Life insurance questions you should ask
You’re in the market for life insurance, nobody really wants to talk about life insurance, it sounds expensive and brings to mind our own mortality.
However, having the proper life insurance in place can bring peace of mind, knowing that your loved ones and beneficiaries will be taken care of financially when you die.
Why Do I Want Life Insurance?
Before you buy any kind of life insurance, think about why you’re buying it. Are you protecting your family in case of early death? Have you taken on additional debt that requires you to provide coverage? Are you looking to leave an inheritance?
What Type of Coverage Is Available?
Most people will have access to at least one of the two types of term insurance policies, group or individual.
Group Life Insurance
Most companies offer their employees some form of term life insurance as an employee benefit. This is called group term insurance. Usually, it’s deducted right from your pay check, and the only requirement for coverage is to complete a questionnaire with details of your health history. Advantages of group term insurance:
- It’s convenient. You can usually sign up for a policy when you take a new job. You may also have an opportunity to sign up for other benefits, such as medical or dental insurance or an employer-sponsored retirement plan.
- No medical exam required. Most group plans don’t require a physical exam. A statement of good health, along with a medical history, is usually all that’s required.
- Automatic payments. Through payroll deduction, you’ll hardly feel the financial hit of paying premiums every month.
Individual Life Insurance
An individual policy is one in which you apply for coverage on your own. You, or a family member, will own the actual policy. You’ll probably have to undergo a medical exam of some sort, provide a detailed medical history. And give the insurance company permission to look into your medical records and perform a background check. This might sound a little invasive, but there are some great benefits to owning an individual life insurance policy.
- It’s portable. If you take a new job at a different company, you don’t have to worry about losing your life insurance protection.
- Level premiums. Generally, individual policies can be structured to have level premiums for the duration of the policy.
- Flexibility. If you ever want to upgrade, you might have more options available with an individual policy than you would with a group plan.
What If I Don’t Die?
For instance, some people who buy term life insurance get upset when they find out that if they don’t die, they don’t get anything back. Therefore it’s important to get an understanding of what will happen to your policy as you near the end of the term.
Therefore as you near the end of your policy term, you may have the option of keeping your policy. If you do, and you have been paying level premiums, you can expect a hefty jump in your premium. So, for instance if you are still healthy at that point in your life and you want to keep the coverage, it may be best to apply for a new policy.
How Can I Upgrade My Current Policy?
Most term policies come with a “conversion privilege.” This allows you to essentially trade in your old term policy for a new permanent policy and continue paying premiums, which however may be higher.
The conversion privilege might have a time limitation on it. For example, you may have to convert it before you hit a certain age. Other policies allow conversion during the entire term of the policy.
Where Do I Buy a Policy?
A number of online companies offer term insurance policies. These distributors typically focus on finding the policy with the lowest cost based on the personal information you provide.
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Until next time.
The MoneyShop Team
This article has been prepared for information purposes only and it does not constitute legal, financial, or medical advice. The publication, journalist, and companies or individuals providing commentary cannot be held liable in any way. Readers are advised to seek legal, financial, or medical advice where appropriate.