10 Frequently Asked Questions About Life Insurance

Not many people are comfortable thinking about or planning for their deaths. Life insurance is the best way to handle the expenses surrounding death and the financial needs of those you leave behind.

1. Why Buy Life Insurance?

There are four important reasons to purchase life insurance:

• Final Expenses. Medical bills, funeral expenses, and burial costs can add up quickly and usually cost thousands of dollars. Few people want to face their own mortality, but a life insurance policy will help your family handle these expenses after you are gone.
• Mortgage Protection. In the event of death, life insurance policies may be used to pay off outstanding balances on mortgages.
• College Funding. In the event of your death, your life insurance policy can help to pay for your children’s education.
• Income Replacement. When a couple plans to exist on two incomes, and the income is reduced to one because of death, life insurance policies can help. The death benefit paid to your spouse can help maintain the lifestyle to which she is accustomed.

2. Who Needs Life Insurance?

Everyone can benefit from a life insurance policy. Life insurance policies help pay for expenses that remain after a death. Almost everyone will acquire some type of medical expenses upon death. The same applies to funeral expenses.

Beneficiaries are not always family, spouses, or children, so these life insurance policies do not exclude single individuals. You may choose whomever you want to entrust with your life insurance benefit to help pay for expenses and obligations after you are gone.

3. When Should I Purchase Life Insurance?

Death can come at any time. Purchasing life insurance as soon as you are able is the best time to do so. Many people find reasons to put off purchasing life insurance, believing that there is always more time to pick up a policy. That time is not always there.

4. What Are the Various Types of Life Insurance Plans?

There are several different types of life insurance plans. In order to get the best one to fulfill the needs that you have established, you should research what plans insurance companies offer and the costs and benefits associated. Types of life insurance include:

• Whole Life Coverage
• Universal Life Coverage
• Limited-pay
• Endowments
• Accidental Death

5. Is It Expensive to Purchase Life Insurance?

Different life insurance plans have different price tags. For many plans, there are premiums that you pay. In Whole Life Coverage plans, for example, premiums are set and due annually. Universal Life Coverage offers more flexibility in the payment of premiums. It is best to shop around and compare price and coverage options.

6. Is There Tax Involved?

Before payment is disbursed to the beneficiaries, there is a tax taken out. If the policy payout is forwarded to an estate, the funds usually go through federal and state inheritance taxes.

7. Can I Change My Insurance Policy Once I Purchase It?

Yes. Insurance companies are aware that situations arise that may require you to change the way you handle and plan things. Beneficiaries can change, as could the amount that you wish for your life insurance policy to be worth.

8. Who Can I Designate as Beneficiary?

You can assign anyone to be your beneficiary. If you choose, you can have an individual, multiple people, a charity, a trustee, or your estate listed as your beneficiary. In the event that you don’t have a beneficiary listed, any death benefits paid out will go to your estate. If you are going to name a beneficiary, it is important to remember that you need to be clear about who receives the benefit and what he or she will receive.

9. How Much Life Insurance Should I Purchase?

Gather all of your financial information and begin sorting through what expenses may remain once you are gone.

For those who do not have family or dependents to care for, an insurance policy that covers the funeral expenses is adequate. For those with family and dependents, it is important to calculate all of the expenses that you will be leaving behind and the expenses of your dependents.

10. Can I Buy Policies for More Than One Person?

Joint or group policies are available for those who want to have one plan that will cover more than one person. As with standard single policies, working with an insurance agent is the best way to establish what needs to be done upon the cashing of the policy.

For more information, visit the website for the Insurance Information Institute at www.iii.org.