Frequently Asked Questions

Your need for life insurance varies with your age and responsibilities. It is a very important part of financial planning. There are several reasons to purchase life insurance. You may need to replace income that would be lost with the death of a wage earner. You may want to make sure your dependents do not incur significant debt when you die. Life insurance may allow them to keep assets versus selling them to pay outstanding bills or taxes. Consumers should consider the following factors when purchasing life insurance: Medical expenses previous to death, burial costs and estate taxes; Support while remaining family members try to secure employment; and Continued monthly bills and expenses, day-care costs, college tuition and retirement.
All policies are not the same. Some give coverage for your lifetime and other cover you for a specific number of years. Some build up cash values and others do not. Some policies combine different kinds of insurance, and others let you change from one kind of insurance to another. Some policies may offer other benefits while you are still living. There are two basic types of life insurance: term insurance and permanent insurance.

Term Insurance

Term insurance generally has lower premiums in the early years, but does not build up cash values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income.

Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar. It generally does not build up cash value.

You can renew most term insurance policies for one or more terms, even if your health has changed. Each time you renew the policy for a new term, premiums may be higher. Ask what the premiums will be if you continue to renew the policy. Also ask if you will lose the right to renew the policy at a certain age. For a higher premium, some companies will give you the right to keep the policy in force for a guaranteed period at the same price each year. At the end of that time you may need to pass a physical examination to continue coverage, and premiums may increase. You may be able to trade many term insurance policies for a cash value policy during a conversion period even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Permanent Insurance

Permanent insurance (such as universal life, variable universal life and whole life) provides long-term financial protection. These policies include both a death benefit and, in some cases, cash savings. Because of the savings element, premiums tend to be higher.
Ask yourself the following questions:

H How much of the family income do I provide? If I were to die, how would my survivors, especially my children, get by? Does anyone else depend on me financially, such as a parent, grandparent, brother or sister? Do I have children for whom I would like to set aside money to finish their education in the event of my death? How will my family pay final expenses and repay debts after my death? Do I have family members or organizations to whom I would like to leave money? Will there be estate taxes to pay after my death? How will inflation affect future needs?

Some insurance experts suggest that you purchase five to eight times your current income. However, it is better to go through the above questions to figure a more accurate amount.
Life insurance through your workplace may be more affordable than you think. In fact, many people can get term life insurance coverage from a quality company for a surprisingly low price.

Premiums are typically based on factors such as:

Age, sex, height and weight
Health status, including whether or not you smoke
Participation in high-risk occupations

Life insurance gets more expensive as you get older, and the type of coverage you choose will also affect your premium. Rates for term insurance are typically lower, while rates for permanent policies are typically higher.
It’s a good idea to review your coverage every few years to make sure it still meets your financial needs. Check to make sure that all information including your beneficiaries, is current. It might be time to re-evaluate your coverage if you:

Recently married or divorced Received an inheritance Purchased a new home Refinanced your home mortgage in the past six months Have a child or grandchild who was recently born, adopted or about to enter college Provide care or financial help to a child or parent Want to ensure that financial resources are available for a loved one’s assistance or long-term care