Question 1

What&#8217;s the best type of life insurance to get?

Accepted Answer

Your needs and budget dictate what’s best for you. If you want affordable, short-term coverage, term life insurance is best. But if you want something more long-term that builds cash value but is more expensive, whole life is best.

Question 2

Which types of life insurance generate cash value?

Accepted Answer

Whole life insurance, universal life insurance, variable life insurance, and variable universal life insurance generate cash value. However, depending on the type of policy, the potential cash value will be greater than can be earned by other types. Indexed universal life insurance also generates a cash value, but this is dependent on the stock index.

Question 3

Which types of life insurance offer flexible premiums?

Accepted Answer

Term life and whole life insurance typically have fixed premiums, but universal life and variable universal life insurance allow you to adjust your premium. When you first purchase your policy, the premium is set, but you can choose to pay less or skip a payment if the cash value is enough.

Question 4

How can I improve my chances of getting approved for life insurance?

Accepted Answer

If you are not opting for guaranteed issue life insurance, the insurance provider is likely going to want to do a deep dive to learn more about you before a decision can be made. Almost all life insurance providers look at certain factors during underwriting to assess risk and calculate premiums, including health, credit score, and driving record. 
Here are a few things you can do to improve your chances of getting approved for life insurance:

Increase your credit score
Improve your health (exercise, eat a balanced diet, take vitamins)
Avoid major traffic violations and accidents
Quit or avoid smoking

In addition to increasing your odds of approval, making these changes can get you a lower premium and save you some cash.

Question 5

How do I calculate my life insurance coverage amount?

Accepted Answer

You can calculate your life insurance coverage amount using one of the below methods.

Multiply your annual income by 10
Multiply annual income by 10 and add $100,000 per child 
DIME formula: Add up the total of your financial obligations: debts and funeral expenses, annual income multiplied by the total number of years to be replaced, mortgage balance, and educational expenses for each child. Financial obligations &#8211; existing assets = life insurance coverage amount

Financial obligations may include annual income multiplied by years of income to be replaced, funeral expenses, college expenses, mortgage balance, additional debts, such as credit cards, auto loans, personal loans, cost of services provided by a stay-at-home parent to be replaced, such as child care.  Assets may include savings accounts, college saving accounts, and additional life insurance policies.

Question 6

What can life insurance be used for?

Accepted Answer

Life insurance can be used for the following:

Inheritance
Funeral expenses
Medical expenses
Income replacement
Debts
Savings
Probate
Charity donation
State and federal death taxes

Knowing why you are getting a life insurance policy can help you determine how much coverage you need.

Question 7

Do I need a medical exam to get life insurance?

Accepted Answer

Depending on the type of underwriting required for your policy, you may or may not need a medical exam. For example, if you have fully underwritten life insurance, a medical exam is required depending on your medical history. However, if you have simplified or guaranteed issue life insurance, no medical exam is required.

Question 8

What are basic life insurance policy features?

Accepted Answer

Basic life insurance policy features include the following:

Premium: The annual cost of the life insurance policy
Term: The length of the time the policyholder is covered
Beneficiary: The person or people chosen by the policyholder to receive the death benefit
Death benefit: The amount paid to the beneficiary after the policyholder dies
Cash value: An investment component that builds throughout the policy term and allows the policyholder to withdraw or borrow against the policy.
Rider: An add-on that offers additional coverage, such as accidental death, which pays out an additional benefit to the beneficiary if an accident results in your death

Knowing these basic features can better help you understand your life insurance options and your policy.

Question 9

What are common financial obligations people want to cover with life insurance?

Accepted Answer

When someone purchases life insurance, the common financial obligations they plan to cover with the policy include the following:

Income replacement
Debts (personal loans, auto loans, credit cards)
Funeral expenses
Mortgage
Educational expenses for each child

Reviewing your financial obligations is a great way to determine how much coverage you need.

Question 10

Are there other types of coverage options to consider?

Accepted Answer

If term life or whole life insurance doesn’t interest you, the following options are available:

Accidental death and dismemberment insurance: Pays out a benefit following the death of the policyholder if the death was due to an accident, such as a car accident, or if an accident results in the policyholder losing their limbs, sight, or hearing
Credit life insurance: Pays off the remaining loan balance after you die
Group life insurance: Free coverage offered by an employer during your time of employment
Final expense insurance: Covers the policyholder’s funeral expenses as well as medical or legal expenses. 
Joint life insurance: Coverage provided for two individuals, such as spouses, with two payouts: one after one policyholder dies and a second after both policyholders die.
Mortgage life insurance: Pays off the remaining mortgage balance after you die.

Rather than choose one, you can purchase term life, whole life insurance, and any of the alternative coverages if you can afford it.

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