Life insurance agents ask many questions to gather a clear picture of your coverage needs and budget. Here are seven questions you should pose to them when speaking to an agent:
1. What is the purpose of life insurance?
Life insurance is a contract designed to provide your beneficiaries with financial payout upon your death. The amount you receive, called the face value of the policy, can be used for funeral costs, mortgage payments, children’s college tuition or anything else you deem necessary. Some policies even offer cash value coverage which builds over time and can help lower or increase premium costs or provide greater death benefit payments.
Life insurance policies don’t fit all, and to determine which plan would work for you best it is essential that you assess your current financial status and assess what would be needed should something happen to you. Take into account expenses like mortgage payments or child care as well as debts such as student loans or credit card balances when considering whether a particular policy meets these criteria.
Once you’ve determined your needs, the next step should be naming beneficiaries – typically spouses or children. Also consider whether to add riders that provide additional coverage like accelerated death benefits, terminal illness riders and guaranteed insurability riders to your policy.
2. What are my options?
Though challenging, this question cuts right to the core of why life insurance exists and allows prospects to explore all their options should they pass away, such as funeral costs, debt (credit cards, mortgage, car payments), preserving wealth for beneficiaries as well as paying final expenses such as funeral costs.
As part of your assessment, this question also helps determine whether a prospect has other policies such as employer or individual plans so you can provide more comprehensive solutions. If they already have existing coverage, be sure to ask what kind and how much of it they already possess.
Life insurance companies will often want to learn about a prospect’s family history, lifestyle and hobbies as well as any risky habits or activities that could compromise their health status – for instance smoking, recreational drug use or reckless driving practices that might compromise it.
Even though this can feel intrusive, knowing these details about potential clients will enable you to tailor recommendations specifically to their needs and circumstances. For instance, if they have had mental health issues under control with medication and might benefit from whole or universal life policies with living benefits like cash values and interest growth.
3. What is the financial strength of the company?
Life insurance providers that possess strong financial foundations and can honor their policy obligations should be selected with care. A reliable way to assess a company’s strength financially is via credit rating agencies; these independent organizations analyze various areas such as profitability, debt repayment and liquidity before providing an overall rating for each business. It would be advisable to compare multiple agencies’ ratings before making your final choice as ratings may differ between agencies.
Financial strength of life insurance companies is of vital importance because it can impact cash value and death benefits of policies. A financially strong firm is more likely to grow, pay their debts off, and turn a profit, enabling them to fulfill commitments made under policies such as paying out death benefits on time.
Search online by typing in: “Life Insurance Company Name + Financial Strength Rating.” Be sure to search according to underwriting company, as some companies market products under multiple brands.
4. What is the policy’s death benefit?
Death benefits are the money your beneficiaries will receive from a life insurance policy in the event of your death during its duration, typically used to cover funeral costs, pay off debt or provide future income. They play an essential role in determining how much coverage costs, so when signing up you can choose how much coverage is best suited for you. Furthermore, riders provide extra benefits.
Beneficiaries are those or organizations who will receive your death benefit upon your passing. This may be individuals or a trust managed by a trustee; even charities could qualify. Furthermore, contingent beneficiaries could be named so they’ll get it should any primary beneficiary pass away before you.
Some policies allow you to take advantage of an option called an accelerated death benefit in case of terminal illnesses such as cancer. Although this will reduce the total death benefit that will go to your beneficiaries, it could help cover medical costs or long-term care needs that otherwise might not be affordable.
5. What is the policy’s cash value?
Cash value is an investment component of life insurance policies that functions similarly to a savings account, accruing tax-deferred and with interest credited at an agreed upon rate by your insurer. Some types of policies, such as whole life and variable universal life policies, also allow you to invest your cash value into subaccounts similar to mutual funds which may provide higher returns but also carry greater risk.
With a permanent life insurance policy, one portion of your premium goes towards funding the death benefit and another towards covering costs and profits of insurer. The remainder contributes to building cash value over time as your death benefit grows larger. Over time, cash value will diminish while death benefit grows larger.
Access the funds accumulated in your policy’s cash value through partial withdrawals or loans; however, this will reduce its death benefit. Furthermore, use it to pay your premiums as needed, either reducing expenses or maintaining full coverage as your circumstances shift. However, unpaid life insurance loans could lead to gaps in coverage which you could withdraw from or surrender the policy upon.
6. What is the policy’s surrender value?
Surrender value refers to the total sum received upon canceling or surrendering life insurance policies, net of any surrender charges and loan balance. This value can be calculated as the sum total of premium payments made under your plan minus surrender charges and loan balance payments.
Life insurance surrender values can be an excellent way of recovering some of your investment money back. But surrendering may not always be the right option – for instance if your premium payments have become overwhelming or you need another source of coverage, surrendering may not be ideal.
Alternative, you could sell your life insurance policy for cash via a life settlement company. This could be an ideal solution if you require immediate funds and don’t have other alternatives available to you.
As cash surrender value from permanent life insurance policies or cash-value-generating annuities can be taxed, withdraws may incur penalties and may reduce death benefits – it is crucial that policy holders understand all their options, their surrender fees and make an informed decision before making their choice.
7. What is the policy’s death benefit?
Death benefits are the proceeds that your beneficiaries will receive should you pass away, helping to pay off immediate debts, funeral costs, support family afterlife expenses and build wealth through investment strategies.
There are three primary options for paying out a policy’s death benefit: lump sum, interest option or annuitization. Your agent can assist in choosing which option best meets your financial goals and budget.
Many life insurance policies feature riders that allow you to increase the death benefit at set intervals (e.g. every three years) without needing a new medical exam or providing evidence of insurability. If this option appeals to you, make sure your beneficiary information remains up-to-date and take any necessary steps.
If you engage in risky activities such as skydiving or racing cars, add an accidental death benefit rider to your policy. This may allow you to qualify for accelerated death benefits sooner, providing your beneficiaries with additional money sooner than expected. It’s also important to understand that if death results from engaging in dangerous activity it could reduce or deny death benefits altogether; during such times insurers often implement two year contestability periods where they investigate all aspects surrounding death to make sure no fraudulent practices were involved.