Frequently Asked Questions About Term Life Insurance
- Why hasn't my agent told me about Term Life Insurance?
- There are many reasons why your agent may not have told you about term life insurance. One reason is that the agent's company may not offer it. While large carriers often provide this type of insurance, smaller, privately held companies may not. Also, your agent may prefer selling permanent life insurance policies with cash value, rather than the life-only coverage of a term policy. Finally, your agent may not have the expertise to sell or assess these types of insurance policies.
- What is the difference between Whole Life and Term Life?
- The primary difference between a whole life and term life policies is that whole life insurance has an investment and loan option, while term insurance provides life coverage only. A whole life insurance policy builds cash value over the term against which the policyholder can borrow. Evaluating present and future financial needs are important to help determine which type of life insurance will best fit those needs.
- Is It expensive?
- For the benefit of knowing a family or business will be able to meet its financial obligations, term life insurance is relatively inexpensive. In fact, of all the different types of life insurance, term life may be the most affordable. It only provides coverage for an insured's life, while permanent policies provide coverage for not only life, but for the investment option as well. Consequently, term life is usually the cheaper option.
- How does Term Life work?
- The insuring process is straightforward. A potential purchaser applies for a term policy with an agent, broker, or other authorized seller and is evaluated for his or her life's expectancy. This statistical analysis, which is based on many factors, such as current health, family health history, occupation, and activities, helps determine the premium a purchaser will pay for the policy. Once approved, a contract may be established between the insured and the insurance company whereby the insured agrees to pay the monthly, quarterly, semiannual, or annual premiums for the duration of the term, while the insurance company agrees to pay the policy's face value to the named beneficiaries in the event of the insured's death. Policy add-ons can help enhance the overall value of the policy.
- How do I qualify?
- Most people qualify for this type of insurance. Insurance companies use a process known as underwriting to assess the company's risk against issuing a policy. An insurance company assigns your policy a rating class, which is the risk category that you are designated according to the company's underwriting policies and guidelines. A preferred policy rating is the lowest risk with the lowest premium; a standard policy rating is average risk with an average premium; and the substandard is the highest risk with the highest premium.
- How do I determine how much Insurance I need?
- To determine how much life insurance you need, several factors should be considered, including your family's current and future expenses (mortgage, car loan, and tuition), your family members' individual financial obligations, your age, and your income. Many agents recommend that if you're the primary wage earner with young children, you should purchase 8-10 times your annual salary. Also, the younger you are, the more life insurance coverage you'll need to ensure your family is secure. Finally, the more expenses you have, the more coverage you'll need to satisfy these obligations. Life insurance, like disability insurance, is a necessity for anyone with a family.
- What is the minimum coverage amount?
- Generally, most companies will offer a minimum coverage of $100,000 with a few companies that offer a minimum coverage of $50,000. There are many companies that offer more than the $100,000 minimum coverage, providing benefits into the millions.
- Does Term Life Insurance have to be with the same company as my other insurance?
- No, your life insurance does not have to be with the same company as your other insurance; however, many companies offer discounted rates for policyholders who have multiple policies with their company.
- What questions will my agent ask me when I call?
agent will want to ask you
several questions to determine the best policy that fits your
present and future financial needs. These include:
- How old are you?
- What is your occupation? Is it a high-risk, dangerous job?
- Do you have any children? How old are they?
- Does your spouse work?
- How is your overall health? Are you on any medication?
- What is your family health history?
- How much coverage do you need?
- How long do you want coverage?
- Who will be your beneficiaries?
- How much can you afford?
- What kind of plan are you looking for?
- Do you currently have insurance?
- What does the rating system mean and how can I find out how find out how my insurance company is rated? A, A+, A++? (www.ambest.com)
The insurance industry has a well-established and well-known insurance rating system. Several companies offer insurance rating services that examine insurance companies to determine their financial stability, creditworthiness, and vulnerability to adverse market conditions. Consumers can use these ratings to evaluate the insurance company. The AM Best ratings are commonly used to evaluate insurance companies. An "A++" or "A+" rating means a superior company while an "A" rating means an excellent company.
Term Life Insurance Directory