People have questions about purchasing life insurance, and this list of life insurance FAQ is designed to give you the information you need. Getting information from life insurance FAQ or FAQ on any topic is a good way to understand what you are buying before you make a purchase. If you still have questions after reading the life insurance FAQ, ask an insurance agent or approach an insurance company directly to get more information.
Life Insurance FAQ #1: What Is Life Insurance?
Life insurance is a written contract (a policy) between an individual (the insured) and the company (the insurer) to pay a certain amount of money if the insured dies while the policy is in effect.
Life Insurance FAQ #2: What Is A Beneficiary?
A beneficiary of a life insurance policy is the person named by the owner of the life insurance policy to receive the payment if the insured dies.
Life Insurance FAQ #3: Why Should I Buy Life Insurance?
When you purchase life insurance, you are buying it to provide financial protection for your loved ones (or business partners). It is designed to replace income in the event of your death. The proceeds from an insurance policy may be used to pay for expenses such as:
- Debts
- Child Care
- Rent or Mortgage
- Funeral Costs
In addition, funds from an insurance policy may be used to pay for children’s education costs or to contribute to a college fund or a retirement savings plan.
Life Insurance FAQ #4: I Don’t Have Any Dependents; Do I Need Life Insurance?
Even if you don’t have any dependent children, you likely have bills and debts that will need to be paid after your death. The proceeds from a life insurance policy can also be used to provide financial assistance to elderly parents or other family members, who may require specialized care or help paying bills.
Life Insurance FAQ #5: Who Can I Designate As The Beneficiary Of My Life Insurance Policy?
The beneficiary of your insurance policy can be any person you choose. It can be your spouse, child, other family member, or a friend.
Life Insurance FAQ #6: How Do I Know How Much Life Insurance I Need?
There are a few different thoughts on that subject. Some insurance agents will tell you that you should be insured for between 10 and 20 times the amount of your annual salary. If that seems like a lot of coverage, keep in mind that the proceeds from your insurance policy are supposed to replace your income if you die.
A person with dependent children will likely want to have enough coverage in place to allow the family to stay in their home and pay for education expenses.
Since life insurance can also be used to pay off bills and debts, make a list of these amounts. Include a certain amount of money to cover the cost of your funeral. This figure should be included in your calculation of the amount of insurance coverage you should have in place.
Life Insurance FAQ #7: I Have Life Insurance Through Work. Do I Need To Buy Additional Coverage?
The problem with having life insurance coverage through work is that if you lose your job, you also lose your life insurance coverage (unless you have a convertible option on your group life insurance policy).
Additionally, most of these policies provide only a limited amount of coverage based on your annual salary. While having some life insurance in place is better than having no insurance coverage at all, you should be looking at buying a personal insurance policy to provide adequate coverage to your loved ones if you should pass away.
Life Insurance FAQ #8: How Do I Find The Best Life Insurance Agent?
If you don’t know anyone who works in the life insurance industry, you could ask a friend, family member, neighbor, or a coworker if they have a good relationship with an agent. Getting a personal referral is a good way to find someone you will be comfortable speaking with.
If you aren’t able to find an agent that way, then your local Yellow Pages will have listings for insurance companies and independent agents that serve your community. Call in to the main number and explain that you want to meet with someone to do a needs analysis to determine the amount of coverage you need.
If you want to find a life insurance agent or broker the easy way then just use our free life insurance quote comparison tool at the top of the page. You can view quotes from different agents and companies that will compete for your business and allow you to obtain the best value.
Life Insurance FAQ #9: What Is A Life Insurance Needs Analysis?
A needs analysis is the process where an insurance agent gathers information about your financial situation (including investments, social security benefits you would be entitled to, pension benefits) to determine how much life insurance coverage you need to fit your (and your family’s needs).
Life Insurance FAQ#10: Will I Need A Medical Exam To Buy Life Insurance?
If you are buying a small policy, then you may not need to answer any health questions at all. For a larger policy, the procedure will vary depending on the insurer. You should expect to answer some general health questions when you apply for coverage.
The insurance company’s underwriters may ask for more information or ask to you to submit to some tests to determine your level of risk (and the appropriate premium level to charge you for coverage).
If you are required to have a medical exam or undergo tests, the insurance company will arrange for them to be conducted at a convenient time. You will not be expected to pay for either service.
Life Insurance FAQ #11: What Do I Do If I Am Turned Down for Life Insurance Coverage?
If you apply for life insurance and are turned down, ask the insurer to explain why that decision was made. (The insurance company may have made an error in processing your application.)
Once you know the reason why you were turned down (and assuming that no mistake was made), apply for coverage through a different insurer. If you are working with an independent insurance agent, he or she can help you find a company that will provide you with coverage.
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