Copyright 2012: ABD Financial Services, Inc. Houston Life Insurance. All rights reserved.
Life Insurance - FAQs
Top 10 Life Insurance FAQs
Get your question answered same day!
Hello, I’m George Watkins.
For a number of years, I’ve been selling life insurance. And throughout that time, I’ve made a number of presentations, recommendations, sales, and policy deliveries. Keep in mind, life insurance, like any product line has a number of different offerings targeted to address varying needs of a broad customer base. As a result, the differing variety of product creates questions in the minds of consumers. So in the course of meeting a ton of clients, I’ve had an opportunity to answer a range of questions related to the varying product types. The questions range from: product cost to product quality, length of coverage to rate class, coverage of children to coverage of difficult cases, and a whole lot more. For the most part, a client has a pretty good idea of want he or she wants when it comes to life insurance, but may not feel totally comfortable making that final choice because of a few missing details. Or the client may need to review a few of the facts just to confirm or reinforce what they already know..
To make it easy I decided to list the top 10 most Frequently Asked Questions (FAQ) about life insurance. And if your question is not addressed by my top 10 list, just ask and I’ll respond with an answer the same day. Just complete the form below and get an answer today.
My top 10 list of questions will change as more questions continue over time. Who knows, your question could make the top 10 list.
My top 10 list falls into 4 broad categories – cheapest, insurance types, most comprehensive, and best return on investment. Here are my top 10 questions and answers listed under the four categories:
1.What is the cheapest life insurance?
By cheapest most mean, which product has the lowest monthly premium for a given amount of death benefit? The answer is a 1 year term life insurance policy. A 1 year term policy’s premiums are guaranteed for one year. Thus in the second and subsequent years the monthly premium can increase.
2.Will I qualify for the cheapest rate?
There are a number of parameters that determine whether you qualify for insurance, such as: build (height and weight), illnesses, and prescribed medication – these and additional items are things asked on the insurance application. In addition, the underwriter may examine medical records and family history. If you get pass those items with a passing grade, you qualify for insurance. Then, once that part of the assessment is complete, an additional exercise is performed to determine your rate. The rating determines the premium you pay. Your rating will fall into one of three broad categories: best rate, standard rate, or substandard rate. Even within these three categories there are sub-categories. For example, the best rate may consist of a Super Preferred rate (the very best rate with the lowest premium) and the Preferred rate (the second best rate with the second lowest premium).
3.What are the different life insurance types and purpose?
Life insurance can be applied to address a number of purposes. All of which can be solved by term or permanent life insurance. Insurance types fall into two categories: term life insurance and permanent life insurance. The difference between term and permanent life insurance is addressed in a later question. Some of the purposes Life insurance addresses are: income protection, mortgage protection, final expense, tax free income, disability income, living benefits, estate tax planning, charity and wealth transfer. The list is by no means complete. Furthermore, the beneficiary of life policies receives the proceeds tax free.
4.What is the difference between Term Life insurance and Permanent Life insurance?
In short, term life insurance will terminate sometime in the future, while permanent life insurance can’t be outlived, and thus is characterized as lasting forever. Term insurance will terminate at some specified age. Most term policies terminate at age 95 or 98. Once terminated, the policy cannot be renewed. Term policies are also characterized by a premium guarantee period, in which the monthly or periodic premium guaranteed period are for 1, 5, 10, 15, 20 or 30 years. If the guaranteed period expires, the monthly premiums can rise each year on the policy anniversary date and may become unaffordable.
Permanent insurance is typically available to age 100 or 120 - an age most will not attain. But if you do reach the maturity age of the policy, any cash in the policy is yours to take. In favorable cases, the cash at maturity is at or higher than the initial policy death benefit, assuming there are no outstanding loans or significant withdrawals. There are a number of permanent policy types all with a different purpose: whole life, universal life, equity index universal life, and variable life. All permanent policies are characterized by having a death benefit and a cash account.
5.What are difficult cases?
Difficult cased are typically defined as impossible to get approved, due to their health condition and health history. Thus, there are a special group of policies to cover these high risk individuals. Some are called high risk policies while some are called final expense policies. Although the premiums may be higher, most high risk applicants can get covered under these policies. There are constraints, such as: age, hospice, nursing home, incarceration, etc…
6.What are Living Benefits?
Living benefits are funds available to the insured while they are still alive. You don’t have to die to use living benefits. The source of living benefits can be the death benefits money or the cash account money. However, you have to meet the criteria to have access to the living benefit. Some criteria under which an insured would have access to the death benefit monies are: heart attack cancer, stroke, paralysis, blindness, or major organ transplant. Examples of cash account living benefits are: cash withdrawals, tax free income and emergency funds
7.Is my policy convertible?
Convertibility is a technical term in the industry meaning that some portion or all of your term policy’s death benefit can be converted to or transformed into a permanent policy. Under the rules of convertibility, insurability is not required. Your state of health is not considered, but your age is. Only you age, your original policy rating, and the policy type chosen at the time of convertibility will be factors in determining the new premium.
Best Return on Investment
8.Can I make a return on my investment, while protecting my principal and gain?
Yes, fixed permanent policies such as universal life or whole life will protect the value of the cash account principal and gains. On the other hand variable life, where the cash account is invested in variable securities can lose gains and principal.
9.Will I be locked into a fixed premium?
For term policies, the premiums are fixed for the guaranteed period. If the premiums are not paid, the policy could lapse. For permanent policies, it depends. Because permanent policies build cash, the cash value can be used to cover the premiums
10.Can I get Tax Free Income?
Yes, any permanent policy can be structured to gain access to the cash account tax free.