Frequently Asked Questions about Life Insurance
1) What is the difference between Term Life insurance and Whole Life insurance?
Deciding whether to purchase whole life or term life insurance is a personal decision that should be based on the financial needs of your beneficiaries (those who will receive the funds after you die) as well as your financial goals. Some people argue that the money one would spend on whole life premiums could be better used in an alternative investment vehicles while others argue that a whole life policy is an investment vehicle worth funding on its own.
I typically recommend term life products to families and younger couples and recommend whole life for young children or older adults who have a substantial cash reserve they are looking to invest or protect.
Here are some of the main features of term and whole life insurance. Click HERE to check out the Life Glossary to better understand terms used here.
Term Life Insurance:
Whole Life insurance:
Disclaimer: This comparison is for informational purposes only. Not all carriers or all products may meet the above specifications. Please consult with me directly for product details and your specific situation and needs.
2) Should You Convert Your Term Life to Whole Life Insurance?
Most term life insurance policies allow you to convert your term policy into a permanent life insurance policy such as whole life insurance. Is this the right thing to do? Some of the reasons it may be a good idea to convert your term policy to a whole policy include:
3) How do I purchase a policy?
First, an application is sent for your signature. At the same time a medical examiner contacts you to set a convenient time at your home or office to take blood and urine. On larger amounts or older ages, a resting EKG or blood pressure check may be required. It is important to give blood after a 12 hour fast so it is better to do the exam in the morning. Once the insurance company receives the exam results, the application, and any additional doctors records that the insurance company obtains at their expense, we receive an offer. Every expense in this process is paid for by the insurance company!
4) How are companies and rates selected by our agency?
A. M. Best is the industry's most recognized insurance rating organization.
A.M. Best uses a letter grade to rate companies overall strength and solvency. Our agency uses only insurance companies that have at least an "A" rating with A. M. Best The top three ratings with A. M. Best are:
A++ Superior
A+ Superior
A Excellent
5) Are these stable companies?
Every company our agency uses has a strong financial rating as determined by the various rating agencies such as A. M. Best, Standard and Poor's and Moody's Bond Ratings.
6) How long does this process take?
If no doctors records are ordered, 3 to 4 weeks. If doctors records have to be obtained, 4-7 weeks since we are dependent on the promptness of the doctor.
7) What is a 'rating' or 'rate'?
A rating is essentially the amount of risk an insurance company is willing to take on based on several factors relating to your health. Insurance companies are learning more and more about identifying their risks. Since cancer and cardiovascular disease are the two leading causes of death where the risk can be lessened by the individual, companies zero in on these risks. Those that qualify for a "super preferred" or "Preferred Plus" would be less at risk, then the "preferred", then the "standard" and down from there. Companies look at height and weight, blood pressure, cholesterol (good and bad), family history (relatives dying before 60 of CV disease or cancer), personal history of cancer and CV disease, and smoking history in addition to your health history, current health, prescription record, and motor vehicle records.
8) If I apply and don't get the rate I applied for, what happens?
The company many times will make another offer. If our office thinks we can get a better offer from another company, we will ship your file over there.
9) What if I don’t fit into any of these categories?
If an individual has one or more of these risk factors, they may still qualify for preferred or standard. If even standard is out of the question, there are some highly rated companies that will still take the risk. Insurance companies fear the unknown. If they can identify what those risk factors are, there is a greater chance they will offer a policy. For example, someone just finds out he has a blood pressure problem and his doctor is trying different medications to bring it under control. Until the blood pressure is under control, this remains an unknown to the insurance company. Once under control it could be a preferred with some companies, standard to others.
10) Do insurance companies treat all tobacco users the same?
Cigarette smokers that smoke less than a pack a day have a chance to get a non smoker rate with one company. Other companies treat pipe smokers, chewers, and cigar smokers as non smokers. Still another company gives almost all tobacco users a non smoker rate for the first 3-4 years! This same company gives a preferred rate if you use tobacco less than three to four times a year. They look at the amount of nicotine in your system.
11) What if an instant quote is not right for me because of my special medical history?
Using the same diligence we use to find the lowest preferred rates for our customers, we will prepare a custom quote. Of course we need to know the medical condition, its duration, treatment and prognosis.
12) Can I apply at my age?
Our agency works with individuals 1 to 85! A few companies provide policies to age 85 for term, second to die or Disclaimer insurance. Occasionally Disclaimer is available past 85.
CAUTION ABOUT RATES!
Please read this section before you apply for insurance expecting a particular rate. Almost all companies have a super preferred, preferred, and standard rate. Some companies only have 10-15% of their applicants come back with the super preferred. Others are less strict and that percentage is closer to 50%. The following are some general guidelines for super preferred: (unisex)
Sample Height to Weight Ratios
5’1”/160lbs
5’5”/180lbs
5’10”/210lbs
6’0”/220lbs
Deciding whether to purchase whole life or term life insurance is a personal decision that should be based on the financial needs of your beneficiaries (those who will receive the funds after you die) as well as your financial goals. Some people argue that the money one would spend on whole life premiums could be better used in an alternative investment vehicles while others argue that a whole life policy is an investment vehicle worth funding on its own.
I typically recommend term life products to families and younger couples and recommend whole life for young children or older adults who have a substantial cash reserve they are looking to invest or protect.
Here are some of the main features of term and whole life insurance. Click HERE to check out the Life Glossary to better understand terms used here.
Term Life Insurance:
- Purchased for a specific time period, such as 5, 10, 15, or 30 years, known as a ‘term’.
- The term must be renewed if you want coverage to be extended beyond the term length (renewal can sometimes be pricey).
- Easiest and most affordable life insurance to buy.
- Pays benefits only if you die while the term of the policy is in effect: if you die within the ‘term’ (10 years, 15 years, etc.), then your beneficiaries will receive the ‘death benefit’ from your policy.
- You typically must qualify with a health examination. Can sometimes be purchased without a medical exam, but at a higher cost
- Can be used as temporary additional coverage with a permanent life insurance policy.
- Can be converted to whole life insurance.
Whole Life insurance:
- Initially has more expensive premiums than term life insurance, but can potentially save you money over the life of the policy if in force for a considerable number of years.
- Covers you for your whole life.
- Provides a ‘cash value’ accumulation that builds during the life of the policy that you withdraw out of the policy at any time (with some exceptions). Policies typically take 12 to 15 years to build up a decent cash value.
- You typically must qualify with a health examination. Can sometimes be purchased without a medical exam, but at a higher cost.
- Can be a good choice for estate planning.
Disclaimer: This comparison is for informational purposes only. Not all carriers or all products may meet the above specifications. Please consult with me directly for product details and your specific situation and needs.
2) Should You Convert Your Term Life to Whole Life Insurance?
Most term life insurance policies allow you to convert your term policy into a permanent life insurance policy such as whole life insurance. Is this the right thing to do? Some of the reasons it may be a good idea to convert your term policy to a whole policy include:
- Your term life policy is about to expire and you are in your 50s or 60s.
- You want to extend your life insurance coverage, but term insurance may no longer be available or has become very expensive due to your current age.
- You are setting up an estate, or you are concerned about estate taxes.
- You are setting up a trust in your will.
- You need a non-taxable investment option.
3) How do I purchase a policy?
First, an application is sent for your signature. At the same time a medical examiner contacts you to set a convenient time at your home or office to take blood and urine. On larger amounts or older ages, a resting EKG or blood pressure check may be required. It is important to give blood after a 12 hour fast so it is better to do the exam in the morning. Once the insurance company receives the exam results, the application, and any additional doctors records that the insurance company obtains at their expense, we receive an offer. Every expense in this process is paid for by the insurance company!
4) How are companies and rates selected by our agency?
A. M. Best is the industry's most recognized insurance rating organization.
A.M. Best uses a letter grade to rate companies overall strength and solvency. Our agency uses only insurance companies that have at least an "A" rating with A. M. Best The top three ratings with A. M. Best are:
A++ Superior
A+ Superior
A Excellent
5) Are these stable companies?
Every company our agency uses has a strong financial rating as determined by the various rating agencies such as A. M. Best, Standard and Poor's and Moody's Bond Ratings.
6) How long does this process take?
If no doctors records are ordered, 3 to 4 weeks. If doctors records have to be obtained, 4-7 weeks since we are dependent on the promptness of the doctor.
7) What is a 'rating' or 'rate'?
A rating is essentially the amount of risk an insurance company is willing to take on based on several factors relating to your health. Insurance companies are learning more and more about identifying their risks. Since cancer and cardiovascular disease are the two leading causes of death where the risk can be lessened by the individual, companies zero in on these risks. Those that qualify for a "super preferred" or "Preferred Plus" would be less at risk, then the "preferred", then the "standard" and down from there. Companies look at height and weight, blood pressure, cholesterol (good and bad), family history (relatives dying before 60 of CV disease or cancer), personal history of cancer and CV disease, and smoking history in addition to your health history, current health, prescription record, and motor vehicle records.
8) If I apply and don't get the rate I applied for, what happens?
The company many times will make another offer. If our office thinks we can get a better offer from another company, we will ship your file over there.
9) What if I don’t fit into any of these categories?
If an individual has one or more of these risk factors, they may still qualify for preferred or standard. If even standard is out of the question, there are some highly rated companies that will still take the risk. Insurance companies fear the unknown. If they can identify what those risk factors are, there is a greater chance they will offer a policy. For example, someone just finds out he has a blood pressure problem and his doctor is trying different medications to bring it under control. Until the blood pressure is under control, this remains an unknown to the insurance company. Once under control it could be a preferred with some companies, standard to others.
10) Do insurance companies treat all tobacco users the same?
Cigarette smokers that smoke less than a pack a day have a chance to get a non smoker rate with one company. Other companies treat pipe smokers, chewers, and cigar smokers as non smokers. Still another company gives almost all tobacco users a non smoker rate for the first 3-4 years! This same company gives a preferred rate if you use tobacco less than three to four times a year. They look at the amount of nicotine in your system.
11) What if an instant quote is not right for me because of my special medical history?
Using the same diligence we use to find the lowest preferred rates for our customers, we will prepare a custom quote. Of course we need to know the medical condition, its duration, treatment and prognosis.
12) Can I apply at my age?
Our agency works with individuals 1 to 85! A few companies provide policies to age 85 for term, second to die or Disclaimer insurance. Occasionally Disclaimer is available past 85.
CAUTION ABOUT RATES!
Please read this section before you apply for insurance expecting a particular rate. Almost all companies have a super preferred, preferred, and standard rate. Some companies only have 10-15% of their applicants come back with the super preferred. Others are less strict and that percentage is closer to 50%. The following are some general guidelines for super preferred: (unisex)
Sample Height to Weight Ratios
5’1”/160lbs
5’5”/180lbs
5’10”/210lbs
6’0”/220lbs
- Each company is slightly different, and most allow 5lbs leeway.
- No tobacco usage last 2 years.
- Cholesterol 180-220 (A couple of our companies will go as high as 230 to 250)
- Blood Pressure 140/90 (untreated)
- Family history (No deaths before age 60, siblings or parents) (sometimes one allowed) of cancer or cardiovascular disease
- Aviation-No super preferred
- Avocation (hazardous) -No super preferred
- Driving- No more than 3 moving violations in last 2 years.
- Travel- No extensive travel to underdeveloped or politically unstable countries.
- If one or more of these variables are out of the guidelines, it can move you from super preferred to preferred. Even if moved to preferred these are still very competitive rates and only 5% to 10 % higher. Again, the preferred rates vary between companies so it is important to try to find which company will consider you preferred. That's where we can help! The requirements vary between companies but here are some general preferred guidelines:
- Height and weight is the same as super preferred but with more leeway sometimes up to 20-25 pounds.
- Cholesterol 250 to 280
- Blood pressure 150/90 (treated or untreated)
- Family history cannot have both parents or one parent and one sibling die before age 60 of cancer or cardiovascular disease.
- Aviation-Sometimes depending on situation
- Avocation-Sometimes depending on how hazardous
- Driving- Same as super preferred
- Travel- Similar to super preferred but not as strict
- These are general guidelines and will vary more from company to company than the requirements for super preferred.
- If after seeing your quote, you would like to discuss this with our office by e-mail, phone or fax, our office will be glad to advise. Click here
- Other factors that may or may not exclude someone from preferred are:
- Current or history of alcohol/drug abuse
- Rheumatoid arthritis
- Asthma (current treatment)
- Personal history of cancer or cardiovascular disease
- COPD
- Crohn's disease
- Current treatment for depression
- Diabetes (oral diabetics can get standard rates, others can get a slightly higher premium)
- Epilepsy
- Kidney/liver disease
- Severe mental illness
