Life Insurance Frequently Asked Questions
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Term life insurance is temporary coverage that lasts for the specific period of time, or term length. Term life insurance is typically the lowest cost life insurance coverage and is recommended for most people seeking life insurance.
You may also be interested in our article: How do Companies Determine Life Insurance Health Rate Categories?
There are five typical health classifications: Preferred Plus (or Super Preferred), Preferred, Standard Plus, Standard, and Table rated. If you are not sure where you fall you might want to give us a call to be sure. Some numbers that will help us know which company and rate class to place you with are your height and weight (referred to as your build), your A1C, your HDL ratio, and your blood pressure.
Preferred Plus: Only about 10% of people qualify for this rate class. You are in excellent health, you have no prior health issues, you refrain from hazardous activities, and your build (height and weight ratio) is within the life insurance companies parameters. Your blood work would show that your overall cholesterol is below 200-240 depending on the carrier (and HDL ratio below 4.5 with some carriers going to 5) with or without medication (preferably without), your blood sugar as measured by your A1C is around 4.5, and your blood pressure is below 130/85 (give or take a few numbers on the diastolic reading with some carriers going to 140/85 if your not using meds) with no medication or with a few carriers who don’t penalize you for taking a blood pressure or cholesterol medication as long as your numbers are good.
Preferred: About 25% of applicants fall into preferred plus or preferred. You health is great, no prior health issues in the last 10 years, you refrain from most hazardous activities, and your build is good but not great. Your blood work reflects cholesterol over 200 or an HDL ratio above 5, your blood sugar as measured by your A1C is below 5, and your blood pressure can be as high as 140/90 with certain carriers, with or without medication.
Standard Plus: Another 15% of applicants fall into this category. You are healthy but have some health issues that show up, whether that is due to elevated cholesterol, blood pressure, or build. You might be a private pilot or engage in other hazardous activities. You may also be a cigar smoker or use chewing tobacco (must apply with a certain carrier).
Standard: The majority of clients end up with a standard or lower rate class. You are not healthy but then again you are not dying of anything. Your blood work is elevated. Cholesterol is 220+, your blood pressure is 140/85, and your A1C is 6+. You can have pre-existing conditions, such as diabetes, and still receive a standard rate class. However, the key will be how well you control your condition.
Determining the amount of life insurance you need depends on a few factors. The first thing to do would be to try and identify why you need life insurance in the first place. For a more thorough undertaking on deciding on the right amount of coverage, see our article: Million Dollar Life Insurance.
The primary bread winner (PBW): This is an easy one. You are your family’s sole income provider. If you died today, your family would be in a world of hurt both emotionally and financially. The good news is you can protect your family from financial disaster and possibly help ease the emotional burden at the same time. The best way to do this is to purchase enough life insurance so that if you died your family would be taken care of for years to come. Most investment experts recommend 7-10 years of your income. Take for example a PBW who makes $50,000 a year. Multiply $50,000 by a factor of 7-10 and you would need $350,000 to $500,000 in life insurance.
The homemaker: This one is not so straight forward. Unless you have had children you will not appreciate the magnitude of this position. But for those of you with kids you understand how much work it takes to raise a family. Now consider if the homemaker were to die. There is a house that needs cleaning, kids that need feeding, and many other invaluable services that will no longer be met. What is the price tag on these services? Further, the PBW will probably need to take time off work to care for the kids and grieve properly. Typically, a homemaker needs at least $250,000 worth of life insurance in place.
The retiree: How much does it cost to bury someone in 10-30 years? For many retirees, the primary concern is to cover final expenses. However, what may cover final expenses today will most certainly come up short down the road. A typically funeral can run $10,000 or more. However, final expense policies can be expensive. Some coverage is always better than no coverage. Therefore, how much coverage you need must be weighed in accordance with how much coverage you can afford.
The approval process can vary depending on several factors. A few factors to consider are what type of policy, no medical versus taking an exam, the face amount, your age, etc… We work with dozens of top rated carriers, so if you need life insurance fast, we can help guide you to the most appropriate company.
Before a life insurance carrier issues you a policy, they will want ample information about you, including your lifestyle choices (do you smoke/drink, etc.) and your medical history. Additionally, they will want to know about your family’s health as well.
Questions about your family member’s medical history will look something like this:
- Has anyone in your immediate family been diagnosed or treated for heart disease?
- Has anyone in your immediate family been diagnosed or treated for cancer? If yes, which kind?
- Has anyone in your immediate family been treated for a stroke?
For more on this subject please see How does family health history affect my life insurance rates?
The answer to this question will vary from person to person. However, the reasons for life insurance are many and can be read in our article the top ten reasons for life insurance.
Despite what you may believe you may not have enough life insurance. And on the flip side, you might just be over-insured. Use our life insurance calculator to find out.
Term length is a very important factor. One of the most important things to understand about term length is that the longer the term the higher the cost of the life insurance. Therefore, you need to determine if you need more life insurance for a shorter amount of time or less life insurance coverage for a longer period of time. This will be determined by various factors.
One factor to consider is the age of your children. If you have a house full of rug rats or if you have yet to have children but are planning on a family in the near future you might consider getting a longer term than if your youngest child is 15 and you have no other debt obligations. Nowadays, most children are dependent on their parents for some sort of support until they are 25-30 years old. So if you have young ones in the house or are planning on starting a family soon a 30 year term might be the best choice.
However, if you have an ascertainable need, such as a mortgage and you are considering a longer term but due to cost you will need to reduce the death benefit of the policy you may want to reconsider. If you have a $500,000 mortgage with a 30 year term and you are debating whether to cover the mortgage or the term you should probably focus on covering the mortgage amount and choose a shorter term. The reason is over time your will pay down your mortgage but if you were to die today you would come up short. Generally, you should buy life insurance based on there here and now instead of on hypothetical situations down the road.
Another factor to consider when deciding term length is your current health. Locking into a longer term now while you are healthy might be a great way to save money on life insurance down the road. If you develop a condition that will prevent you from purchasing life insurance or make life insurance too expensive you still have your current policy. The life insurance carrier cannot terminate your current policy due to health problems. Also, with most term life insurance policies there is a conversion option which allows you to convert the policy to a permanent policy with no proof of insurability (meaning you don’t need to take another exam).
The difference between term and whole life: It’s in the name!
Term life insurance provides protection for a specific period of time (typically 10, 15, 20 or 30 years). The specific period of time is the term of the life insurance. Once the term ends the life insurance policy will renew on an annual basis. Most term life insurance policies will allow the owner of the policy to renew until age 95.
Whole life insurance provides protection for your whole life. Generally, whole life insurance offers fixed premiums, a guaranteed cash value, and protection until the day you die. Since whole life insurance will be with you until that inevitable day it will cost you more than other types of life insurance.
For a more thorough analysis, please visit Term Life Insurance versus Permanent Life Insurance: What is the Difference? and Top Whole Life Insurance Companies
When deciding on a beneficiary for life insurance it is not as straightforward as many think. There are implications of naming certain people as your beneficiary, such as your minor children. Consider naming your spouse as the beneficiary of your policy and your Family Trust as the contingent beneficiary. The advantage is that your children will not receive outright but will receive under the terms of your living trust. Click the link for more on how to choose a beneficiary for life insurance.
The premium you pay will be determined by the life insurance carrier. Your premium will be the same regardless of who you apply through. Therefore, if you choose TermLife2Go, another online insurance brokerage or a local agent, your premium will be the same.
Also, most life insurance carriers require applicants to apply for life insurance through either an agent or broker of the company. Very few companies sell insurance products directly to the client.
Life insurance companies allow the client to pay monthly, quarterly, semi-annual, or annual. The payment method on the four varies. You can pay monthly via electronic funds transfer (EFT) by providing the life insurance carrier with your banking information. You can also pay via credit card quarterly, semi-annual, or annual. Life insurance carriers prefer you pay annually so there is a small discount (usually 5% or so) for paying a year’s worth of premium at once.
Yes, you can. There are various high risk life insurance products available. We have helped secure life insurance for people with a health history of diabetes, cancer, stroke, heart disease, COPD, and the list goes on and on. Just because certain online companies refuse to offer you life insurance does not mean that a policy for you does not exist. Speak to one of our independent life insurance agents today at TermLife2Go and find out what options are available for you.
How a life insurance company will view a client that uses tobacco varies. It varies in the frequency of use and the type of product the client uses. All life insurance companies consider cigarette use to be tobacco use. It does not matter if you smoke 1 cigarette a year or a pack a day. However, other forms of tobacco may not even be considered tobacco use.
For example, a typical cigar user (say on the golf course once a week) would not be considered a tobacco user by many of the top life insurance companies. However, it is essential that the client admits to tobacco use on the application.
Also, most companies consider chewing tobacco to be tobacco use. However, there are companies available that do not rate the client a tobacco user if the only tobacco use if from chewing tobacco.
In order to secure the lowest cost, cheapest life insurance policy make sure you are applying with the best life insurance company for your particular need. This is why it is imperative that you speak to a licensed professional that represents multiple life insurance carriers, such as TermLife2Go.
Our goal at TermLife2Go is to save you time and money. The best way to do that is to get you the best results on your life insurance exam. So here are some tips for acing your life insurance exam:
- In the days leading up to the exam watch your diet. Focus on eating things that improve your blood work. Leafy greens, such as spinach, broccoli, and salads, help to lower your blood pressure and cholesterol. Also, avocados are great at raising your HDL (good cholesterol) level, which is the primary concern of life insurance underwriters. Stay away from processed foods high in salt and sugar (e.g. fast food).
- Drink a lot of water. This will flush out your system and make it easier for your examiner to draw blood.
- 24 hours before your exam please refrain from exercise or alcohol. Exercise can elevate your blood pressure and may also cause elevated proteins in your urine. Also, consider laying off of the supplements (such as creatine) for a few days. Alcohol is high in calories and sugar and has a direct effect on triglycerides.
- Please fast for at least 8 hours prior to your exam. If you do not fast you risk elevated blood sugar levels and blood pressure levels.
- The morning of your exam, have a glass of water in expectation of a urine sample, but no breakfast or coffee until after the examiner has taken your labs. If you follow these easy steps you should have no problem qualifying for your best rate class.
- See acing your life insurance physical exam
The life insurance exam can seem like a daunting undertaking to some. As a result, we thought we would help demystify the experience by shedding light on what the life insurance medical exam looks for. See Exploring what life insurance medical exams test for
Clients often ask us, “How much is life insurance?” We usually reply by stating that it will depend on several factors. Some clients will follow up this question with, “Well, I am just looking for a quote. What’s my quote?” And once again we must reply that the cost of life insurance depends on several factors. Continue reading by clicking here: How Much Does Life Insurance Cost?
Clients often ask us, “What’s in it for you?” The reality is, we are paid directly from the insurance company. There are no fees or hidden costs to the client. While that is good news for you, there are some things you should be aware of when choosing who will be your life insurance agent. Continue reading by clicking here: How Do Life Insurance Agents Get Paid?
You most often hear about parents buying their own life insurance policies so that in the event of an untimely death, their children will still be well provided for. It makes sense; the parent is the caregiver, so what would happen to the child if the parent didn’t have life insurance? Read more about Buying Life Insurance On Children.
Conversion option: Pretty much all term life insurance comes with a free conversion option. Basically, you can convert all or a portion of your term life insurance to a permanent policy (think Universal Life). There is no proof of insurability (i.e. no medical exam or health questions). Your policy is simply converted based on your current age and the rate class you originally qualified for. You must convert before the end of your term or by age 70, whichever comes first.
This option would be exercised when a person is diagnosed with some sort of disease or condition which would preclude them from getting life insurance or make getting new life insurance too expensive.
Child rider: You can add your children to the policy. Typical life insurance amounts range from $1,000-$25,000. The best part about a child rider is you pay the same price whether you have 1 child or 10. This is a really great option for someone with a large family.
Accelerated death benefit rider: If you are diagnosed terminally ill then your life insurance policy will pay out up to $250,000 depending on the specific carrier. Typically you will need a note from your physician which states you have less than 1 year to live. You can use that money to do whatever you need. Most people find it useful to pay medical bills, hospice, and any other expenses they may have.
Accidental death benefit rider: You can add additional coverage in the form of an accidental death policy. Since this only covers accidental death and does not cover natural causes (such as heart disease, stroke, or cancer) it typically only purchased when the insured is maxed out on the amount of life insurance they can qualify for and they need some additional coverage.
Return of premium rider: This is a rider on a term life insurance policy. The ROP rider allows the owner of the policy to recoup all the premiums paid throughout the term of the policy (i.e. return of premium). Either the policy pays out or your money is returned. Since your premium is returned at the end of the term it is more expensive than term life insurance.
Waiver of premium rider: This rider allows the premium paid to be waived if the insured becomes disabled. The insurance company pays the premium on the insured’s behalf for the period of time that they are disabled.
Disability rider: If the insured becomes disabled, the life insurance company will pay a monthly lump sum to the insured. There is typically a six-month waiting period before any money is paid out.
Chronic Illness Rider: This rider pays a lump sum or monthly payments if the insured cannot perform 2 of 6 ADLs (activities of daily living).
Visit How Life Insurance Can Avoid Taxes for a more thorough read.
Everyone interested in life insurance wants to know if there are taxes on life insurance. And the correct answer is probably not. However, there are instances when life insurance will be taxed.
The main reason for taxes on life insurance is when a person dies and their estate is valued above the federal exemption limit. In order for an estate to have to pay a federal estate tax or “death” tax the estate must be over the current 2020 exemption limit of $11,580,000.1 Most people do not have to worry about taxes on life insurance because their overall estate is below the federal estate tax exemption limit.
Another way that life insurance could be taxed is if you live in a state that has an inheritance tax. Currently, only a handful of states have a state inheritance tax.
For those lucky enough to have to worry about federal estate taxes, an irrevocable life insurance trust is a great option to help pay estate tax or avoid paying estate tax to protect your assets and beneficiaries.
Fully underwritten policies require an exam. No exam life insurance does not require an exam. Which is the best choice for you? Visit Exam versus no exam life insurance for more.
What other types of life insurance are available?
Besides term and whole life insurance there are other types of life insurance products available. It is good to know what your options are so you can tailor your life insurance policy to your specific need. More info is available in our article on the most common types of life insurance. The other types of life insurance you need to be aware of are:
- Buy-Sell Agreements allow a business interest to pass on according to the terms of the contract. Basically, one business owner’s share of the business is bought with the life insurance proceeds at a price determined in advance. This sort of protection offers peace of mind to business owner’s who do not want the deceased partner’s family members taking ownership of the business the family members have no skill to operate nor desire to do so.
- Key Person Insurance is a life insurance policy taken out on a “key” person within the business. The key person is typically one whose knowledge, work, or overall contribution is considered of unique worth to the company.
- Life Insurance to cover SBA Loans or bank loans is another reason business owners seek life insurance.
This offers guaranteed life insurance to individuals who are considered a “high risk” due to a pre-existing medical condition. Individuals with various health issues (including HIV, Diabetes, Heart Disease and Cancer) are eligible for life insurance with premiums derived primarily from gender and age. There are no health questions involved so that anyone who fits within the accepted age brackets can qualify.
This is a rider on a term life insurance policy. The ROP rider allows the owner of the policy to recoup all the premiums paid throughout the term of the policy (i.e. return of premium). Either the policy pays out or your money is returned. Since your premium is returned at the end of the term it is more expensive than term life insurance.
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