If you’re considering purchasing a new life insurance policy or converting your military life insurance policy to a new, private policy, you probably have many questions. Life insurance can be a daunting topic, both emotionally and due to the wide range of companies, policy types, and all the ins and outs of how life insurance works.
One of the best things you can do to feel confident and set yourself up for success in your life insurance shopping is to identify a good set of questions to ask, and this article will help you with that.
Good questions to ask if you are seeking life insurance protection have to do with assessing the needs of you and your family, asking about particular life insurance policies, and gaining an understanding of how to apply for a policy and what to expect from that process.
Questions About Life Insurance Coverage Amount
Performing a needs analysis is an important early step toward finding a life insurance policy that will help you protect your family.
How Much Life Insurance Coverage do I Need?
You may or may not already feel like you have a solid idea of how much life insurance coverage you need. In either case, it can be helpful to talk to a life insurance agent who is trained to give recommendations about which types of policies and how much coverage would be best for you.
For single individuals without children or other dependents who rely on them for income, a relatively low amount of coverage like $50,000 might be a sufficient death benefit to start with, at least until such life circumstances change. If you have a family, you might decide you need substantially more life insurance coverage: $100,000, $200,000, or maybe even up to $1 million. It all depends on what you are trying to achieve by purchasing a life insurance policy and what your financial obligations and goals are, beyond just the policy’s death benefit.
All life insurance policies will offer some financial security in the form of a death benefit payout that will help protect your family if you pass away unexpectedly or at a particularly vulnerable period of time—while your children are still under 18, for instance. In addition to this death benefit, some life insurance policies can also help you build wealth over time through their cash value component.
What is the 10x Rule for Life Insurance?
A common rule of thumb for a self-guided needs analysis is the 10x rule for life insurance. According to this rule, you should purchase a life insurance policy with coverage equal to 10x the amount of your annual salary.
The idea is that this is a death benefit amount that, when paid out to your loved ones following your death, should be enough to cover funeral expenses and other expenses, and replace the income you would have earned for a significant period of time: 10 years or more if that life insurance policy had a cash value component and/or if the money from that payout is tucked away or invested wisely.
However, keep in mind that the 10x rule is just a starting point. There are other factors to consider beyond your current salary, such as affordability and availability. If you make $100,000 per year, for instance, the 10x rule would suggest you should purchase a $1 million life insurance policy. Not all carriers offer policies with that much coverage, and for those that do, a policy with that much coverage can be quite expensive. A lesser amount of coverage can still provide some amount of income replacement, or can help with other financial burdens such as outstanding debts or final expenses, at a more affordable price point.
There may also be other significant factors worth considering, which might escape your notice. For that reason, talking to an agent about the financial support your family needs can help tremendously.
Life Insurance Policy Options
In addition to helping guide you through a needs analysis regarding coverage amount, a life insurance agent can answer important questions about life insurance options. As representatives of a life insurance company, life insurance agents have the best understanding of which types of policies are offered by the company, who would be eligible to qualify for different policies, and more.
Which Types of Life Insurance Policies do You Offer?
This is a very important question to ask a life insurance company’s agent. The duty of a life insurance agent is not just to sell you a policy, but to offer education and guidance as well. A life insurance agent can tell you which types of life insurance policies a company offers, but they can also explain the features of these life insurance options and compare them in ways that will be easy to understand even if you don’t have any preexisting knowledge of life insurance.
The two basic types of life insurance policies are term life insurance and permanent life insurance, with permanent insurance breaking down into two more main types: whole life insurance and universal life insurance. Permanent life insurance is so named because it provides the insured with lifelong coverage. The coverage length of a term policy, in contrast, is a fixed, specified period of time.
There are pros and cons to all three of these policy types, which are meant to fit the needs of different types of individuals and families. One of the main benefits of both types of permanent insurance – whole life and universal life – is the tax-deferred accumulation of cash value attached to the policy. This cash value component falls under the category of “living benefits,” with the living benefits of a permanent policy being things that the policyholder can take advantage of while the insured is still alive. Term insurance does not come with living benefits, which is partly why term policies have lower premiums.
The specific policies corresponding to these types will differ across companies, so even if you understand the basic differences between the policy types, it’s beneficial to speak to an agent who can walk you through the policy details for a given company.
Military Conversions
A select number of life insurance companies are approved by the VA to offer what is known as “military conversions,” and American Fidelity Life Insurance Company is proud to be one of them.
The topic of life insurance military conversions is a bit nuanced, and there is a lot of misinformation and conflicting information surrounding it. American Fidelity Life Insurance Company has agents who are trained specifically to answer any questions you might have about military conversions, so if you are interested in this process, which can offer a pathway toward guaranteed issue life insurance coverage regardless of your health, it is a good idea to talk to an agent.
Good questions to ask a life insurance agent regarding military conversions include:
Does your company offer military conversions?
Am I eligible for a military conversion?
Is military conversion my best option?
Which of your policies are eligible for military conversion?
How soon do I need to act to take advantage of a military conversion?
Which Policies do You Sell in My State?
For good reasons, life insurance is a heavily regulated industry. That means that each private life insurance company must seek state-by-state approval for each of the policies they wish to sell. What this means is that, just because a particular company offers a particular life insurance policy, that policy may not be available in your state of residence. A life insurance agent will know which policies are approved in your state, so this is another good question to ask early on.
Am I Too Old for Life Insurance?
Age is one of the major factors that influences pricing and eligibility for life insurance policies. Again, different life insurance companies will have different guidelines for this. Across companies, most types of policies will be available for people up to age 50. Beyond that point, the answer to the question, “Am I too old for life insurance?” will vary by company and policy type.
However, if you are above the age of 50, do not get discouraged. Many life insurance policies are available to people older than 50, including permanent and term insurance. Age will always play a role in the cost of life insurance, with higher ages corresponding to higher premiums, but it may not be a barrier to actually applying and qualifying for a life insurance policy. A life insurance agent will be well-suited to provide guidance on this topic as well.
Questions About Buying Life Insurance
Once you understand what your policy options are for a particular life insurance company, it can be a good idea to ask questions about life insurance applications, so that you understand what’s involved in the process. This, too, will vary by life insurance company and policy type.
How Much Will This Life Insurance Plan Cost?
You, of course, will want to know how much the premium payments would be for a particular policy before applying, and this is probably one of the first life insurance questions you will think to ask. For permanent policy options in particular, it is important to speak with an agent to get an accurate quote on how much your premium payments would be, as this figure depends on a variety of factors specific to you.
How do I Apply for Life Insurance?
As stated earlier, there are two main types of life insurance policies: term life insurance and permanent life insurance. Term life insurance is cheaper and comes with less benefits than permanent life insurance. For this reason, term life insurance is considered to be lower risk from a company perspective. This, in turn, means that many life insurance companies provide a streamlined approach toward applying for term life insurance.
American Fidelity Life Insurance Company, for instance, has an easy-to-use online calculator and quick self-service application on our website for term life insurance.
Applying for a permanent policy tends to be a slightly more involved process. Most companies will require you to talk to an agent before applying for any kind of permanent life insurance in order to determine if you’re eligible and to provide you with an accurate policy illustration and quote.
Additionally, permanent life insurance applications tend to have more questions to fill out than term life insurance applications, including a health questionnaire. These extra health questions are intended to gather more information about your medical history and other risk factors that can affect your eligibility and the premium cost of the policy. In many cases, a life insurance agent will help you fill out a permanent life insurance application, or will fill it out on your behalf in your presence.
Are Medical Exams Required?
Whether or not medical exams are required as part of the application process varies widely by company, policy type, and applicant. It is rare for medical exams to be required for term life insurance applications. For permanent life insurance applications, medical exams are more common, but in many cases are still not required.
When reviewing your life insurance application, the underwriting team of a life insurance company will begin by reviewing the information gathered on the life insurance application itself. If they feel there is enough evidence of your good health, they might be able to approve your application without gathering any additional information.
However, if they wish to gather more information about your health and medical history, they will typically start by requesting your medical records from your physician or care facility. At that point, they may have enough information to approve or decline your application, or they will request that you undergo a medical exam.
What are Some Common Disqualifying Health Conditions?
Every life insurance company has different guidelines regarding risk assessment and disqualifiers for being approved for a life insurance policy, which fall under the domain of underwriting. As such, this is one set of questions for which a life insurance agent will not have a comprehensive set of answers, nor will any other representative of the life insurance company be able to answer this question in detail.
However, there are some disqualifiers that are common across life insurance companies. Most life insurance companies will be unlikely to approve life insurance applications for individuals who engage in certain risky habits such as skydiving, flying (with the exception of commercial pilots), and those with a history of substance abuse.
When it comes to health status and medical history, the guidelines for disqualifiers are murkier. For some companies, a history of cancer may be a disqualifier, while it might not be for others; the same goes for other serious conditions like diabetes, PTSD, and so on. For some companies, such conditions may be disqualifiers if the conditions are left untreated, but they may not be disqualifiers if the applicant is receiving proper treatment.
A life insurance agent will not be able to give definitive answers regarding which specific conditions are automatic disqualifiers, but it can be good to ask them for whatever knowledge they do have on the matter.
What Not to Say When Applying for Life Insurance
Because there are certain medical conditions, habits, and activities than can disqualify you from life insurance, there can be a tendency for applicants to withhold information. It is important to understand, though, that it is always in your best interest to be as honest and forthcoming as possible during the life insurance application process.
If a life insurance company finds out that you provided inaccurate or incomplete information on your application that would have changed the company’s decision on your application, they can void your life insurance policy even if it’s already been issued for a period of time: usually 2 years.
The worst-case scenario, which is a very real possibility, is this: you decide to withhold important information on your life insurance application because you’re worried it might disqualify you from being approved. The company reviews your application, approves it, and issues you a policy. You pay premiums each month, and then you die about a year after your policy has gone into effect. The life insurance company then discovers the information you withheld. They can legally decide to deny your family’s death claim because the policy was issued under false pretenses, even if you had been paying the premiums on the policy the entire time.
So, there really isn’t anything you shouldn’t say when applying for life insurance. It is in your best interest to be totally honest when speaking to a life insurance agent and when filling out an application so that you know you’re applying for a policy that, if approved, will remain in force without any surprises later on.
Other Questions
The above questions are probably the most important to ask to the representatives of a life insurance company if you’re considering applying for a policy. However, there are other life insurance questions you may wish to ask concerning more specific policy details. Here are some examples.
Do You Offer Any Policy Riders?
Life insurance policy riders are add-ons that are typically not automatically included as part of the policy, but can be applied as an additional clause to the policy upon request, usually for an additional cost. There are exceptions to this, such as the accelerated death benefit rider that is included in our universal life insurance policy at no additional cost, and can help cover the costs associated with the insured developing a terminal illness or other critical illness.
You can ask a life insurance agent which policy riders the company offers, and for which policies, if you wish to learn more.
What are the Rules for Full and Partial Surrenders?
A life insurance surrender involves the withdrawal of some or all of a life insurance policy’s cash value. Only permanent life insurance policies have cash value components, so this question would only be relevant if you’re applying for permanent life insurance as opposed to term life insurance.
As with other policy details, the rules for full and partial surrenders of cash value will differ across companies and specific policies. These rules govern when surrenders of cash value can be issued, how much can be withdrawn in a partial surrender, if there are financial penalties for doing so, and more. A life insurance agent should be able to answer these questions about a policy’s cash value component and surrender rules for you.
You may additionally wish to speak to a financial professional about the living benefits of a permanent life insurance policy to assess how the opportunity to build cash value in this way can fit into your family’s overall financial goals, financial needs, and plans. Personal finance is a major area of consideration when purchasing life insurance.
Talk to an American Fidelity Life Insurance Agent
This article is meant to serve as just a starting point to prepare you for your first conversation with a life insurance agent. Keep in mind that it’s normal for additional questions to arise for you between now and then. You will likely also have new questions pop up during your conversation with an agent. Having a list of questions you want to ask before you talk to an agent can be helpful, but our agents are trained to ask you questions to help clarify important needs and considerations that might not have occurred to you.
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