Frequently Asked Questions

 Life insurance is a contract between you and an insurance company. In exchange for regular premium payments, the insurance company promises to pay a lump sum (death benefit) to your beneficiaries upon your death. The purpose is to provide financial security to your loved ones. 

• Term Life Insurance: Provides coverage for a specified period (10, 20, 30 years). If you pass away during the term, your beneficiaries receive a payout. It is generally more affordable than permanent insurance.
• Whole Life Insurance: A type of permanent insurance that covers you for your entire life, provided premiums are paid. It has a cash value component that grows over time.
• Universal Life Insurance: Another form of permanent insurance, offering more flexibility in premiums and death benefits. It also includes a cash value component.

 The amount of life insurance depends on your financial situation, debts, income, and future financial goals for your family. A common rule is to get coverage that’s 7-10 times your annual income, but it can vary based on specific needs (mortgage, college expenses, etc.). 

• Term Life Insurance offers temporary coverage and is more affordable. It provides a death benefit only if the insured passes away during the term.
• Whole Life Insurance lasts for the insured’s entire life, has higher premiums, and includes a cash value component that grows over time and can be borrowed against.

 The death benefit is the amount of money paid to your beneficiaries when you die. It is usually paid out as a lump sum and is generally tax-free. 

 You can name one or more people or entities (e.g., family members, friends, a trust, or a charity) as beneficiaries. The beneficiaries will receive the death benefit after your passing.  

If you stop paying premiums:

• For term life insurance, your coverage will lapse, and you’ll no longer have protection.
• For whole life or universal life insurance, the policy may use the cash value to keep the policy active temporarily. However, if the cash value runs out, the policy may lapse.

 In most cases, the death benefit is not taxable for beneficiaries. However, there could be taxes involved if the payout is made to an estate or if interest accumulates on the payout. 

 The cash value is a feature of permanent life insurance policies (like whole or universal life). It’s a savings component that grows over time, tax-deferred, and can be borrowed or withdrawn (with some conditions). 

 Yes, you can have multiple life insurance policies. Many people use a combination of policies (e.g., term and whole life) to meet different financial needs. 

 Some policies require a medical exam (fully underwritten policies), while others do not (simplified issue or guaranteed issue policies). The policies that do not require an exam typically have higher premiums due to less information about the insured’s health. 

 If you outlive your term life insurance policy, the coverage simply expires. Some policies allow you to renew coverage at a higher premium, or you may have the option to convert it into a permanent policy, depending on your policy terms. 

  You can borrow money from the cash value of a whole life or universal life insurance policy. However, borrowing reduces the death benefit unless the loan is repaid. 

 Yes, you can change your beneficiaries at any time by notifying your insurance company. It’s essential to keep your beneficiary designations up to date, especially after major life events like marriage, divorce, or the birth of a child. 

Premiums are based on several factors, including:

• Your age
• Health and medical history
• Lifestyle (smoking, drinking, etc.)
• Policy type and term length
• Amount of coverage
• Occupation and hobbies (if considered risky)

A rider is an optional add-on that provides additional benefits or features to your policy. Common riders include:

• Accidental death benefit: Pays an additional benefit if death is due to an accident.
• Waiver of premium: Waives premiums if you become disabled.
• Child term rider: Provides coverage for your children.
• Living benefits: Allows you to access part of the death benefit if diagnosed with a terminal illness.

 Underwriting is the process by which an insurance company evaluates your risk and determines your premiums. It typically involves reviewing your medical history, lifestyle, and other personal factors. 

Yes. Certain types of life insurance, like whole or universal life, build cash value, which can be used for:

• Borrowing against (loans from the policy)
• Withdrawing funds (in retirement or for emergencies)
• Paying premiums if needed (from cash value)

 The best time to buy life insurance is when you’re younger and healthier, as premiums are lower. Waiting until later in life or until you have health issues can result in higher costs or difficulties qualifying. 

 Yes, but it may be more expensive. Some policies, like guaranteed issue policies, do not require medical exams and accept applicants regardless of health, though these policies often have lower coverage limits and higher premiums.