FAQs of First-time Life Insurance Buyers
If you have never bought life insurance before, then the process might seem like a challenge. For help, consider frequently-asked questions those in your position often ask.
1. What is life insurance?
Life insurance will pay out an amount of money if a person, whose life the policy insures, dies. The sum it will pay is a death benefit.
2. Who’s Who in Policies
There are three parties involved in most life insurance policies.
- The policyholder: The person who owns the policy. They make decisions about the policy and pay the premium.
- The insured: The person who has to die for the policy to pay.
- The beneficiary: The party that will receive the death benefit. The beneficiary can then use the money to afford various costs they might face down the road.
- You often also name contingent or alternate beneficiaries. These parties will receive the death benefit if the primary beneficiary cannot.
Sometimes, you can be both the insured and the policyholder. In other words, you can take out a policy on your own life that will pay someone else as the beneficiary.
You can also be both the policyholder and the beneficiary. You might name someone else (like a spouse), the insured. You can then make yourself the beneficiary in case your spouse dies. Yet, to name someone else as the policy's insured, you will likely need their permission.
If you are the insured, then you cannot be the beneficiary. That’s because you’ll have to die for the policy to pay.
3. Who can be my beneficiary?
You can name almost anyone as a beneficiary if you are the insured, including:
- Spouses
- Parents
- Adult children
- Trust accounts
- Your estate’s executor
- Charities
4. How much coverage do I need?
We recommend that you carry at least 10-15 times your annual income if yours is the insured life.
Some people want their death benefit to go towards specific purposes, like mortgages or a child’s education. In these cases, you will need at least enough coverage for these costs.
5. Are there different types of policies?
The two most-common types of life insurance are:
- Whole-life insurance: Once you enroll, this policy will remain active indefinitely as long as you pay your premium. Many whole-life policies offer both death benefits and cash-value accumulation options.
- Term life insurance: A term policy will only last for a set number of years. If you die before the term ends, the policy will pay the death benefit. If you don’t, the policy expires and will not pay.
Within the spheres of term and whole-life policies, there are further options. Let one of our agents help you determine the right course of action for your needs.
6. What will my policy cost?
The type and amount of coverage you buy will of course influence your policy’s premiums.
Insurers will also look at various demographic factors to set individual rates. Those can include (but are not limited to):
- Your age and gender
- Your overall health
- Your occupation
- Your smoking habits
Generally, the policyholder will pay more for a policy if the insured person has a higher risk of dying. The factors above might influence those risks.
Call us today at (915) 599-2900 or visit www.MtFranklin.com to see how we can help you.