Buying the right type and the right amount of life insurance can be a confusing process, especially if you are just beginning to research the best life insurance policy for you and your family. There are many questions to consider and there isn’t a one-policy-fits-all answer. Although you will definitely want to discuss all of your options with a reputable insurance agent who will provide recommendations based on your specific needs, here are some life insurance FAQs to get you started:
How much insurance do I need?
The amount of life insurance you need depends on your individual circumstances and may need to be modified several times during your life as your family grows and your assets increase. The general rule of thumb is that your insurance equals six to eight times your annual gross income. However, there are many important factors to take into account:
• The number of individuals who are financially dependent on you
• Income sources and amounts other than your salary earnings
• Whether you are married and, if so, your spouse’s annual gross income
• Whether you have any special insurance needs, such as mortgages, estate planning, college funding, etc.
• The amount of death benefits payable from an employer-sponsored insurance plan and social security
What is term insurance?
Term life insurance provides protection for a specific period of time, and it only pays a benefit if you pass away during the term. Term insurance is a popular option because it is generally inexpensive when you purchase it at an earlier age and benefits can be used to pay off outstanding debts.
What is whole insurance?
As long as you pay the premiums, which will be higher than term insurance, whole life insurance remains in effect throughout your lifetime. Whole life insurance policies are especially beneficial if you want to use your insurance as collateral for loans or receive cash payments while you are still living.
What is universal insurance?
Universal life insurance gives you permanent insurance protection, but it is more flexible than whole life insurance because it allows you to select the amount of protection that best fits you and your family. You can increase or decrease your universal coverage as your insurance needs change, and have more control over the amount and frequency of payments.
Whom can I name as a beneficiary?
Your beneficiary is the person or persons for whom you will want to provide financial support when you pass away, and is typically a spouse, children, or other relatives. However, remember that you may need to update your insurance policy as circumstances change. For instance, if your spouse becomes unable to handle financial matters or you get divorced, you may need to review and modify the beneficiary designation on your policy.
Can I name my estate as beneficiary?
The short answer is yes, but it may not be the best option for a variety of financial considerations. For example, many state laws dictate that life insurance benefits paid to an estate must go through a probate process before your beneficiaries can receive the proceeds of your policy. You will want to speak with your legal advisor to discuss the financial implications of naming your estate as your beneficiary.
Do I have to take a medical exam?
Medical exam requirements vary depending on the life insurance company, but most will require some form of exam to obtain an objective evaluation of your health. As you might imagine, the results of a medical exam will influence the type and amount of insurance for which you are eligible. One of the most important health factors is whether or not you smoke cigarettes. Due to the increased mortality risk associated with smoking, smokers almost always pay higher premiums and, in some cases, may be denied life insurance coverage.
These are likely just a few of the questions you have about life insurance. Get all of the answers you need to choose the best type and amount of insurance for you and your family when you meet with a trustworthy insurance agent. Learn more about insurance by visiting http://www.KellyWilliamsIns.com or calling 562.498.8661.
Kelly Williams is the president of Kelly Williams Insurance, a boutique, full-service Long Beach insurance company specializing in all lines of insurance including auto, home, life, health, and business. Kelly Williams Insurance was founded in 1895 and is based in Long Beach, California. The insurance company also serves Orange County and Los Angeles County. Visit http://www.KellyWilliamsIns.com or call 562.498.8661 to learn more about the company’s personal and busine