Life Insurance Frequently Asked Questions

What is life insurance?

It is a financial resource for your loved ones upon your death. You are required to pay premiums in exchange for a contract which your insurer promises to provide a certain amount of money to your beneficiaries in the event of your death.

What is a beneficiary?

This is the person specified to receive the proceeds of your policy upon your death. You have to choose a beneficiary when you sign up for the policy, but you can change beneficiaries by requesting it with your insurance company.

Do I need life insurance?

It depends on your own circumstances, personally and financially. You can consider buying the life insurance if:

- You are married

- You have dependent children

- You need to support an elderly family member

- You have a need to provide for other loved ones

- You have your own business

- You do not have sufficient money to cover your final expenses

- You believe that your retirement and savings would not be sufficient to take care of your family in an inflated economy

What kind of life insurance is available and which is the best for me?

There are four kinds of life insurance and which to choose depends on whether money is for building up savings to use while you are still alive or is left for your family.

- Term Life Insurance - It is the least expensive and simplest life insurance which does not build cash value and payments are provided in lump sum. It stays in effect for a fixed time period which is normally a set number of years. You will get lower premiums when you are younger and they increase as you age.

- Whole Life Insurance - It is more expensive initially in order to cover raising costs as you get older. Premiums are fixed and it builds cash value on a tax-deferred basis. However, death benefits will reduce if there are withdrawals. It stays in effect for lifetime if you do not cancel your policy.

- Universal Life -Has benefits which are adjustable and flexible premiums. Payments are accumulated and interest is earned and this may cover occasional premiums if you find yourself facing financial difficulties. Cash value is accumulated which may be withdrawn or borrowed but rates are subject to change though they would never fall under the minimum rate which is guaranteed in your policy.

- Variable Life -The policy is tied to financial market performance. Decision is made by you on how to invest your earnings and opportunity is given to you for more rapid cash value accumulation though it is more risky. At any time, you may withdraw or borrow against cash value at any time.

When should I buy life insurance?

It is the best to buy it when you are young and healthy. If you do not plan to buy it until later, you may want to invest your money elsewhere. The money accumulated can be used to buy life insurance policy in the future.

What are the ways my family or I can use it?

- As a savings mechanism to cover your family financial expenses upon your death.

Depending on your policy, it can also be used as:

- Payment for major expenses such as your children college’s fees or new home down payment

- Payment for funeral expenses or estate taxes

Do I need life insurance if I am single?

Ask yourself the following questions and if you answer yes to any of the questions, it is advisable for you to buy it.

- Do you have any dependants?

- Do you have a mortgage/other loans which will fall to a cosigner?

- Are you facing risk of getting any major medical conditions?

- Do you leave enough to cover your funeral expenses if you die now?

How much should I buy?

An amount of 15 to 20 times your yearly income is recommended. Discuss with your insurance agent or financial advisor for further advice.

Will I need to be medically examined to get life insurance?

If you are below 40 years old and buy less than $100,000 in coverage, it is most likely that you are not required for a medical exam. As you age, the likeliness to undergo physical and basic blood and urine tests increases. Part of this is also determined by your health history and insurer’s underwriting guidelines.

Is it possible to insure my parents, children and myself?

Although you may hold life insurance on anyone who you depend on financially, generally, it is better to start consider taking life insurance out on your children when they reach adulthood. Children normally do not need life insurance because main purpose of life insurance is to replace lost income. However, if your financial well-being is contributed by your parents, you may choose to add them in the form of rider to your policy. Otherwise, buy a separate policy to cover them alone.

Should I replace or trade my policy if I already have life insurance?

As your life changes, you may need a new policy or need to adjust your benefits. The changes include:

- Divorce or marriage

- Purchase of a new home

- A birth

- Refinancing of a home

- Health changes

- Retiring early

- Caring for elderly family members

- Career promotion

- Becoming a receiver of an inheritance

Discuss with your insurance agent or financial advisor for the best alternative for your circumstances.

What is "cash surrender value"?

If you give up a policy, you will get this amount of money back from your insurer. The amount of expected cash surrender value is determined by taking your policy’s current cash value, minus any surrender charges, monthly contract charges and outstanding loans which may apply and interest accrued is added back.

How to cut down the costs on life insurance?

- Buy it when you are young

- Only purchase coverage which you need

- Shop around to compare price and coverage of the policies

- Occasionally, you may find yourself paying less for a little more, especially if you go for larger amount of coverage. Find out the rate per $1000 of coverage, which usually reduces once you exceed a certain level.

- Find insurance companies which offer competitive rates for health conditions such as heart disease, cancer or diabetes which usually pushes up the rates. You will get more affordable premiums in the event of you getting the diseases.

- Lead a healthy life by quitting smoking, maintaining an ideal weight and exercising.

- Pay premiums in advance rather than in monthly installments to avoid hidden fees and save money in the long run.

- If you buy a term insurance, get a guaranteed renewable policy so that you don’t have to get a new policy with higher premiums as you age.

Shop around with an unbiased party such as Insurance Centre Online to connect with agents on our network to choose the best life insurance policy for you. Get ready now with the right life insurance.

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