Life Insurance FAQ

life insurance faqs text overlaying image of a blue background with a question markDo I need life insurance?

No, not always, but it’s usually a good idea. With that being said, if you don’t have any children or other people who depend on you financially, you might not need life insurance. Life insurance is meant as a safeguard for your loved ones. So, they can replace your lost income, continue paying their mortgage, cover funeral expenses, etc. But you can also use it to protect a business partner or leave a legacy behind. So, it’s something to consider even if you don’t have a young family and don’t think you “need” it.


How is my life insurance premium determined?

Rates for premiums are usually based on things like age, gender, BMI, health (including whether or not you smoke). As well as whether or not you do high-risk jobs or activities. Essentially, the older, riskier, or unhealthier you are, the higher your premiums will be. You can do things to lower your premium like quitting smoking or purchasing a policy earlier in life.


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What if I miss a premium payment?

The standard grace period for a missed premium payment on most policies is 31 days, during which your policy will not be terminated for non-payment. In most cases, your insurance company will cancel your policy if the premium is not paid within the grace period. You can also choose to pay your premium for a permanent policy directly from the cash value of the policy (if you have enough cash value available).


What is a contestability period?

Life insurance policies typically have a contestability period of two years beginning on the date of purchase. If your insurance company discovers during this time that you misrepresented or failed to disclose material information necessary for them to issue the policy, they have the right to cancel the policy. So, if you pass away during the first two years of having your policy, and your insurance company finds that you had and knew about a condition you did not put on your application (or if you were a smoker and said you weren’t etc.), they will not pay your death benefit to your beneficiaries. That means it’s best to be completely honest when you enroll to avoid this situation entirely.


What is the “return of premium” feature?

If you choose a term life policy, your policy will only be in effect for a chosen number of years. In most cases, if you do not die during your policy’s term, you will get neither the policy’s death benefits. Nor get back the premiums you paid. But if you choose a term policy with a return of premium feature. Your insurance company will return all or a portion of the premiums you paid if you don’t die during your policy’s term. To get this feature, you’ll need to pay a higher premium and stay up to date on your payments.


What are accelerated death benefits?

Accelerated death benefits are a rider that most insurance companies allow you to purchase. With this rider if you are diagnosed with a terminal illness, a policy may allow you to receive a substantial portion of the death benefit while you are still alive. You will be able to use the money for whatever medical care you need or final wishes you have. If you use your accelerated death benefits, your policy’s death benefit will be reduced by the amount you withdraw in accelerated death benefits, plus interest.


How much life insurance do I need?

You should consider the current and future financial needs of your loved ones and the amount of money you have saved when deciding how much life insurance to purchase. Think about the following things your family will need money for after you pass away:

  • Immediate needs – funeral costs, medical bills, taxes
  • Ongoing needs – mortgage payments, utilities, food
  • Future needs – college tuition, retirement funds

Take a look at your combined income, savings, income-generating assets, and investments. Then subtract from all of those assets your debts. So, you can get a good idea of how much your family will need. 


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How much coverage can I buy?

This question is mostly part of the financial underwriting process. Meaning insurance companies will look at your financial worth when deciding how much coverage you will be allowed to buy.

Here’s a simple way to figure out how much coverage you can get:

  • Up to age 40: You can buy 35 times your yearly income.
  • 41–50: You can buy 25 times your yearly income.
  • 51–60: You can buy 20 times your yearly income.
  • 61–70: You can buy 10 times your yearly income.
  • 71–80: You can buy 5 times your yearly income.


What is a graded benefit life insurance policy?

A graded benefit A life insurance policy is a type of life insurance that usually offers a limited death benefit for a certain amount of time, usually the first few years of the policy. Over time, the death benefit slowly goes up until it reaches the full amount set by the policy.

Most of the time, graded benefit policies are made for people who may have trouble getting traditional life insurance because of their health or other risk factors. They are often marketed to older people or people who already have health problems, and they may be given out without a medical exam or questions about health. 

With a graded benefit structure, the insurance company accepts the higher risk of insuring people who are more likely to die in the first few years of the policy. This risk is lessened by the small death benefit.

For example, if you buy a $10,000 policy, your insurance company will pay 40% of that $10,000 benefit if you die in the first year, 75% in the second year, and the full amount starting in the third year.


What is the underwriting process for life insurance?

The life insurance underwriting process is how companies decide whether to approve, deny, or raise your rates on a policy based on your medical exam (if needed), answers on your application, and search results from databases (Medical Information Bureau, prescription database report, and Motor Vehicle Report).


How long will it take to get approved for my life insurance policy?

That depends on the insurance company you chose and the kind of coverage you want. In general, approval for a traditional, fully underwritten policy can take anywhere from two to eight weeks. But approval for a no-exam or final expense policy that doesn’t require the underwriting process can be given anywhere from a few minutes to around two weeks after you apply. Your policy will usually be sent out around a week after it is signed.


Do I need to undergo a medical exam to get a policy?

Yes, you will have to undergo a medical exam if you want a traditional life insurance policy. This is because if you die soon after getting a large policy, the insurance company will have to pay out millions in some cases. They improve their chances by giving you an exam, which helps them figure out how risky you are to insure. 

There are, though, a few insurance companies that will give you up to $1,000,000 in life insurance without making you undergo an exam. There are also policies like final expense policies that have smaller death benefits, but are approved based on a simplified issue, which means you don’t have to undergo a medical exam.


What are risk classifications?

Risk classification, which is also known as health classification, is a way for the underwriter to figure out how much of a risk you are to the insurance company. A basic idea is that the riskier you are to insure (if you are less healthy, have a dangerous job, engage in risky hobbies, etc.). The more you will pay in premiums. If you take less risk, you will spend less. Since it is impossible to know for sure how long a person will live, the carriers group people with similar risks together and figure out their rates. We call these groups “classes.”


Which is better: term life insurance or permanent life insurance?

When compared to term life insurance, whole life insurance has a number of benefits, such as the fact that it is permanent, that it includes a cash value investment component, and that it gives you more ways to protect your family’s financial security over your lifetime. Because of these features, it is a better choice for a lot of people. If you only care about getting the biggest death benefit for the amount of premiums you pay, though, term life insurance might be a better choice.


What are life insurance riders?

Life insurance riders are extra features you can add to your policy to improve it or tailor it more to your needs. Some riders are built into your policy’s coverage and don’t cost anything extra. It’s important to remember that riders are bought at the same time as the policy and cannot be added later. Here are a few common riders you can add to your policy:

  • Waiver of premium
  • Disability income
  • Term conversion
  • Accelerated death benefit
  • Child’s term life
  • Accidental death benefits
  • Return of premium (ROP)


Can I have more than one life insurance policy?

Yes, you can, just make sure it’s worth it to you to be paying more than one premium. For example, if you just had a baby, you may want to add to your current policy from work or get another term life insurance policy. The insurance company cares more about how much your total death benefit is than about how many policies you have. This means you can have as many policies as you want. But typically, you can’t have more than 35x your income.


How much is life insurance?

The price of life insurance varies depending on a few factors like age, gender, health and lifestyle. If you would like a more specific estimate of life insurance for you, you can check out our guide to life insurance by state here. You can get a real quote you can enter your zip code in the bar below to see your options.

If you have any more questions about life insurance please feel free to ask! Our local life insurance agents are ready to answer all of your questions and compare options for you. Don’t worry about getting the wrong life insurance plan, not enough coverage, or anything else. Let an EZ agent help you by calling today! 877-670-3560

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About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.