Frequently Asked Questions
1. Who needs life insurance?
Life Insurance can be used in many ways and provide peace of mind to anyone. The majority of clients we see fall into one of three categories:
- Young Families – For people with young children or a home with a mortgage, we use term insurance to provide affordable protection in the event of a tragedy.
- Final Expense – On the opposite end, we have clients looking to plan for their future and protect their families so they do not leave behind a financial burden on their heirs.
- Investment Vehicle – In some cases, life insurance can be beneficial as an investment vehicle. We still get peace of mind from the policy’s death benefit, but these policies are designed to build cash value (think equity in your home) to be used later on. The concept here is becoming your bank.
2. Are there different types of life insurance?
Yes, many different life insurance types and products exist in the marketplace. The most popular are term insurance and whole life insurance.
Term Life insurance is for a predetermined set of times, such as 10, 20, or 30 years depending on how long you want the coverage (think of this as renting).
Whole Life insurance is permanent coverage (think owning a home here). These policies build cash value as time passes, which can be used if needed.
Another type of permanent coverage we use often is Indexed Universal Life (IUL) insurance policies. IUL policies tend to be more flexible in premium payments than whole life insurance policies and are linked to an index, such as the S&P 500. The cash value of an IUL policy is determined by the indexes used within the contract and can be credited interest; however, IULs cannot lose cash value due to a market downturn.
Another somewhat popular type of insurance is a Variable Life Insurance policy. These are similar to Indexed Universal Life, but these policies are linked directly to the market and, as such, are subject to the risk of loss in a down market.
3. How much life insurance do I need?
Everyone’s needs are unique, and no “one size fits all” life insurance plans exist. Our team has developed a unique process in which we discuss your situation, obstacles, and goals to assemble the best, most cost-efficient method for YOU.
Who can start a life insurance policy for me?
Be wary of the online “set your policy up in minutes” technique. We highly recommend a local professional who can help guide and assist in setup. Our team is always available to set up a no-hassle 15-minute strategy session to help navigate you through the process.
4. Do my life insurance beneficiaries need to have an insurable interest?
No, the policy owner, if not the same person as the insured, has to have an insurable interest, but the policy owner can name beneficiaries as they see fit. Most times, there needs to be some sort of relationship or a reason to name a beneficiary. Still, insurable interest only becomes a factor when the owner and the insured are not the same individual or entity.
5. Will I need a physical exam to start a life insurance policy?
We deal with carriers that offer a simple submission process in which 50% of our clients will not have to do a medical exam. Generally speaking, a physical exam will be needed. The amount of coverage determines the extent of the physical exam.
6. How does “term” life insurance work?
Think of term insurance like renting an apartment. As long as the premium (rent) is paid, your coverage (death benefit) will be there. There is no cash value build-up. Simply put, you’ll pay a set monthly premium for 10, 20, or 30 years; at the end of that timeframe, there is nothing to show. On the flip side, if a death occurs to the insured, the beneficiaries will receive a large death benefit. The monthly cost of a term policy tends to be very affordable.
7. What’s the significance of the cash value of my life insurance policy?
Clients often use life insurance for both the death benefit and the benefits of creating cash value. The cash value of a life insurance policy can be used as a loan, and the income is tax-free. Cash value life insurance can be an excellent tool, as many policies offer significant loan provisions. Often, if a loan is not paid back, the loan amount is simply deducted from the death benefit. Permanent life insurance policies that build up cash value can create options for clients down the road while also providing peace of mind with the death benefit feature.
8. What happens when my permanent life insurance policy is fully paid up?
A few things can happen here: 1) you can stop making premium payments and just let the policy remain in force at its current death benefit, or 2) you may be able to continue making payments where your policy/death benefit can grow.