Essential Q&A for Those About to Buy Life Insurance

Q. Who should I buy term life insurance from?

A: First of all, there are lots of reputable term life quoting sites out there that offer instant quotes for many carriers as well as helpful advice, so we're not here to slam the competition.

But for those who want to shop without fear of intrusion, there are lots of sites which seem to offer live, instant quotes, but don't.

When you submit your information hoping to get a quote, your information is actually sold to several insurance agents, and this is something you have no control over.

Anyone who is willing to pay for the lead gets it. Do you know which sites offer instant term quotes and which ones don't?

If not, and if you do not want to be hounded by 5 or more life insurance agents for the next month, then you may want to end your search here.

We will never sell your information to anyone at any time for any reason. If you want to remain anonymous, no problem with that either. We understand that you may just be curious without being ready to buy, so we do not use form validation.

There is also one more reason, and that is that we want your business and the only way to ensure we earn it is to provide you with the best possible policy at an affordable price.

Q: What are the eligibility rules for term life applications?

A: In order to enroll, you must have insurable interest. Insurable interest is where you have a vested interest in someone’s life as they support you financially and their loss would result in significant financial hardship. When any policy is taken out, there must be some party as insurable interest involved, such as your partner, kids, grandchildren or yourself.

In some circumstances there could be other people who qualify for insurable interest. Business owners may have a key person who is integral to the job and without whom the business would lose significant revenue.  They could qualify as an insurable interest.

In this instance the policy would be categorized as key man insurance or key person insurance. Partners or spouses will often insure each other as insurable interest exists between the two individuals.

Secondly, enrollees must qualify medically, usually though taking the paramedical exam and answering a health questionnaire.

Thirdly, enrollees must be able to afford the premium repayments. Anybody of any age can apply for term life, provided they fit these three criteria.

Q: Is it always necessary to submit medical tests upon application?

A: No, there are alternatives such as no exam life insurance, which is increasingly popular among those with pre-existing conditions and those who, for other reasons, do not wish to take the paramedical. It is offered by most major insurers nowadays.

No-exam and guaranteed policies are more costly than basic life insurance, but the application process is quicker and the process is less stringent. Not everyone qualifies for this type of policy. Certain regulations still apply, but if you feel you'll be refused regular insurance for any reason, it's a good idea to get a quote on no-exam, to give you the benefit of the doubt.

The most common type of guaranteed life insurance is the group plan, although individual plans are available in most states. HIPAA eligible individuals also qualify for group policies provided they meet the enrollment criteria.

Applicants can expect to wait up to three months for group life insurance to process. HIPAA eligible people may have to wait for the expiry of their COBRA benefit before their policy is activated.

One thing to think about if you decide to go with a traditional term policy is that the paramed exam is basically a free head to toe physical.

Guaranteed issue life insurance is also popular, but this product will require a written medical evaluation prior to acceptance. The downside of these plans is that they have fewer benefits on offer. They are also more expensive than regular life insurance. Death benefit may be accelerated and you may not be able to convert your policy.

The paramedical exam could be seen as a free physical examination, which could be beneficial on many levels. If you are in reasonable health, you can save money and get better coverage with a regular plan.

Q: How do insurers price term life insurance?

A: Term life insurance is priced according to certain variables such as age, gender, health, coverage amount, location, length of term and additional riders. In general, a good amount of coverage can be purchased for less than $40 per month, but this is subject to your application criteria.

Q: How much is my application affected by my health status?

Aside from age, this is the second most decisive variable in a policy application as far as rates are concerned. ‘Standard’ policies are the most popularly applied for. Preferred best is the policy that we would all ideally wish for, but only certain individuals, with an excellent health status qualify for this category. Most providers assign five categories for health insurance pricing:

• Tobacco: Most providers class all tobacco use under one category, niche plans aside. Any tobacco user can expect to pay considerably more for their life insurance premiums.
• Standard: Most applicants fall into this category, as it suggests a normal level of health.
• Standard Plus: Height and weight restrictions apply, some medication allowed
• Preferred: Much higher than average health status
• Preferred Best: For those lucky enough to be in exceptional health

Q: Are rating classes flexible, depending on varying health status?

A: Rating classes can be revised pending a change in lifestyle and health status. If you stop drinking, smoking, improve blood pressure or cholesterol or manage to improve your weight, you can submit a request for a better rating class.

Q: Should whole life insurance be considered as an option?

A: Term life insurance is by far more popular and affordable, and is appropriate in most cases. While we don’t actively promote either, we will be happy to discuss the benefits of each. Whole life comes with an investment product, and has the benefit of giving permanent coverage.

Term life will insure you for a certain period, with most policies giving you the option to convert your plan to a whole life plan without having to submit evidence of your insurability status. You must have sufficient funds to pay for the coverage and usually need to be below the age of 75 in order to apply for conversion.

Q: At what age is it best to buy term life policies?

A: The younger you are, the better it is! If you wish to qualify for the optimum rating class, it is best that you enter into a policy when you are younger and healthier. Even standard plans are highly affordable for younger generations.

Q: Which term length is best?

A: Term life insurance is usually sold in increments of five years, at between five and thirty years' term.

Longer term lengths will be more expensive, but greater savings will be made overall as compared to renewal rates with shorter plans. A ten year plan can work out cheaper than a term of half that, as underwriting costs take several years after the issue date to retrieve.

Q: Which insurance provider offers the best value for money?

A: The best rate depends on your requirements and your statistics. No company can claim to be cheaper than another. This is the reason to research your policies before making a purchase. Speak to agents and submit your details to internet quote engines. Compare the rates on offer and consider the advice of an insurance professional. This will give you a good grounding for a lengthy payment plan and help you make potentially large savings.

Q: Would I be eligible given the condition that I'm not getting younger anymore?

A: Very few people are 100% physically fit. Even those diagnosed with pre-existing conditions, may still be eligible for term life insurance, despite what some agents may say.

These policies have to be flexible in order to cater to such a wide section of society, and therefore providers have much looser parameters than previously. It's all about the balance between risk and cost, and finding a carrier that will accommodate your needs.

Q: Can a policy be cancelled?

A: You are not bound to a life insurance policy and can cancel at any time. Once you stop making payments, your policy will contractually end.

Q: What if I have an existing policy?

If you have been paying for life insurance for some time, it is a good idea to shop around and see what the current situation is, financially. The situation has changed in the last few years, with the internet dominating the market and as a result, favorable premiums are more accessible to customers. These days it's easy to compare up to forty providers in a couple of hours, whereas once people would shop with maybe four or five. This way you'll be surprised how much you can save, particularly over a 30 year term.

Q: How much coverage should I apply for?

A: This is completely down to the individual and their requirements. Think about your mortgage repayments, your kids' college fees, your final expenses and what 5 years' salary is worth.

Factor this in with your budget and you will usually arrive at some kind of decision. It will usually come down to a balance of face amount, versus policy term. Many feel that, due to the increased risk of death as you age, the longer term with smaller face amount makes most sense.

 

A 30 year term costs far less than three consecutive ten year terms. As well as this, your term policy may not be renewable if you have spent the last term in poor health conditions. These should all be considerations.

 

Remember that you will need to prove your net worth when applying for significant amounts of coverage. You may need to provide documentation as proof of this before your policy is activated.

 

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