Answers to common questions about life insurance
You’ll likely have a lot of questions as you shop for life insurance quotes — not only about what you’re buying, but also about what can happen after your purchase. Here are common questions about life insurance.
Can I have more than one life insurance policy?
Yes, you can have multiple policies from the same or different life insurance companies. For example, you could have a permanent life insurance policy and also a term life policy for a short-term need. But if you apply for more insurance coverage than your situation indicates you need, the insurance companies will likely ask why.
How do I calculate how much life insurance I need?
A thorough "life insurance needs analysis" looks at your current and ongoing expenses, plus your future expenses like college, or your funeral. But simply adding up all those numbers could amount to a bigger policy than you need. You should also subtract assets that can go toward those expenses, such as savings and investments.
Also, Insure.com's Life Insurance Needs Estimator Tool can help pinpoint an amount.
What happens if I don't pay the premiums?
Typically, you will have a 30- or 31-day grace period. If you pay within this time period, your policy will continue in force. If you don't pay within the grace period, your policy may lapse, depending on the type of policy you purchased. With a permanent policy, however, your life insurer may use your cash value, if available, to cover premium payments.
If you are unable to pay because you have become disabled, and you elected a "waiver of premium" provision or rider on your policy, you do not have to pay premiums for the duration of your disability. Universal life insurance policies generally offer policyholders increased flexibility in premium payments that may be important when your cash flow is variable.
What if my policy lapses?
A policy (other than universal life insurance) lapses when you fail to pay your life insurance premium by the end of the grace period. If you have a permanent life insurance policy and enough cash value in it, you may borrow from the policy to pay the premium. If you have a term life policy and don't pay your premium within the grace period, your policy will lapse and simply end.
Do I need life insurance if I'm a young single person?
An advantage to buying life insurance when you're young and healthy is you'll be able to lock in a good rate for the duration of the policy. If you have dependents in the future, you will have secured a low rates and you will have guaranteed your "insurability," meaning you won't have to worry about higher rates as you age and possibly experience declining health.
The older and less healthy you are when you buy a policy, the higher the price.
However, if you have no dependents, you don't have a current need for life insurance. You'd be better off putting your money toward savings.
Are there cases in which I don't have to take a medical exam to buy life insurance?
Group policies generally don't require medical exams, unless you have to prove your “insurability” in order to buy a large group life amount. Most group life insurance enrollments are held annually through your employer.
"Simplified issue" policies require that you answer some medical history questions but don't require an exam. Read more about simplified issue term life insurance.
"Guaranteed issue" policies require no medical exam or medical questions, but you will pay significantly more in premiums than you would with an underwritten policy, even if you've had some health issues. These policies can be an easy way to get coverage to pay for your funeral. Here's how to evaluate final expense insurance.
What do insurance companies look for in the medical exams?
The medical exam generally collects your height, weight, blood pressure, urine sample and blood sample. These results, along with your age, gender, family health history and answers to health questions, will determine what rate class you fit in. Your agent or insurance company should explain what criteria determine the class into which you fall.
Find out more about taking a life insurance medical exam.
If you don't qualify for the preferred rate today, you might be able to improve your rate category if certain health factors improve. For example, say a 35-year old woman buys a life insurance policy. She is 50 pounds overweight, has high blood pressure and is trying to quit smoking. Two years later, her policy is still in force and she has lost 50 pounds, her blood pressure is normal and she has been nicotine-free for a year. She could talk with her agent about possibly getting a re-evaluation of her rates.
If the medical evaluation showed a new health condition for which she would be classified into an even higher rate category, she would remain at her current rate.
The insurance company will not reclassify you into a higher rate bracket during a re-evaluation.
Can I buy a policy on someone else?
Yes, but only if you have an "insurable interest" in that person. That means you would suffer financially if that person passed away.
This usually means a spouse, domestic partner, live-in companion, business partner or parent. You can't buy a policy on a random neighbor, for example.
Can I buy a policy on someone else without them knowing about it?
Although there are certain exceptions in some states (a husband or wife, for example, may be able to purchase insurance on his or her spouse), the answer to the question generally is "no." You cannot take out an insurance policy on someone else's life without his or her knowledge and consent.
Can I name anyone I want as my beneficiary?
Yes, you own the policy and you can name whoever you want as the beneficiary. While many people choose only their spouse, it is possible to name more than one person as a beneficiary. For example, if you have a $100,000 individual life insurance policy, you could name your spouse and four children to share in the policy equally at $20,000 each.
Does a husband or wife have automatic right to life insurance money?
Usually not. Life insurance companies typically write a check to whoever is named on the policy as a beneficiary. Sometimes that could be an ex-spouse if the policy owner didn't change beneficiaries after getting divorced. A spouse has no automatic right to life insurance money except in states with community-property laws. In those states, a spouse might be entitled to a portion of the benefit. Find those community-property states listed here.
Do life insurance policies ever cancel each other out? If I have a credit life policy and a whole life policy, will one not pay out?
No. Upon your death (assuming you have paid all the necessary premiums), both policies will pay out to the beneficiaries named. A person could have multiple policies. However, life insurers will become suspicious if you are buying several policies without showing the need for them.
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