Can you explain exactly what life insurance is and why do I need it?

Basically, a life insurance policy is a binding contract between you (the insurance policy owner) and the insurance company. If you should die, the insurance company pays a cash amount or death benefit to your beneficiary(s), which you would name beforehand in the policy.

And the reason you’d want a life insurance policy is first and foremost to help provide financial security for your beneficiaries, to pay your estate tax, among others.

As mentioned before, the two main types of life insurance policies are term life insurance and permanent life insurance.

Ok, so how much life insurance do I need?

The industry average for life insurance is about 6 to 8 times your annual earnings. Although you may find other factors like income sources, the number of dependents you have, the amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan among other factors that you’ll want to consider in your decision

Calculating the appropriate amount of insurance you need can be tricky. To make sure you’re getting adequate coverage, please fill out the short form on this site and a trained insurance specialist will be glad to assist you.

Is it better to get term life insurance or whole life insurance with a cash value?

This is one of the most debated questions in the industry today.

To help answer it, you must consider the key advantages of each:

If you need a large amount of life insurance, term life can help you get the coverage you need, since it comes with a lower premium.

If you can afford the amount of insurance you need, then you might consider other important factors like your income tax implications, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and how the rate of return on another type of investment with similar types risks matches up.

Explain term life insurance

Term life insurance is a straightforward type of life insurance. Typically, you’ll find it provides coverage for a predetermined period such as 1, 5, 10, 15, 20, 25, or 30 years. In return you pay predetermined premium based on the length of time you’ve chosen.

If the policy is written to cover you and you should pass away within the specified timeframe, then the insurance company is obligated to pay the death benefit specified in the policy. If the policy’s time frame lapses or expires while you are still living, the policy simply becomes null and void and no benefits are paid.

I’ve heard I can use my insurance coverage to pay down my mortgage balance. Is that true?

Actually, you can. Regardless of whether your policy is a term life policy or cash-value life insurance policy, you can use the cash benefit to pay the balance on an outstanding mortgage loan balance if should you (the insured) pass away before the term of the mortgage is complete.

Do I really get my premium back with a Return of Premium (ROP) Life Insurance policy?

This policy is a form of term life insurance that lets you get back up to 100% of all the premiums you paid over the life of your policy. If the policy gets to then end of the specified term and you are still living, that is, no death benefit has been paid, the insurance company will give you back all premiums paid on the policy.

Companies that offer ROP policies charge a bit more for it than they would for a non-ROP term insurance policy. This allows the insurance company to invest portions of the premium and to make money on it. As a result they are able to return your premiums to you at the end of policy.

Explain what permanent life insurance is?

A permanent life insurance policy offers you protection for your entire life. But beware, permanent life policies can be more complex and expensive compared to a term life policy. Ask your agent to detail each of the policies to see which one is right for you. You can find a knowledgeable agent in your area by filling out the form on this site.

How can I calculate how much coverage I need?

Start by looking at your individual situation. You should look at your anticipated funeral expenses, medical bills, plus any money your family members might need for to pay the mortgage payment, the car payment or credit cards bills. 

Some people will take 6, 8 or 10 times your annual income to start. That will usually cover the expenses mentioned above for the foreseeable future so that your family and loved ones won’t be shouldered with the burden of extra payments or financial obligations.

How long should my policy be?

Again that depends on many other factors in your life, including your age, your husband/wife’s age, your children's ages, how much time you have left on your mortgage, home equity loans and student loans and the number of years until retirement.

Ideally, you want to choose a term that covers all of the above factors. For example if you have a ten-year old son and you would like to be able to provide for him through his college years, you’d want to get a term period of at least another 10 years.

Should I add an Accidental Death Benefit?

This depends on your needs and what makes you feel comfortable. However, this benefit pays money in addition to what’s covered in your policy if you should die in an accident.

Should I add an Accelerated Death Benefit?

Again, you can only answer this after you’ve done an insurance analysis with your agent. If it makes sense for you, this type of policy would allow you to collect a percentage of your policy's death benefit in if you’re diagnosed with a terminal illness.

Are my rates going to change every year?

With a term policy, your rates are guaranteed to be the same for the entire length of the policy. A policy like this is referred to a fully guaranteed or level term policy. 

What do I do when my policy ends?

Your tem life policy is void at the end of the specified term period so there is nothing to do. But even then, you might still want to renew your policy on an annual basis. If that is the case, be ready to pay a bit more than your usual payment. The premium will most likely be quite a bit higher for the annual policy.

Do I get my premium back if I’m denied coverage?

If you made a payment with your application, it will be refunded to you if you are not approved or if you simply choose not to take the policy.