuals pay lower premiums.
- Not always. While many traditional policies require a medical exam as part of the underwriting process, some policies—like guaranteed issue or simplified issue life insurance—do not require medical exams and are more accessible for individuals with health concerns.
- Yes, many life insurance policies allow for changes. You can adjust coverage amounts, add riders, or convert a term policy to a permanent policy, depending on your needs. Review your policy regularly to ensure it remains suitable.
- A rider is an add-on to a life insurance policy that provides additional benefits or coverage. Common riders include accidental death benefits, waiver of premium for disability, and living benefits that allow access to funds in case of terminal illness.
If you miss premium payments, most policies have a grace period (usually 30 days) during which you can pay without losing coverage. If premiums remain unpaid after the grace period, the policy may lapse, resulting in a loss of coverage.
- If you have a permanent life insurance policy with cash value, you can borrow against it. The loan amount will accrue interest and will reduce the death benefit if not repaid.
- To file a claim, contact your insurance company and provide necessary documents, including the death certificate and policy information. Your insurance agent can assist you in navigating the claims process.
Generally, life insurance death benefits are not subject to income tax for the beneficiaries. However, any interest earned on the benefit may be taxable. It’s best to consult a tax professional for specific advice.
- Yes, you can have multiple life insurance policies. Many people choose to supplement their coverage with additional policies for various needs, but keep in mind that you should evaluate your total coverage to ensure it meets your financial goals.
- The contestability period is typically the first two years of a policy when the insurance company can review and contest claims based on misrepresentation or fraud. After this period, claims are generally paid as long as premiums have been paid.
If your policy lapses due to non-payment, contact your insurance provider immediately. Depending on the company’s policies, you may be able to reinstate your coverage within a certain timeframe by paying back premiums.
You can choose one or more beneficiaries when you apply for a policy. Consider family members, friends, or organizations. It’s essential to keep beneficiary information updated to reflect your current wishes.
- Term life insurance provides coverage for a specified period and does not build cash value, while whole life insurance offers lifelong coverage and accumulates cash value over time, which can be borrowed against or withdrawn.
