When going through the process of buying life insurance, many question may arise. You are working hard to find the policy that will best fit your family’s needs because you know that this is a decision that should not be taken lightly. We have listed some of the most common questions surrounding term life insurance so you can be more informed and better equipped to make an educated choice.
If you still have questions after browsing our FAQ, a licensed agent may be your best resource to get the answers you need. If you have a specific question about your personal coverage needs, you can view our live rates chart to find an agent in your area. You can easily access this page and find qualified agents by filling out the short quote form. This will allow us to direct you to professionals that offer the services you need and are knowledgeable about the products you are interested in.
Life Insurance Basics
- 1. What is term life insurance?
- 2. What other types of life insurance are there?
- 3. What is temporary insurance?
- 4. How much life insurance do I need?
- 5. How long do I need coverage?
- 6. Can I renew my policy?
- 7. What happens to the money I have paid into a term life insurance policy at the end of the term?
- 8. Does my spouse also need coverage?
- 9. How can I determine the financial strength of the insurance company?
- 10. How is TermLifeInsurance.com different from other free quote websites?
Lifestyle and Health
- 1. What are the life insurance rate classes and what factors affect this rating?
- 2. Will I qualify for a term life insurance plan if I use tobacco or am a smoker?
- 3. Will I qualify for a term life insurance policy if my health is poor?
- 4. Will my policy ever be cancelled due to a health reason?
Process of Purchasing a Policy
- 1. How long is the application process?
- 2. Do I need to take a medical exam?
- 3. What is the underwriting process?
- 4. When will coverage begin?
- 5. What is the “free look” period?
- 6. Can I apply online?
- 7. Is the application free?
- 8 How often do I need to pay premiums – monthly, quarterly, semi-annually or annually?
- 9. What if I already have a term life insurance policy?
Life Insurance Basics
1. What is term life insurance?
Term life insurance is the most common and most straightforward type of policy. What generally appeals to people is the fact that this type of coverage is the most affordable, the easiest to buy and understand, and it covers temporary needs during the time in your life when you need the protection.
The drawbacks are that it expires and if you outlive or cancel your policy, you do not get anything in return. It is important to remember that this is insurance – not an investment. It should be viewed much like buying car insurance or health insurance. The policy will provide financial protection in the event of a covered incident. When you purchase car insurance, you don’t hope to get in an accident so you get to use your policy. When you buy health insurance, you don’t wish to get sick so you don’t waste money on the coverage. Life insurance should be viewed the same way. It’s there if you need it, but hopefully you won’t.
2. What other types of life insurance are there?
In addition to term life insurance, there is whole life and return of premium, which is like a combination of term and whole.
People may choose a whole life insurance policy because it is permanent protection, meaning it will never expire, as long as you pay your premiums. It also accumulates a “cash value,” which is essentially a forced savings account that you can borrow from for a fee. Whole life also provides excellent estate-planning for people who are worried their estate will be subject to a hefty tax burden.
The major drawback of whole life insurance is that policies are very expensive and not everyone can afford the premiums. If you can afford them and are confident your financial situation is stable enough to pay the high price tag for the long term, shopping around for the right policy is difficult. Policies are confusing and come with some investment risks. Most likely, people can do a better job saving for retirement on their own rather than counting on their whole life investment to pay out more than 4% to 5%. Generally a 401(k) or IRA is a better investment option.
Return of Premium
At first, a return of premium plan seems to be a best of both worlds option. It will pay out a death benefit if you die within the term limits and you get all of your money back if you outlive the term. It is affordable for some – cheaper than whole life but about 50% more expensive than a comparable term life plan. Although you will get back the same amount of money you paid in if you continue with premiums for the entire term, the insurer keeps all of the interest and returns on investments the money made. If you chose a 30 year term, you are essentially giving a free loan for 30 years, without accounting for inflation. This means you will be getting a 0% return on your investment as where investing the savings from a term life insurance policy will more likely yield much better results. Additionally, if you cancel the policy before the end of the term, you only get a small percentage of your money back. For instance, if you cancel after 10 years, you may only get back 9% and if you cancel after 20 years, you may get 35% returned.
3. What is temporary insurance?
Term life insurance is sometimes referred to as “temporary” because the policy only lasts as long as the specified period of coverage. You can liken this to the “temporary” nature of your auto or homeowner insurance, which only provides protection for a set period of time before it needs to be renewed.
4. How much life insurance do I need?
The reason people purchase life insurance is to secure their family’s financial future in the event of their death. As such, you will want to choose a plan that provides enough coverage to cover any immediate expenses upon your death as well as provide continuous income for your beneficiaries until they are financially independent. Some financial planners recommend coverage that is 5 to 10 times your annual income as where others feel 10 to 20 times is more appropriate. This may depend on how young your family is and how long you will have dependents. To more accurately determine your needs, you can use our life insurance calculator or speak to an attorney, financial advisor or other professional.
5. How long do I need coverage?
Generally people want to have coverage for as long as their beneficiaries depend on them financially. If you have a spouse that is a beneficiary, you should think about covering him/her until you plan to retire. If you have children, consider having protection until they are 18-years-old or finish college. If you are concerned about a mortgage, you can choose a policy that will be as many years as you have the loan. Depending on your financial responsibilities and your age, you can buy policies that are guaranteed for 10, 15, 20 or 30 years.
6. Can I renew my policy?
Generally, you can renew most policies for one or more terms, even if your health has changed. However, there may be a premium increase. Be sure to find out if you lose this right to renew at a certain age or what health factors may prevent you from renewing. This varies from company to company, so be sure to find out before agreeing to any terms.
7. What happens to the money I have paid into a term life insurance policy at the end of the term?
When you purchase a policy, you are buying a guarantee from the insurer that if you die within the term of the policy, the insurer will pay a death benefit to your beneficiaries. Some people feel that if outlive the term period, they have wasted their money. However, consider other types of insurance that you purchase, like car insurance. Do you feel like you’ve wasted your money if you don’t get into a car accident? Will you feel like you’ve wasted money if you don’t die before your policy expires?
8. Does my spouse also need coverage?
The need for coverage applies equally to income-earning spouses; however, there are reasons to purchase a policy for a spouse who is not earning a wage. Losing a stay-at-home spouse can lead to an increase in child-care and home-care costs as well as more time the surviving spouse will spend away from work. Additionally, they may have final expenses and outstanding debts. It is generally recommended to purchase at least 50% of the term life coverage for the stay-at-home spouse as for the spouse who primarily earns the family income. Another way to factor this amount is to estimate that a stay-at-home spouse would earn at least $35,000 annually to be replaced.
9. How can I determine the financial strength of the insurance company?
This is easy with TermLifeInsurance.com. When you compare your quotes, the rating from A.M. Best is listed for each life insurance company. This is done with an easy-to-read scale of one to five stars and an A, B, C rating. A.M. Best is the leading provider of rating, news and financial data for insurance companies. You can learn more about the A.M. Best rating system by visiting their website.
10. How is TermLifeInsurance.com different from other free quote websites?
TermLifeInsurance.com differs from other free quote websites because it displays real time rates without you having to enter your personal contact information. This site is constantly monitoring and posting live quotes from a nationwide network of insurance companies. These quotes are displayed in an easy-to-read chart so you can compare the policies and premiums side by side.
This active quote engine does not require any personally identifiable information. This way, you can shop anonymously without being bombarded with high pressure sales calls. You can compare rates on your own time, quickly and easily, so you can make the most educated choice for your family.
When you’ve decided which policy offers the most coverage for the most affordable rate, you can fill out a short online application. Some carriers require a medical exam, other do not. For many, the entire process can be done online from the comfort of your own home.
- No Personal Information Required
- Free Live Rates
- Easy to Read Quote Comparison
- No High Pressure Sales Calls
- Fast Online Application
- Some Carriers Offer No Medical Exam Policies
Lifestyle and Health
1. What are the life insurance rate classes and what factors affect this rating?
Each insurer uses their own criteria to determine their applicant’s health class, which can vary from company to company. The information below gives you a general idea of how some insurers may decide which rating you would be approved under. Because of the large amount of qualifying criteria for each category, it is important to shop around to find the best rate. You may qualify for “preferred plus” by one company and get the lowest possible premiums, as where another company may have you classified as “preferred” and thus charge a higher premium. Only about 3% of applicants are denied coverage.
If you fall in the preferred plus category, you will enjoy the cheapest rates. About 21% of applicants are considered preferred plus. This rating does come with the most stringent standards. Your health and lifestyle should exhibit the following:
- ideal weight/height ratio, with a BMI of about 25 or less
- excellent health history
- no serious or chronic illnesses or ailments
- LDL cholesterol level that is less than 220 and good LDL/HDL ratio of 5.0 or less
- blood pressure readings that average 140/85 or less
- no family history of cardiovascular disease or certain cancers before age 60
- no tobacco use or have been nicotine free for over five years
- never treated for drug or alcohol abuse
- no high-risk activities like rock climbing, sky diving, hang gliding, etc.
- no high-risk occupational activities like mining or offshore drilling
- excellent financial standing with no recent bankruptcy
- clean driving record – no DUIs or reckless driving convictions in the last five years
- no more than one or two moving violations in the past three years
To be considered for the preferred category, you should have an elevated blood pressure of approximately 145/90 or less. Your LDL cholesterol is around 260 with a LDL/HDL ratio of 5.5. Approximately 48% of applicants fall into this category.
To qualify for standard plus, your elevated blood pressure should be about 150/92 or less. Your LDL cholesterol can be 270 with LDL/HDL ratio of 6.5. About 27% of applicants are rated in standard plus or standard categories.
To be in the standard category, your elevated blood pressure can be 150/95 or less. YourLDL cholesterol levels can be 300 with a LDL/HDL ratio of 7.9. Both asthma and depression are acceptable in the standard category.
2. Will I qualify for a term life insurance plan if I use tobacco or am a smoker?
There are many insurers who offer affordable rates to people who use tobacco or smoke cigarettes. It is important to share this information when comparing quotes and applying for coverage. Companies differ in how they rate the variety of nicotine and tobacco products. They also may have different standards depending on how often you use or how long ago you quit using such products. One insurer may be more lenient than others and offer more affordable rates. For example, one carrier may not count an occasional cigar or electronic cigarettes as tobacco use as where another company does. You can anonymously enter your health information to compare rates to find out what options are available to you.
3. Will I qualify for a term life insurance policy if my health is poor?
Many companies will offer affordable rates to people with less than perfect health. This is why it is important to shop around and compare rates. TermLifeInsurance.com makes this easy with their live quote engine that requires no personal contact information and displays real time rates in an easy-to-read chart.
Additionally, you can explore your options for no medical exam term life insurance policies. This means that you do not need to have a health check up in order to qualify for coverage. It is possible to find insurers who will approve people with histories of cancer, diabetes or heart disease. We work with a nationwide network of life insurance providers, many who specialize in working with people with less than perfect health.
4. Will my policy ever be cancelled due to a health reason?
No. Once a policy is issued, it cannot be cancelled by the insurer during the policy period. This is true as long as premiums are paid and there was no misleading or inaccurate information on the application. However, a policyholder can choose to stop paying premiums at any time and the coverage may be cancelled.
Process of Purchasing a Policy
1. How long is the application process?
The application process only takes a few minutes. After reviewing our live rates just click on the “Apply” button and follow the application process. While some life insurers require a signature on paper many of our life insurers now offer e-signature.
2. Do I need to take a medical exam?
In order to obtain the lowest premiums, a medical exam is required.
3. What is the underwriting process?
The underwriting process includes a review of the applicant’s background information and medical history. This information allows the insurance company to determine what rate class the applicant qualifies for.
4. When will coverage begin?
Coverage begins when the application is approved and your first premium has been paid. This can happen in as little as 24 hours with medically underwritten policies.
5. What is the “free look” period?
The free look period is a policy provision that allows the policyholder to examine the contract for a set number of days. If the policyholder decides they do not want to purchase the policy, the contract may be cancelled and the entire premium will be refunded by the insurer. The amount of time allowed for the free look period varies from state to state. Generally, the range is 10-20 days and this begins as soon as the policyholder receives the policy.
6. Can I apply online?
Yes. This is the fastest and most convenient way to apply for coverage. Some insurers even offer e-signature.
7. Is the application free?
Yes. There is no charge for the application and no obligation to buy a policy.
8. How often do I need to pay premiums – monthly, quarterly, semi-annually or annually?
How often you want to pay premiums is decided between you and your insurer. Usually, there are cost savings when paid annually.
9. What if I already have a term life insurance policy?
If you decide a policy that you’ve found on TermLifeInsurance.com is more suitable for your personal situation, you can replace your exsisting policy with a new one. However, you should not cancel your existing coverage until you have received, reviewed and accepted your new policy. You should complete all necessary steps so that your new policy is enforced before you cancel your old policy. Be sure to consult a legal or tax advisor to learn off all possible tax consequences or penalties if you have any cash value built in your existing plan. Additionally, new plans have contestability and suicide period provision.
You can shop for term life insurance and view live rates with no obligation to purchase a policy. You do not need to enter any personally identifiable information, so you can check any time to see how your current policy stacks up against others nationwide. You may find better coverage and huge savings on your premiums. To see how your current policy stacks up against today’s rates, you can compare live quotes now.