Life insurance research can simply be overwhelming. With unfamiliar terminology and processes, getting all of your questions answered can be difficult. We have compiled a few common questions that are typically asked during the life insurance discovery process to get you started.
1. What is Life Insurance?
Life insurance is a contract between you and an insurance company that states a cash benefit will be paid to your beneficiary in the event of your death.
2. What are the Different Types of Life Insurance?
There are a few different formats of life insurance to consider in our search including term, whole and universal life insurance. Here are the core differences:
- Term Life Insurance: Offers coverage for a designated period
- Whole Life Insurance: Offers coverage for your entire lifetime
- Universal Life Insurance: Offers protection for a lifetime with accumulating cash value
For more details on each type, visit this post exploring the various benefits of each life insurance policy.
3. What is a Beneficiary?
A beneficiary is the chosen person or entity to receive life insurance proceeds upon your death. Once a policy is purchased, you will be asked to name a primary and contingent beneficiary.
4. How Much Does Life Insurance Cost?
There is a wide range of life insurance costs depending on a variety of factors including the type of insurance, health history, age etc. Most commonly, according to one report, the average cost of life insurance is around $26 per month.
5. Why Do You Need Life Insurance?
This is an important one. Life insurance can be used for a variety of financial goals. Typically, life insurance is a way to ensure your loved ones have financial support when you pass away.
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6. How Does Life Insurance Work?
Now that we’ve covered the basics, let’s get into the process of life insurance a little bit. Life insurance pays a cash benefit to your beneficiary or chosen recipient of the policy. This cash payout process occurs in the event of your death ensuring your family members are financially supported for funeral costs, day-to-day costs, education expenses and beyond.
7. How Much Life Insurance Do I Need?
There are a few different schools of thought on this topic. The simplest version includes multiplying your income by 10 or using the DIME (debt, income, mortgage and education) method. You can also use insurance calculators to determine a more specific amount.
8. What is a “Free to Look” Period?
The “free to look” period is a specific duration of time after you purchase a life insurance policy, that allows you to return the policy or opt out for any reason.
9. How Does Life Insurance Help Me Financially?
Beyond covering final expenses and funds for our loved ones, life insurance can also have a cash value component. This cash value could supplement retirement income while you are alive. Depending on the type of insurance purchased, you can invest in personal financial success in addition to contributing to generational wealth.
10. What Does Paid Up Mean?
If you get a notification that you are fully paid up on your life insurance policy, it means you have made enough payments to cover the cost of insurance for the duration of your life.
11. Can My Life Insurance Application Get Denied?
You can be ineligible for life insurance for a few reasons including health history, dangerous lifestyle and age. Certain plans guarantee you will not be turned down due to your health and rates will never increase.
Colonial Penn is here for you!
Colonial Penn has specialized in making life insurance simple and accessible by offering it directly to consumers since 1957. Click here to learn more.
