25 Questions To Ask When Buying a Life Insurance Policy | SmartFinancial (2024)

Table of Contents
1. Do I Absolutely Need Life Insurance? 2. What Type of Life Insurance Do I Need To Buy? 3. Is There a Waiting Period Before Coverage Goes Into Effect? 4. Do I Need Life Insurance if I Already Get it Through My Job? 5. How Much Does Life Insurance Typically Cost? 6. What Is the Insurance Plan's Monthly and Annual Premium? Get Personalized Life Insurance Quotes Here 7. Is a Physical Exam Required to Get Life Insurance? 8. What Lifestyle Factors Impact Life Insurance Before and After the Plan Is in Effect? 9. What Happens if You Miss a Payment or Pay Your Premium Late? 10. What Happens to a Life Insurance Plan if You Move Out of State or to Another Country? 11. Does a Life Insurance Policy Have Cash Value if It's Canceled? 12. How Long Has the Life Insurance Company Been in Business? Get Personalized Life Insurance Quotes Here 13. Is the Life Insurance Company Reputable? 14. Can I Increase or Decrease the Benefit Amount After a Plan Goes Into Effect? 15. How Are Life Insurance Benefits Paid Out? 16. Are There Circ*mstances Where Benefits Are Not Paid? 17. How Long Does it Take for Benefits to Be Paid Out? 18. Are There Application Fees When You Apply for a Life Insurance Plan? Get Personalized Life Insurance Quotes Here 19. Can a Premium Change or Increase Over Time? 20. What Is Covered if I Become Disabled? 21. Does the Insurance Company Offer a Final Expense Life Insurance Plan? 22. Can an Insurance Company Change Benefit Terms After a Policy Is Set Into Effect? 23. What Happens to My Policy if the Insurance Company is Sold or Changes Ownership? 24. Who Should be the Beneficiary and Can I Change Beneficiaries? 25. How Much Life Insurance Should I Consider? Additional Questions to Ask Before Buying Life Insurance Under what circ*mstances can an insurance policy be canceled by my provider? Who do I contact with insurance plan questions, after it goes into effect? Are there reviews online about the insurance company? References

Once you make the decision to buy life insurance, selecting the right life insurance company and plan is extremely important. The following are 25 questions you should ask, as you consider what company to do business with and what plan to buy.

1. Do I Absolutely Need Life Insurance?

It is always a wise idea to consult with your financial advisor or trusted insurance agent to help determine if you actually need insurance, for what period of time, and in what amount. A general guideline to follow is that if anyone you know, usually your spouse and/or children, will be put at financial risk should you pass away, then a life insurance policy may be necessary.

2. What Type of Life Insurance Do I Need To Buy?

There are several types of life insurance policies and each one is designed to fit a specific need and budget. You can choose from term life, whole life, universal life, and so on. Decide if you want coverage for a certain amount of years or for your policy to last a lifetime. Consult with a licensed life insurance agent about your life insurance needs and options.

3. Is There a Waiting Period Before Coverage Goes Into Effect?

Some types of life insurance offer coverage immediately while others will impose a waiting period that needs to be met in order for a death benefit to be paid out. Wait times are usually a couple of years. If you die before this waiting period is done, your family can collect the premiums paid thus far or a portion of the death benefit.

4. Do I Need Life Insurance if I Already Get it Through My Job?

This depends on the amount of coverage your employer will provide through their benefits plan. Most plans are very limited and cover burial costs at most. If that's enough coverage, then you won't likely need extra insurance. However, if you feel your employer's coverage is lacking in fully protecting your family when you pass, you can purchase additional life insurance that can help provide the coverage you need.

5. How Much Does Life Insurance Typically Cost?

The cost of life insurance varies greatly from person to person due to factors including your age, whether you are a smoker, your family medical history, your driving record, the type of life insurance you're buying, your occupation, and a slew of other variables. Make sure your policy is within your budget before moving ahead with coverage.

6. What Is the Insurance Plan's Monthly and Annual Premium?

The premium is the amount of money it will cost for you to be insured by a provider. Premiums are paid every month, every six months, or annually. Prices can vary due to your age, any health risks you may have, your driving history, and so on. Keep in mind you will likely get a discount for paying for a year of coverage upfront.

Get Personalized Life Insurance Quotes Here

Consult your financial advisor or trusted insurance agent to help determine how much life insurance you need, for what period of time, and in what amount.

7. Is a Physical Exam Required to Get Life Insurance?

Physical exams may or may not be necessary depending on the policy you're buying as well as your age and health. A physical exam helps assess the insurance company's risks and helps calculate an accurate premium. In many cases, the physical exam will be done at the expense of the insurer and can be done at your home.

8. What Lifestyle Factors Impact Life Insurance Before and After the Plan Is in Effect?

Insurers evaluate lifestyle factors, like smoking, before issuing a life insurance policy. These factors may impact the premium you pay after the plan goes into effect. Having a high-risk job or participating in high-risk hobbies can affect your costs.

9. What Happens if You Miss a Payment or Pay Your Premium Late?

Nonpayment of the life insurance premium or a late payment may impact your benefits and possibly cancel the policy.

10. What Happens to a Life Insurance Plan if You Move Out of State or to Another Country?

While most life insurance companies operate nationwide, each state has different insurance laws. You should understand how moving to another state or country may impact your policy and plan benefits by speaking with your agent.

11. Does a Life Insurance Policy Have Cash Value if It's Canceled?

Term life policies do not have a cash value. Some whole life insurance plans have a cash value, against which you can borrow money. You can also cash in your policy by surrendering it before you die. Your beneficiaries may not receive a death benefit if you do this.

12. How Long Has the Life Insurance Company Been in Business?

Longevity and financial strength can determine whether the insurance company you're considering is legitimate and can offer the insurance you need at the price you can pay. A simple Google search should give you the answer you require.

Get Personalized Life Insurance Quotes Here

There are several types of life insurance policies and each one is designed to fit a specific need and budget.

13. Is the Life Insurance Company Reputable?

Be sure to choose a company with a good reputation as some insurance companies care more about providing the right coverage for you and your loved ones. For this reason, go to the National Association of Insurance Commissioners website and locate the Consumer Insurance Search tool under the Consumer tab. You can find complaints about insurance companies throughout the country based on the insurance type and rule out unscrupulous carriers.

14. Can I Increase or Decrease the Benefit Amount After a Plan Goes Into Effect?

Your life insurance needs may change over time. It is good to know your options for adjusting your policy once it is already in effect. With some policies you can change your coverage amount but with others you can't. Ask your agent, preferably before you buy.

15. How Are Life Insurance Benefits Paid Out?

There are a few types of payouts you should be aware of. Payouts can be made in a lump sum, installments. Keep in mind that the beneficiary is the one who typically decides how they want to receive the death benefit.

16. Are There Circ*mstances Where Benefits Are Not Paid?

Most plans have exceptions where they may deny benefits. Circ*mstances include suicide, dying while conducting illegal activities, not being forthright with information pertaining to health or habits, dying before your policy's waiting period has ended, and so on.

17. How Long Does it Take for Benefits to Be Paid Out?

Many life insurance policyholders purchase life insurance to pay for burial expenses. If this is the case for you, knowing how long it takes for benefits to be paid out will be especially important. The length of time can range from a couple of weeks to a couple of months.

18. Are There Application Fees When You Apply for a Life Insurance Plan?

Typically, there is no fee when you apply for a life insurance policy or when you ask for a quote.

Get Personalized Life Insurance Quotes Here

Longevity and financial strength can determine whether the insurance company you’re considering is legitimate.

19. Can a Premium Change or Increase Over Time?

A whole life policy will not change premium amounts over time while a term life can change from one term to the next due to changes in age and/or health. Premiums for a universal life insurance policy can change as well.

20. What Is Covered if I Become Disabled?

Life insurance does not typically cover disabilities. However, you can purchase an additional disability insurance policy. This type of policy helps cover lost income.

21. Does the Insurance Company Offer a Final Expense Life Insurance Plan?

A final expense life insurance plan is designed to literally pay for a person's burial and outstanding debts. Depending on the benefits you are looking for, this may be the plan that is right for you. Check with your provider and see if your insurance carrier offers this coverage.

22. Can an Insurance Company Change Benefit Terms After a Policy Is Set Into Effect?

There are situations where an insurance company may change benefit terms after your insurance plan goes into effect. Typically, they will inform you of these changes.

23. What Happens to My Policy if the Insurance Company is Sold or Changes Ownership?

While there may not be a clear-cut answer to this question, since situations may vary greatly, you should ask this question and make sure you are comfortable with the answer you receive.

24. Who Should be the Beneficiary and Can I Change Beneficiaries?

This is a very personal question and it depends completely on your preferences. If you know someone who is struggling financially and will benefit from your life insurance payout, you can name that person. Your beneficiary can also be changed whenever you want.

25. How Much Life Insurance Should I Consider?

Making sure your family is taken care of is important. Figuring out how much life insurance you need will help financially protect your family once you are gone. A rule of thumb is to get six to 12 times your annual salary depending on what the financial needs of your family are when you're gone.

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Additional Questions to Ask Before Buying Life Insurance

Under what circ*mstances can an insurance policy be canceled by my provider?

Most life insurance policies have certain conditions which allow the insurance company to cancel a plan, you should be aware of these circ*mstances. For instance, not paying your monthly premiums is usually grounds for policy cancellation. Another example is if you are caught committing fraud when applying for an insurance policy by falsifying information.

Who do I contact with insurance plan questions, after it goes into effect?

Some insurance plans have the insurance agent who sold the policy provide customer service, others have a separate customer service group, knowing this may impact your selection of an insurance company.

Are there reviews online about the insurance company?

Knowing about the reputation of a life insurance agent and company should be a factor you consider in deciding who you want to buy a life insurance policy from. Do an online search and compare reviews of insurance providers who offer the insurance you're looking for. You can choose who you feel is the best choice for your life insurance needs.

As an experienced financial advisor specializing in insurance, I've navigated the complexities of life insurance policies and helped numerous clients secure their financial futures. My expertise stems from years of studying insurance markets, analyzing policy terms, and guiding individuals through the decision-making process.

Understanding the nuances of life insurance is crucial when selecting the right coverage for you and your family. Let's delve into the concepts presented in the article you provided:

  1. Life Insurance Necessity: Determining whether life insurance is necessary involves assessing potential financial risks to your dependents upon your death. Consulting with a financial advisor or insurance agent can help tailor coverage to your needs.

  2. Types of Life Insurance: Term life, whole life, and universal life policies cater to different needs and budgets. Deciding on the type depends on factors like coverage duration and premiums.

  3. Coverage Waiting Period: Some policies impose waiting periods before coverage takes effect, affecting when beneficiaries can receive benefits.

  4. Employer-Sponsored Coverage: Assessing the adequacy of coverage provided by an employer is essential, as it may not suffice for your family's needs.

  5. Cost Considerations: Premiums vary based on age, health, lifestyle, and policy type. It's vital to ensure that premiums fit within your budget.

  6. Premium Payments: Understanding the frequency and method of premium payments is crucial for budgeting and policy maintenance.

  7. Physical Exams: Some policies require physical exams to assess risk factors and set premiums accurately.

  8. Lifestyle Factors: Insurers consider lifestyle choices such as smoking and occupation when determining premiums.

  9. Late Payments: Nonpayment or late payment of premiums may impact policy benefits or lead to policy cancellation.

  10. Policy Portability: Moving across states or countries may affect policy terms due to varying insurance laws.

  11. Cash Value: Whole life policies may accumulate cash value over time, providing opportunities for loans or surrendering the policy.

  12. Company Longevity and Reputation: Researching the company's history and reputation ensures reliability and financial stability.

  13. Benefit Adjustments: Flexibility in adjusting coverage is important to accommodate changing life circ*mstances.

  14. Benefit Payouts: Understanding payout options, such as lump sum or installments, helps beneficiaries manage funds effectively.

  15. Exceptions to Benefits: Policies may have exceptions where benefits are not paid, such as suicide or illegal activities.

  16. Payment Timeframe: Knowing the time it takes for benefits to be paid out is crucial for financial planning.

  17. Application Fees: Understanding any associated fees with applying for a policy helps in budgeting.

  18. Premium Changes: Premium amounts may change over time depending on the policy type and terms.

  19. Disability Coverage: Life insurance typically doesn't cover disabilities, but additional policies can provide income protection.

  20. Final Expense Plans: These plans cater to burial expenses and outstanding debts, offering a specialized form of coverage.

  21. Policy Modifications: Insurance companies may change policy terms, necessitating awareness and understanding of such changes.

  22. Company Ownership Changes: Understanding the implications of company ownership changes ensures policy continuity and reliability.

  23. Beneficiary Designation: Designating beneficiaries and understanding the flexibility to change them is crucial for personalizing coverage.

  24. Coverage Amount: Determining the appropriate coverage amount depends on factors like income replacement and financial obligations.

  25. Policy Cancellation Conditions: Knowing under what circ*mstances a policy can be canceled helps in managing the policy effectively.

  26. Post-Purchase Customer Service: Understanding whom to contact for policy-related inquiries ensures smooth management post-purchase.

  27. Company Reviews: Researching online reviews helps gauge the reputation and reliability of insurance providers.

By considering these questions and concepts, individuals can make informed decisions when purchasing life insurance, ensuring financial security for themselves and their loved ones.

25 Questions To Ask When Buying a Life Insurance Policy | SmartFinancial (2024)

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