- Life Insurance
A life insurance agent can make the process of buying life insurance much easier. They can find you the best deals and ensure you’re completely covered. This is important, as close to a third of all Americans admit to lacking confidence about the insurance application process and can’t answer many basic questions about their needs and the coverage they seek.
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But what sort of questions should you be asking your life insurance agent and what answers can you expect in reply?
Who is Offering the Insurance?
Does your life insurance agent work on behalf of a single company or multiple companies? What are the names of those companies, and can you verify their legitimacy using a simple Google search?
No two insurance companies are the same. Many policyholders focus their attention solely on the price of the policy and the coverage it provides. But the company’s history of payouts and its reputation also comes into it. A cheap life insurance policy is pointless if the company has a reputation for not paying out.
Fortunately, it has never been easier to determine the legitimacy of an insurance company and a simple online search is all you need.
What Are the Guarantees?
The numbers you need to focus on the most are the guaranteed ones. This tells you how much a permanent policy will pay regardless of market changes. The projected figures are subject to change, but the guaranteed figures will provide you with some stability and assurances over the term of the policy.
Will It Adjust for Inflation?
It’s important to make sure the grant you receive will be paid after adjusting for inflation, because what seems like a lot of cash today may be worth much less in the future after years or decades of inflation.
$250,000 can seem like a huge sum of money today. If anything happens to your spouse and they are the breadwinner, this money can help to clear the mortgage and bolster your savings, securing you for years to come and allowing you to prepare for a future without them.
In forty years, however, $250,000 may count for very little. As an example, let’s imagine that you took out an insurance policy for your spouse in 1980 and they have just passed away. That policy was $100,000 at the time and this was a huge sum, enough to buy you two houses or 13 cars based on the national average rate.
Today, after accounting for inflation, that sum would be over $315,000, which is also a lot of money (although not quite enough for two houses). However, if the policy didn’t adjust for inflation, you’d get $100,000, which simply isn’t enough to cover an individual for life, especially if they have just lost most of their household income and still have a big mortgage to repay.
What Happens in the Future?
What happens to your policy as you age, can you switch your term policy to a permanent one, what options do you have, and can you save any more doing this? The older you are, the more you will pay, and by quite a considerable amount.
What costs you $100 a year when you’re in your forties could cost you $500 a month when you’re in your seventies. You’re a higher risk, and because life insurance is based on probability, you will be expected to pay a lot more.
Are You Covered if You Become Ill or Disabled?
Life insurance is designed to support your family in the event of your demise. However, you have your own wellbeing to think about as well. What happens if you become disabled or fall ill—what happens if you can no longer work and have growing medical bills to worry about?
This could place a big financial burden on your household and it’s something that you need to prepare for. Ask your life insurance agent if you will be covered in the event that you fall ill or become disabled. And, if so, what will that cover provide?
Many life insurance policies offer some kind of disability or illness cover, but this can vary greatly from policy to policy. More importantly, life insurance companies have their own definitions of what constitutes “disabled”. For some, it’s the inability to perform specific actions; for others, it’s about being unable to perform any actions at all.
What Happens if I Can’t Pay the Premium?
Life insurance providers are not as forgiving as banks and creditors when it comes to missed payments. They won’t chase you down, give you multiple chances, and then offer payment plans and other assistance programs to get those payments started again. In many ways, the ideal outcome for a life insurance company is if you meet the payments for twenty years and then stop.
That way, they have secured a sizeable profit without the risk of a payout. And if you need to resign, you’re now much older and will, therefore, have higher premiums to repay.
Discuss this potential issue with your life insurance agent in advance. Ask about grace periods and automatic premium loans; the former will give you a break to allow you to find your feet again, the latter will allow you to borrow against the policy.
What if Your Health Improves?
If your health gets gradually worse, your policy shouldn’t change and that’s a good thing, otherwise, life insurance would be pretty pointless. However, if you’re not in the best of health when you take out the policy, but this soon improves, there’s a chance you could get a discount.
Ask your life insurance agent what your options are in the future if your health or your situation changes. You could get a new underwriting if you lose weight, stop smoking, stop drinking or remove some other negative trait that initially increased your premiums.
Summary: Keep the Questions Coming
Life insurance agents are there to answer questions and support you in whatever way they can. Obviously, they benefit more if you don’t take up too much of their time, agree with the first policy they offer you and quickly sign on the dotted line. But you’re not there to make their life easier, you’re there to make a commitment that will impact you for years to come, one that will continue to provide for your family after you’re gone.
It’s important, therefore, to take your time and get everything off your mind. Don’t worry about sounding stupid and asking a question you feel you should know the answer to. You’d be surprised at how little the general population knows about life insurance and how common the most basic of questions are.
The most important thing is that you get the answers you seek and the policy you need. If that means asking a string of questions and making a life insurance agent wish they’d never met you, so be it!