Buying life insurance can be a long-term financial commitment, so it’s good to be informed from the start. Here are key questions to ask your life insurance agent when you first sit down together:
Each person’s circumstances are different, so there’s no “easy” formula that works for everyone. A middle-aged couple with no children and a house that’s paid for won’t need the same coverage as a young couple with a mortgage and children who have college in their future. You can get a working idea of your life insurance needs by using an online Life Insurance Needs Calculator like this. However, your insurance agent does this for a living and can help give you the most accurate assessment available. The agent can also walk you through why they might recommend a specific amount of coverage.
Again, the answer won’t be the same for everyone. Term life insurance covers you for the period of the policy—ranging from 10 to 30 years. Because there’s no cash-accumulation feature like you’d find with a permanent policy, it’s generally less expensive initially to own, and can be a low-cost way for young families to get a large amount of coverage when the financial risks of premature death are high. However, if you’re interested in lifelong coverage and like the idea of your policy accumulating cash value, you may want to consider permanent life insurance. This is where good advice from an agent can help you determine the right type—or maybe a combination—of coverage and keep it within your budget.
At this point the agent will ask questions about your health and lifestyle to get an idea of your health rating. The better your rating, the lower your life insurance premium. That’s because of the underwriting process: Life insurance companies take into account health and lifestyle issues to determine your risk of dying prematurely. So, someone with high blood pressure who goes rock climbing will have a higher premium than someone with no major health issues or risky hobbies. Based on your answers, the agent can give you a working idea of how much you’ll pay for your premium.
Once you give the green light, the agent or proposed insured will fill out an application. Know that the life insurance company will confirm the answers you give. The agent then submits your application to the company, along with your payment for the first premium. Find out if you’ll get “conditional coverage” once your medical exam is complete (often given at home by a paramed). This is temporary coverage for the period that your application is being reviewed and can provide you with peace of mind. If not, your coverage will start once your application has been officially approved.
Now that you’ve read this, be sure to gather these and a few other questions prior to your conversation with an agent.
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