It’s important to learn about the ins and outs of life insurance before purchasing a policy. Understanding how it can be beneficial and the types available can drive your decision-making process. For most people, life insurance can offer peace of mind if they secure the right coverage. Discover how life insurance works, so you can plan for the future and help to financially protect your loved ones.
What is Life Insurance?
Essentially, life insurance is a contractual agreement between a person (policy holder) and a life insurance provider, that if the life insured passes away, the provider will pay out a death benefit (lumpsum) to the beneficiaries. Often the policy holder and the life insured are the same person, but there are instances where they aren’t.
In order to maintain life insurance coverage, you will need to continue to pay your premiums. Your coverage and premiums are based on the life insurance provider’s underwriting guidelines. Keep in mind that each provider has different guidelines. The insurance provider will use their underwriting guidelines to consider the information in your application and determine your risk of passing away while you’re covered. This is important since this will increase the probability that the provider will need to pay out the policy.
Types of Life Insurance
Term Life Insurance Versus Permanent Life Insurance
When considering life insurance, you’ll need to choose between term and permanent life insurance. Term life insurance is coverage for a duration of time specified in your policy (typically 10, 15, 20 or term 100 years). At the end of the term, you can decide if you’d like to renew your policy with a new premium which will be based on your current age or allow the policy to expire.
Meanwhile, permanent life insurance is coverage for a lifetime. Your premiums are locked in when you sign the contract for a permanent life insurance policy which means they will never increase despite changes in your health status. Depending on your life insurance plan, permanent life insurance may also have a cash value component which earns interest and increases in value as you pay your premiums.
Traditional versus No Medical Life Insurance
When you’re shopping around for life insurance it’s important to know that you have the option of purchasing either traditional or no medical life insurance. In both application processes, being as honest as possible is critical because if a life insurance provider discovers that you lied on your application then they can reject a claim, and not pay out the benefit.
Traditional life insurance requires a lengthy application process consisting of a medical exam. If you have a chronic health condition, they may also require an attending physician statement (APS) which lists the conditions you’re being treated for and your prognosis. The life insurance provider will use your medical exam to understand your level of risk and determine the plans you can qualify for. Typically, your policy may not be issued for weeks or even months as a result of the time it takes to complete the application process.
On the other hand, no medical life insurance doesn’t require medical exams which means if you aren’t keen on needles then this may be a good option for you. Instead, if you are applying for simplified issue no medical life insurance then the application process usually consists of some medical questions. The life insurance provider will use your responses to these questions to decide what plans you qualify for. In cases where individuals have a chronic illness or are in poor health, no medical life insurance can ease anxieties about the potential to be declined coverage. In fact, guaranteed issue no medical life insurance doesn’t require any lifestyle of medical questions in the application process and applicants are guaranteed coverage at a higher premium.
How to Purchase Life Insurance
Purchasing life insurance is a big decision that can often feel overwhelming. With so many options to choose from, how do you know which plan is right for you? While you can pursue the process independently, working with an insurance broker can be a smart decision. By having an insurance broker on your side, it can go a long way to ensuring you have the right life insurance coverage in place.
They can help you determine the type of plan that could move you closer to your financial goals and help you figure out the amount of coverage you may need. They work with your budget to find appropriate plans that you can afford. They may also guide you during the application process to help increase your chance of approval at a fair price.
The team at Keller & Associates Insurance Brokers have many years of experience helping customers like you find a selection of suitable life insurance options. Our life insurance brokers have one priority – working in your best interests to help you secure the right coverage. With financial protection in place for your loved ones, you can get the peace of mind you deserve. Get in touch and we’ll help you navigate the process of selecting and purchasing life insurance.