Life Insurance
Buyers Guide
As prepared by the Life Insurance Help Desk.
This information is intended for general educational purposes and should not be considered financial, legal, or tax advice. Life insurance policy features, benefits, and availability vary by carrier and state. Guarantees, if applicable, are based on the claims-paying ability of the issuing insurer. Always review your policy and consult with a licensed insurance professional for details specific to your situation. This guide is not intended to endorse any insurer or policy type. “Licensed Life Specialists” are state licensed insurance professionals employed by Life Insurance Help Desk.
What is Life Insurance?
A Life insurance policy is a contract outlining a financial agreement between an individual and an insurance company, that provides money to chosen beneficiaries when the insured person dies subject to terms of the policy. In exchange for regular payments, called premiums, these policies help protect loved ones by reducing the financial impact of lost income, debt, end of life medical expenses, funeral costs, and other final expenses that might be left behind when the insured person passes on.
How Much Life Insurance Do You Need?
How much coverage is needed depends on the financial needs that will be left behind when an individual passes away. The following questions can help you and your licensed agent determine your potential coverage needs for your unique situation.
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Does anyone depend on me financially?
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How much of the family income do I provide?
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How will my family pay for my final expenses and repay debts after my death?
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Do I need temporary protection for the next 10 or 20 years or should I be concerned with a permanent coverage option?
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Would I like to leave a legacy by leaving money behind to family or charity?
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If I have coverage through my employer, is it enough to meet my financial obligations?
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Will my employer provided coverage still be available after retirement?
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What will insurance cost if I wait to get it? Can I afford it then?
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Will my health remain stable enough to qualify if I put this off?
“Many people delay planning for final expenses and later find that premiums may be higher or options may be more limited if you wait. It is important to consider this early when thinking about your coverage”
How Do I qualify For Life Insurance?
An application for Life Insurance is processed through agents either over the phone, via mail, online, or in person. Information required to complete an application will include all of your personal identification information as well as information about your health, habits, and history that the insurance company will use to determine your risk. Depending on the type of policy, the insurer might require you to have a “Medical Review” performed by a physician and / or answer a “Health Questionnaire” to assess your eligibility for the policy against a set of predetermined criteria by the insurance company. Policies that do not require detailed health information typically cost more, provide less coverage, and have waiting periods before coverage takes effect.
“Never be afraid of the a health review or assume you’re ineligible for coverage. Each company is different. Life Insurance options may be available for many age and health statuses, including options for those with serious health conditions. Let your Licensed Life Specialist find the right company and policy for you.”
Policy Truthfulness:
A life insurance policy is a legally binding contract between the Insured & the Insurance Company. It is important to tell the truth on the application, answer each question accurately, & review these questions before you sign. Misrepresentations on a Life Insurance policy are a form of insurance fraud. This means that if the insurance company discovers false statements on your application after it issues your policy or during a claim, they may be within their rights to reduce your coverage, cancel your coverage, or even deny the claim.
Your Affordability:
Your age, health, and habits determine your risk. In general, policies that include more detailed medical reviews will offer lower premiums and higher coverage amounts because the insurer’s has a clearer understanding of your risk. Before purchasing Life Insurance, make sure you can afford the premiums and understand if they may change in the future. Some policies are sensitive to changes to credited interest rates or performance changes, which may affect future cost. Ask your licensed agent to explain the potential premiums changes and how to plan for them.
Your Beneficiary:
A Beneficiary is an individual, entity, or organization who you wish to receive your policy’s pay out upon your death. You will commonly need the Date of Birth or Social Security Number / Tax ID Number for all beneficiaries. You may also be asked to explain your beneficiary designation if they are not a family member, this is referred to as defining “Insurable Interest”. Experts generally advise against designating a minor as a beneficiary, since claims to minors may require a court-appointed guardian or trust. Policy holders often choose to name their estate or a trust as their beneficiary instead of their child.
If You Have Life Insurance Already, Assess Your Current Policy:
It is important to review your current policy to ensure it still fits your needs as well as compare it to any policy you might be looking to buy. You may be able to review your current policy with your agent to determine if changes could better align with your goals. You may also have experienced changes to your health that have impacted your ability to get a new policy or a premium you can afford. Above all, do not cancel your current policy until you get your new policy packet and verify the paperwork is accurate.
If You Are Getting A Policy, Assess The Future Of Your Policy:
Does your policy build a cash value? If so, how quickly? What will your options be down the road? Some policies build cash value slower early, then faster later on—others build gradually over the lifetime of the policy and most Term policies won’t build cash value at all. Some policy types such as Universal Life’s even use cash value to pay premiums if the cost of insurance increases subject to policy terms and conditions. Consider asking your licensed agent or company representative for an illustration showing future values and benefits, but please note that illustrations are projections and not guarantees of performance.
After You Purchase Life Insurance, Read Your Policy Carefully:
After you receive your insurance and receive your policy, be sure to check for accuracy and read it carefully. Be sure that you personally check on & understand the following information.
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After you get insurance and receive your policy, be sure to check for accuracy and read it carefully.
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Is my personal information correct, does it accurately represent my health & habits?
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Do the premiums or policy values change over time?
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Are there any parts of the premium or policy values that aren’t guaranteed?
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How will the timing of premiums or withdrawals affect interest or benefits on the policy?
“Instances of agent misconduct can occur in any industry. Always review your Life Insurance policy for accuracy no matter where it is obtained, even from us.”
It is important to review your life insurance policy every few years to keep up with changes in your policy, coverage, premium, or coverage needs. Life events such as divorce, children, adoption, death, marriage, retirement, or job change will frequently alter insurance needs. The insurance company can provide you with statements and illustrations that will assist with this review. As the policy owner, you can change the beneficiary at any time with no extra cost.