• Which One Is Better: Term Life Insurance or Permanent?

    This question has been debated for as long as life insurance been around. For most, term life insurance will be the preferred choice because it offers the most significant benefit amount for the lowest price. Furthermore, since most expenses aren’t permanent (mortgage balance, young children), getting the most amount of coverage in the most crucial period when the family is young is a sensible option.

    That said, there are a few cases for a permanent policy which can be best used for estate planning or when you buy a small final expense policy.

  • What Are Life Insurance Riders?

    Life insurance riders are add-on provisions to enhance or customize your current coverage to fit your needs. Some riders come at no additional cost and are baked in the coverage. It’s worth noting that riders are purchased with the policy and can’t be added later. Here are a few common purchased riders:

    • Waiver of premium
    • Disability income
    • Term conversion
    • Accelerated death benefit
    • Child’s term life
    • Accidental death benefit rider
    • Return of premium (ROP)

  • What If I Die Without Life Insurance?

    Life insurance’s primary purpose is to prevent financial hardship for your loved ones. Whether it’s burial expenses or mortgage balance you worry about, a proper life insurance policy can help your beneficiaries avoid this misfortune. First, let us clarify two fundamental distinctions. A funeral is different than proper disposal of the body.
    No one is entitled to a funeral (for those who say, “I don’t really care what happens when I die”), so if no one pays for your funeral service, guess what? The local government will take over and bury you in a potter’s field or cremate your body.

    If, however, your loved one insists on having a proper burial and funeral service, they can pay for this themselves (which you may not want to burden them with) or use any assets you left behind to pay for it.

    The person who signs the contract with the funeral home is legally obligated to pay for it. Hence, buying a policy isn’t really for you. It’s to prevent the extra headaches someone you love has to go through when they need to deal with all you left behind.

  • Why Do I Need to Disclose My Income on the Application?

    Your current and past health aren’t the only parameters the carrier uses to evaluate your application for life insurance. Moreover, since life insurance is meant to protect financial devastation to your heirs, the insurance company needs to make sure you are not over-insuring yourself and that the payment is within your means.

    If you make 20K per year and want to purchase a 20-million-dollar insurance where the premium is so high, you can’t afford it, this will trigger a red flag, and you most likely will not be approved for coverage. Lastly, any amount you choose to buy, you must justify it through income or assets that you are trying to protect.

  • Can I Buy Life Insurance on Anyone I Choose?

    Sure, provided there is an insurable interest a relationship and with the insured’s consent. Insurable interest is a reason to buy life insurance on someone else because you could undergo a financial disaster if they die. A relationship can be:

    1. Husbands, wives, or children
    2. A business owner can buy life insurance on his key employees
    3. Creditors are allowed to take a policy on their borrowers

  • Can I Get a Better Price If I Buy Directly from the Insurer?

    Thankfully, no. Life insurance prices are fixed by law and are subject to the insurance carrier and the state’s department of insurance approval. If that were the case, brokers, agents, and the insurance companies couldn’t compete ethically in the marketplace, and consumers would be even more baffled with life insurance.

    As a client, you may choose to work with a broker because he can shop all companies and offer you the best one for your situation. Besides, a broker doesn’t charge a fee because he gets paid by the insurance carrier.

  • Can I Buy More Than One Policy?

    Sure, you can, provided there is a financial need for it. You may want to supplement your current policy from work or add another term life insurance because you just had a new addition to the family. The insurance company is more interested in the total death benefit amount you currently hold rather than in how many policies you have.

  • What Are Risk Classifications?

    Risk classification, also called health classification, is a method the underwriter uses to determine the risk you pose to the insurance carrier. A fundamental concept is the higher the risk, the more you will pay in premiums; the less of a risk, the less you will spend.

    Additionally, since it’s impossible to determine one person’s mortality with absolute accuracy, the carriers group individuals with similar risk and calculate their rates. These groups are called classes.

  • How Much Life Insurance Can I Buy?

    In insurance lingo, brokers refer to this question as part of the financial underwriting process. The amount of coverage you can buy must reflect your economic value. There are a few ways to justify the requested face amount by calculating your assets and liabilities.

    However, most companies follow this simple formula: the younger an applicant is, the more coverage he needs because the children are still young, the mortgage balance is still outstanding, so passing away in these critical times could devastate the beneficiaries.

    Nevertheless, once the applicant is older and has fewer liabilities to protect (children are older, the mortgage is paid off), the less coverage he will qualify for.

    Here is a basic formula to estimate the maximum coverage you can receive:

    • Up to age 40: You can buy 35 times your yearly income.
    • 41–50: You can buy 25 times your yearly income.
    • 51–60: You can buy 20 times your yearly income.
    • 61–70: You can buy 10 times your yearly income.
    • 71–80: You can buy 5 times your yearly income.

  • Does Life Insurance Cover Suicide?

    First thing first: If you or someone you know is considering suicide, please talk to someone about your thoughts. The suicide provision states that, if you die within two years after buying the policy as a result of suicide, the carrier will contest your claim and will not pay your beneficiaries. After two years, an insurer can’t challenge the death claim and must pay the benefit.

  • What Is Accidental Death and Dismemberment Insurance?

    If I had to rank the number one reason clients are so angry, it is discovering they just bought accidental death and dismemberment (AD&D) and not a traditional life insurance policy. Since many potential buyers don’t understand life insurance nuances, they fall prey to the wrong brokers or agents who just sold them on the idea that they bought life insurance at the best price.

    An accidental death and dismemberment policy pays a death benefit to beneficiaries ONLY if you die as a result of an accident-related event. If you had cancer, heart attack, stroke, or any disease and died as a result—you guessed it—your beneficiaries will get zilch.