Just over half of all Americans (52%) have some form of life insurance, which gives them peace of mind knowing that their passing won’t financially strain their family. But that leaves 48% without coverage. Maybe you’re part of that group. Perhaps you’ve heard that only certain people need life insurance, or you’re deterred by the medical checks often required. Or maybe you’re just confused by all the insurance lingo – riders, premiums, death benefits, and so on.
The trick to finding the right life insurance is knowing what questions to ask. Here’s a handy guide to help you navigate your discussions with life insurance companies.
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How much does life insurance cost? This is a common question, but there’s no one-size-fits-all answer. An agent can give you a rough estimate based on your specific circumstances. The exact cost won’t be clear until your application has been processed, as many factors can influence the premiums. These include the type of policy, your age, the length of coverage, your health, whether you smoke, and your driving record.
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How much life insurance do I need? Again, this depends on your personal situation. But asking this question helps the agent understand what you’re looking to cover. A general rule of thumb is to have coverage worth ten times your current income. So, if you earn $75,000 a year, you’d need $750,000 in life insurance. But it’s easy to underestimate your needs, so it’s crucial to talk this through with an agent. They’ll consider your income, debts, expected expenses, and assets, including their future value, to determine the right amount of coverage.
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What’s the minimum coverage you offer? The minimum coverage varies depending on the policy type and the insurer. For individual term life insurance, it’s typically $50,000 or $100,000, although some insurers may offer lower amounts. It’s important to ask this question to ensure the insurer can meet your needs.
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Can I convert a term life insurance policy to a permanent one? Many term life insurance policies include a conversion rider, which lets you switch to a permanent policy during a specified conversion period. This usually starts five years after you buy the policy and lasts until the end of the term. Converting to a permanent policy will significantly increase your premium, but you might be able to offset this by reducing your death benefit. Make sure to ask your agent about the specifics of the conversion process.
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Do all life insurance applications require a medical exam? Some policies, known as no-exam policies, don’t require a medical exam. However, they may still consider your answers to health and lifestyle questions and may review your medical records. Ask your agent if they offer no-exam policies and what the requirements are.
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What happens during the life insurance medical exam? Each insurer handles this differently. The exam might take place at a medical testing center or in your home, and it’s usually conducted by a licensed nurse. They’ll check your weight, height, blood pressure, pulse rate, and possibly other vitals. Ask your agent what tests they require, how long the results take, and how they use the results.
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How long does the life insurance policy last? This is an important detail to ask about. Typically, a term life insurance policy lasts for the initial term, which can range from five to 30 years. During this time, the premium stays the same. At the end of the term, you might be able to renew the policy for one or more shorter terms, but the premium will be higher because you’ll be older. Ask your agent if they offer the option to renew or if you need to reapply for new insurance. Permanent life insurance policies, on the other hand, don’t have fixed terms and remain in force as long as you pay the premiums.
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Are there policy exclusions? It’s crucial to ask your agent about any exclusions that apply to the policy. These are standard exclusions that apply to everyone, and there may be additional exclusions added to your policy after underwriting. Knowing about these upfront can prevent unpleasant surprises later on.
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Can I access my term life policy’s death benefit before I die? Some insurers offer living benefits or an accelerated death benefit rider, which allows you to access a portion of your death benefit while you’re still alive. The amount you can access varies but can be up to 75% of the death benefit, depending on the policy and insurer. This benefit only applies if you’re diagnosed with a terminal illness expected to result in death within a certain timeframe, often two years. Like regular death benefits, accelerated death benefits are tax-free. Ask your agent if this option is available.
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Can I cancel a term life insurance policy? Most policies have a "free look" period, usually 30 days or less, during which you can cancel the policy for a full refund of any premiums paid. After this period, you can cancel the policy by simply stopping the premium payments. Once the grace period ends, the insurer will cancel the policy.
Many working-age Americans need some level of life insurance coverage, but many never get around to buying it. They’re busy, they worry it’ll take too long to apply, they’re intimidated by the medical checks, or they just don’t know where to start. If you’ve been putting off buying life insurance, hopefully, this guide will help you feel more prepared to take the next step.
