Life Insurance 101

Life |

Are you thinking about buying life insurance?

Here are answers to some of the most common questions people have about it. They can help you decide if your need life insurance and find the coverage that’s right for you at the lowest possible cost.

How does the life insurance offered by insurance companies differ from that provided by my employer?

The group policy your employer offers is affordable and easy to sign up for. However, the amount of coverage is usually limited. A typical policy covers only one or two years worth of salary. That may not be enough to pay your family’s expenses, including housing, food, utility and education costs, if you pass away. Also, this coverage may not be able to move with you if you get a new job. Having a personal policy to supplement your employer-provided insurance makes sense to ensure adequate and continuing coverage should the unexpected happen.

Should I get term or permanent life insurance?

Term policies are usually used to cover financial responsibilities that have a specific end date, such as paying a mortgage or for college. Permanent policies are usually used to plan for longer-term issues like retirement or caring for a sick or disabled family member.

At identical coverage levels, premiums are usually lower for term policies than for permanent ones. You should be aware the term policy premiums usually go up at the end of the initial term. Also, if you don’t pay your premium for any reason, your policy will no longer be in effect and and your beneficiaries could be left at risk.

The premiums on a permanent policy are fixed and will not increase, even if you become ill. The cash value of permanent policies will grow over time.

An insurance agent can help you decide which type policy is better for your situation.

Can my premiums increase?

As outlined above, it depends on the type of insurance you purchase. With term life coverage, your premiums start out lower than comparable permanent coverage and stay fixed for the initial term. If you choose to extend your policy past the first term, premiums will likely increase. With permanent life insurance, as long as the policy never lapses, premiums will not rise for the rest of the owner’s life.

Is a medical exam required?

Some insurance companies offer life insurance policies that require no exams for qualified applicants. You simply answer a few questions about your health during the application process. The application is reviewed and you will be approved for coverage or asked to undergo a medical exam.

You are more likely need an exam if you’re older, have health issues or are purchasing a policy with a high face value.

Can I be prevented from getting coverage?

Most people should be able to find coverage. Policy terms, prices, and exclusions vary from company to company. However, insurance companies stay in business by offering coverage to as many prospective customers as possible. They don’t want to turn business away. Many dangerous activities like mountain climbing and tight rope walking that might have been excluded in the past are now generally accepted at higher premiums. Even people who have certain chronic conditions are able get coverage if they’re willing to pay a significant amount more than a healthy person.

How can I save money on life insurance?

There are four things you can do to control insurance costs:

  1. Buy your policy as soon as possible. The older you are, the more a policy will cost.
  2. Some insurers reduce life insurance rates if you bundle your coverage with your auto and home policies. Check with your auto and home insurer to see if this is possible.
  3. Paying premiums annually usually costs less than paying in monthly installments.
  4. Going paperless may help you save money, as well.

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