Buying life insurance to protect your loved ones is one of the most responsible things you can do. Unfortunately, shopping for life insurance can be a little intimidating for some. What kind of life insurance should you purchase? How much do you need? Which company should you use? These are some of the most common questions that people ask when shopping for coverage. We will list the top 15 most commonly asked questions about life insurance that we come across when speaking to customers. Hopefully, our list will help make the buying process for life insurance easier for you.
- Do I even need life insurance?
If you passed away, would you leave anyone with a financial burden? If you have people who depend on you financially, it’s safe to say that you need life insurance. For most people, it might be a spouse and children, but that is not always the case. What if you take care of your parents financially? It might make sense to have a life insurance policy that will take care of them if you pass away prematurely. Do you have business partners? If you pass, it might make sense to use a life insurance policy to fund a buy/sell agreement so that your beneficiaries and your business will be taken care of. Do you have a favorite charity? Many people use life insurance to leave a bequest to their favorite charity. Life insurance is a versatile product that offers many uses.
- How much life insurance do I need?
Most experts say that you should purchase coverage equal to 7 to 10 times your salary. This is a very simplified approach which could leave you underinsured. It probably makes more sense to use a comprehensive life insurance calculator that specifically breaks down your assets (personal savings, retirement savings) and liabilities (mortgage, income to be replaced, education expenses, final expenses, personal debts etc.).
- How long do I need protection?
There are a few options that you have when determining the length of coverage. Some duration options for coverage are:
- Coverage until your youngest child is financially independent (usually when they reach their mid 20’s)
- Coverage that lasts until your mortgage is paid off
- Coverage that lasts until retirement
- Coverage that lasts your entire life (most people do not need coverage that lasts their entire life)
These are just a few milestones that you could use in determining your coverage duration needs.
- What kind of life insurance do I need?
There are many different options when it comes to life insurance products. There is term insurance, return of premium term insurance, whole life insurance, universal life insurance (variable universal life, guaranteed universal life, current assumption universal life) and more.
Term insurance products are meant to provide temporary coverage that lasts for a specific period such as 10, 20, or 30 years. Term insurance offers the most amount of coverage per premium dollar.
Permanent life insurance products such as whole life and universal life offer coverage that lasts your entire life. As we mentioned earlier, most people do not need life insurance coverage that lasts their entire life, but permanent life insurance products offer a cash value component that policyholders can borrow from in the future. Some consumers find this feature appealing. Before you consider buying a permanent life insurance product, make sure you consider the high cost of coverage compared to term insurance and make sure you understand all the various expenses and charges as well.
- How much does life insurance cost?
This is probably the most common question we hear every day. The cost of life insurance depends on many different variables such as your age, gender, health class rating, amount of coverage, and duration of coverage. Don’t let an agent quote you ‘Preferred Best’ rates without asking questions about your specific situation. In many cases, this will lead to an unpleasant surprise when the insurance company comes back with a lower health class rating. Some agents will do this just so that they can get an application started. Remember, each person’s situation is unique so it makes sense to talk to an agent who will ask the important underwriting questions so that you can get an accurate quote and have realistic expectations.
- What is the process for buying life insurance?
The process for buying life insurance is simple. In fact, most companies allow online submission and signatures of applications. You can fill out the application over the phone with your agent. A medical examiner will come to your home to conduct a brief paramedical exam, which will require a blood draw, urine sample, blood pressure measurement, height and weight measurement and a resting EKG (depending on the size of the policy). The examiner is usually in and out in about 20 minutes. If your medical records do not need to be ordered, it is usually about 3 to 4 weeks, depending on the company, for you to receive a response. Once approved, sign the policy electronically, pay your premium and you are covered.
- What kind of questions does the life insurance company ask on the application?
Life insurance companies are very thorough when it comes to underwriting. They will ask basic personal questions such as contact information and social security number. They will also ask about your family history, medical history, current or past medications and your overall health. They will also ask about your job (is it dangerous), lifestyle questions (do you drink, smoke, take drugs, engage in dangerous hobbies, clean driving record) and other questions to make sure you are not a high-risk applicant. They will also check your motor vehicle record, Medical Information Bureau file and prescription database file to verify the facts on your application. It is important to tell the truth on a life insurance application. Life insurance companies are so thorough when it comes to underwriting, that you will usually get caught if you try to lie on an application.
- How long does it take to get life insurance?
The length of time it takes to get insurance, usually depends on the type of insurance you purchase. A fully underwritten policy that requires a paramedical exam can take 3 to 6 weeks, depending on the company. If your medical records need to be ordered, it could add 6 to 8 weeks to the process. Some companies offer no medical exam life insurance with instant approval in many cases. These policies cost much more than fully underwritten coverage, but there is no waiting time.
- What life insurance company should I use?
There are so many life insurance companies to choose from. When you choose a life insurance company make sure that it is financially stable. Companies with an ‘A’ rating or better from ratings agencies such as Moody’s, A.M. Best or Standard and Poor’s are considered financially stable and able to meet financial obligations. If you are buying term life insurance, it makes sense to use a company that offers a generous conversion feature if you ever want to convert to permanent coverage in the future.
- How do I find the right life insurance agent?
You can either choose an independent agent or a captive agent. A captive agent only has access to one company’s product. An independent agent has access to multiple insurance companies and will give you the most options when it comes to coverage. Having multiple options is important considering each life insurance company has its own underwriting requirements. If you have any medical or lifestyle impairments, it makes sense to have multiple options when applying for coverage.
- Can I get life insurance if I have health issues?
Life insurance underwriting has come a long way over the years. You can qualify for a ‘Preferred Best’ or ‘Preferred’ health class rating with minor health impairments. For instance, many life insurance companies offer ‘Preferred Best’ rating for applicants who have cholesterol and blood pressure that is controlled with medication. Some companies will even offer ‘Preferred’ health class ratings for controlled anxiety. Do not put off applying for life insurance if you have a health impairment. Use an independent agent who can shop your case to find you the company that will best underwrite your case.
- Do I have to take a medical exam?
Some applicants prefer not to take a medical exam. Maybe it’s a fear of needles or the inconvenience of taking a medical exam. No exam policies are more expensive than fully underwritten coverage. Since the insurance company is doing less underwriting, they are taking on more risk and passing the cost of risk to the policyholder. These policies also limit the amount of coverage as well. If you are in excellent health, some companies like SBLI and Principal Financial offer an expedited no exam option at fully underwritten rates up to $1 million of coverage.
- Should I Just choose the least expensive policy?
If you are looking for simple term coverage, choosing the least expensive coverage might make sense if the company has a good conversion feature and an ‘A’ rating. Some policies offer extra features such as living benefits that you can use if you become disabled or need long-term care. You will pay more for these types of policies but the extra features might be worth it to you. If you are looking for permanent coverage like whole life or universal life, there are many other variables you should look at such as expenses, charges, and potential returns. An illustration will breakdown down the fees and show you how your policy will perform under various conditions.
- I have life insurance through my work. Should I buy more coverage?
Group life insurance through your work is usually offered in smaller amounts such as 1 to 3 times your salary. There are a few things that you should know about group life insurance. The premiums increase every 5 years, you can’t take the coverage with you when you leave, the coverage is limited and you could get better rates with a standalone policy if you are healthy. In some cases, people with health issues might be better off maxing out group coverage since there is limited underwriting.
- What if I get declined for coverage?
Getting declined for life insurance with one company doesn’t mean that another company won’t approve you. You might have simply applied with the wrong company. Many people get discouraged once they are declined and never apply for life insurance again. A good agent will document the specifics of your case and informally shop it to multiple companies so that realistic expectations are set. This will allow you to get feedback from underwriters about your case so that there are no surprises. In many cases, an underwriter can look at the informal facts of your case and pretty much tell you if you will be declined.
These are some of the most common questions we’re asked by customers shopping for life insurance. If you have a question that is not on this list, feel free to ask us. Simply email your question to info@archstoneageny.com and we will respond immediately. Shopping for life insurance doesn’t have to be difficult. Let us show you how easy it is to shop for life insurance.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com.
