Establishing a life insurance policy is one of the many ways to protect your family and your legacy, but there are questions you should ask before you purchase a policy. Knowing what to expect, and understanding how you can get what you need, is the most important way to make sure that you get the coverage that best fits your life.
As we get older and our responsibilities seem more complex, it becomes increasingly important to know that your loved ones are protected no matter what happens. Knowing and understanding the benefits and options around life insurance will give you peace of mind, as you build confidence that you can provide for others even after you’re gone.
Are there certain lifestyle factors that can impact your life insurance policy before or after the plan goes into effect?
There are a number of lifestyle factors that can impact your life insurance premiums. Your medical history and general health, including whether or not you are a regular smoker or alcohol drinker, your weight, and any medical conditions, can all affect your policy.
If for example you quit smoking after starting your life insurance policy, contacting your insurer and updating them may help to lower your premium.
Your occupation and hobbies can also be a factor, such as if you participate in riskier activities, as defined by the insurance company you choose.
Is there cash value to be obtained if I decide to cancel the policy?
Maybe. If you cancel a term life insurance policy after the free look period, you do not get any money back. If you cancel a whole life policy you may receive the cash value of the policy. This cash will be seen as income so you will have to pay taxes on those funds you receive.
How are benefits paid out?
When it comes time for the benefits of your life insurance policy to be paid out to your beneficiaries, there are a variety of options available for the distribution of payments. Lump sum payouts are a popular choice, for example, but you may not want or need all of the money at one time. The options include the following:
- Fixed Payouts – Beneficiaries can receive a specific amount for the duration of the payout, whether that is monthly or annually. Once funds have been depleted, payouts end.
- Interest Income – The death benefit stays intact and the beneficiary receives income from any interest generated from the benefit.
- Life with Period Certain – Beneficiary receives payments for life. It can be dictated that at least a minimum number of years must be set to receive payment. If the beneficiary dies before the set number of years, benefits are transferred to someone else.
- Lifetime Income – Beneficiary receives payments for the rest of their life. The amount is determined based on the age of the beneficiary and the size of the policy.
- Lump Sum – Beneficiary receives the entire amount at the time of your death.
Why would I need life insurance?
The reasons behind buying life insurance are as varied as the people buying the policies. There are however, some fairly common reasons for buying life insurance.
To protect family and loved ones
Benefits from a life insurance policy can be used to financially protect loved ones after your death. Funds can be used to help subsidize loved ones after your passing. Knowing that you’ve left enough so that loved ones don’t have to scramble immediately after your death is one of many reasons for purchasing life insurance.
To leave an inheritance or for financial security
If you don’t have outstanding debts, life insurance can be used as a financial gift, either to a loved one or to an institution or organization you feel strongly about. You might be gone before a grandchild graduates college or gets married but you can leave a gift to help them get started in life. Perhaps there’s a non-profit organization that you feel does important work? You can provide a financial gift after you’ve passed away that will continue to support the institution.
To pay off debt and outstanding expenses
When someone passes away there can often be outstanding debts and expenses. Life insurance allows your loved ones to make mortgage payments, pay medical expenses, and cover funeral costs.
Can you change beneficiaries later on?
At any time you can change beneficiaries for your life insurance policy if you are the owner of the policy. You will need to contact your policy provider and submit a document to officially change the beneficiaries.
You can declare almost anyone the beneficiary or your life insurance policy. However, minor children cannot receive a payout directly. You do not need the consent of the previous beneficiary to remove someone as a beneficiary from your policy.
What is a final expense life insurance plan?
A final expense life insurance plan is actually a small whole life insurance policy. The beneficiary of a final expense policy can use the insurance payout in any way they deem fit. These funds are not limited to funeral expenses or medical expenses.
Does the plan require a physical exam?
The type of life insurance you purchase determines whether you will need a physical exam. Depending on several factors when purchasing term life insurance, you may not need a physical exam. With permanent life insurance policies you will probably need a physical exam that will be paid at your expense with a doctor approved by the insurance company.
Life insurance policies to prepare for the unexpected
Life insurance can help you protect those who truly matter to you, even after life. Find a policy that will help your family with final expenses and their own finances, as well as one that can help you build an investment portfolio throughout the years.
Frost & Remer can help you choose a policy that allows you to grow your assets and protect your beneficiaries, while still being affordable.
Schedule a virtual appointment with us for a free full risk assessment and to discuss our range of life insurance options so that you can find the right policy for your life.