Life Insurance FAQ
What is life insurance?
Life insurance is a contract between an individual (the policyholder) and an insurance company, where the insurance company promises to pay a designated beneficiary a sum of money upon the death of the insured person. The policyholder pays regular premiums in exchange for this financial protection.
Why do I need life insurance?
Life insurance provides financial support to your dependents when you’re no longer there to provide for them. It can be used to pay off debts, cover living expenses, fund children’s education, or ensure that your spouse maintains their standard of living.
What are the main types of life insurance?
The two primary types of life insurance are term life and whole life (or permanent) insurance. Term life covers a specific period, and if the insured person dies during that term, the death benefit is paid out. Whole life insurance covers the insured person for their entire lifetime, with a guaranteed payout upon death. To learn more about all the various types of life insurance policies check out our explainer here: Types of Life Insurance Explained
What is the right amount of life insurance coverage for me?
The right amount of coverage varies based on individual circumstances, such as income, debt, lifestyle, and the number of dependents. A general guideline is to have coverage 10-15 times your annual income.
How are life insurance premiums calculated?
Premiums are calculated based on factors like age, gender, medical history, occupation, lifestyle habits (like smoking), and the amount and type of coverage you choose.
Can I buy life insurance if I have a pre-existing condition?
Yes, but it may affect your premiums or your eligibility for certain policies. Insurance companies consider the risk associated with your health condition before determining your premiums.
What is a beneficiary?
A beneficiary is a person or entity you designate to receive the death benefit from your life insurance policy in the event of your death.
Can I have more than one life insurance policy?
Yes, you can have multiple policies from the same or different insurance companies. This is known as “layering” and allows you to customize your coverage to meet different needs at different stages of your life.
Can I change my life insurance policy after it’s issued?
It depends on the type of policy. Some aspects of a term life policy can be modified, while whole life policies often offer more flexibility, like increasing the death benefit or changing the premium payment structure.
What happens if I miss a premium payment?
If you miss a payment, most policies offer a grace period, typically 30 days, during which you can pay the premium with no penalty. If you don’t pay by the end of the grace period, your policy could lapse.
Does life insurance provide any benefits while I’m still alive?
Most term life insurance policies only provide a death benefit. However, some term and many whole life policies have “living benefits,” like the ability to accumulate cash value or access to the death benefit under specific circumstances, such as terminal illness.
Is life insurance through work enough?
Life insurance provided by employers, often known as group life insurance, may not provide sufficient coverage for your needs, especially if you have dependents or significant debts. It’s also important to remember that coverage usually
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