Frequently Asked Questions About Life Insurance

The following is a list of frequently asked questions about asset protection, income protection, and life insurance. Get answers to your questions by clicking on the frequently asked questions below. If you have specific questions, contact us.

1. How much life insurance do I need?
2. How is my "Health Class" and resulting rate determined?
3. I have a health problem. Can I get life insurance?
4. What's the difference between term insurance, whole life insurance, and universal life insurance?
5. Does it make sense to replace a policy?
6. When will the policy begin?

How much life insurance do I need?

If you are providing financial support for people who are depending on you, you need life insurance. To determine how much you need to replace your lost income, deduct the total income that would be lost upon your death from the sum required for your family's ongoing financial stability. Beyond that, it depends on your particular circumstances (e.g., whether you have considerable net worth or few backup resources, number of children, etc.) and whether you want insurance for other purposes, such as educational funds. An old (and dated) rule of thumb was to use a factor of your income, typically 5-10 times your income. In today's environment, a detailed needs analysis will factor in your income, assets, survivor needs, education needs, retirement needs and more and will provide you with a custom tailored plan. You can then choose the amount of coverage for you. Return to Questions

How is my "Health Class" and resulting rate determined?

Each company uses their own criteria to determine which health class you will qualify for and your resulting life insurance rates. In fact, it is entirely possible for the same person's health class to rate as "Standard" with one company and "Preferred" with another! Some factors such as smoking can have a direct impact on determining your health class. Here are some health class rating guidelines for non smokers.

"Preferred" rates require excellent overall health and a healthy lifestyle. Each company's guidelines determine limits on weight to height, cholesterol, blood pressure, and family and personal health history. You must not have a history of alcohol abuse or drug use. You may not be involved in hazardous activities.

Please note that all insurance carriers require a simple medical examination prior to determining your actual health class and resulting rate. This determination may differ from the initial health class or rates you were quoted during the application process. Return to Questions

I have a health problem. Can I get life insurance?

There are many companies available that specialize in getting you coverage. EVEN if you have been declined in the past, you may be able to obtain coverage. It definitely pays to try. We  can help. Return to Questions

What's the difference between term insurance, whole life insurance, and universal life insurance?

Term Insurance is typically the lease expensive of all policies and allows you to obtain the maximum benefit for the lowest cost. In the majority of scenarios, term insurance is the best way to go.

Whole Life Insurance is also called "permanent" insurance. It can be kept in force for as long as you live provided that the policy performs according to assumptions and projections and you have paid sufficient premiums into the policy. The face amount and the premium are fixed at the time you buy your policy and stay the same as you age, BUT be careful! Certain assumptions are built into this type of policy such as interest rate assumptions, projected dividends, etc. If the assumptions are correct, the policy may build cash values over the course of time. If these projections are wrong, you will end up with an unpleasant surprise such as an additional premium notice or a lapse notice!

Universal Life Insurance is also called "permanent" insurance. With this type of policy, there is the potential for cash value to build up over time, but the real focus is to provide a guaranteed death benefit to age 100 and beyond! It is very similar to a term policy that never ends.

In many cases where the insured is age 60 or greater it pays to compare universal life to term insurance as the premiums may be similar. Return to Questions

Does it make sense to replace a policy?

It ALWAYS makes sense to shop around, and it may make sense to replace your policy if:

• Your premium increases each year. Even though you are older now then when you first purchased your policy, a term policy with level premiums may be less expensive than the increasing term premium policy. It pays to shop.
• Your original policy was issued at a higher rate due to health issues. Each company uses different underwriting guidelines, if you are with the wrong company you may be able to save.
• Your health status has improved: If your health has improved through exercise, weight loss, better blood pressure or cholesterol control, etc. you may be able to obtain a better rate.
• You quit smoking or changed your smoking habits. If you are a former cigarette smoker, you should definitely shop around for a better rate. As soon as you have been a non-smoker for 12 months or more, non-smoker rates are available to you. If you have always been an occasional cigarette smoker, there is now a company available that will offer you non-smoker rates.
• Other tobacco use: cigar, pipe, chew, snuff users. If you are paying a smoker/tobacco rate, you are paying too much as non-tobacco rates are definitely available to you.

If you do shop around for a new policy, NEVER let your existing coverage expire until the new coverage is effective. Return to Questions

When will the policy begin?

The date that insurance goes into effect could be different from the date the company issues the policy. If you decide to purchase the policy, the insurance becomes effective when you have accepted the policy and the home office has received all necessary documents and premium required. Return to Questions

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