FAQ:

Do I really need life insurance?

You don't need life insurance so long as no one else is financially dependent on you. But examine this question carefully. If you have children and their financial well-being would be materially affected by your death, you probably need life insurance. If you're married but childless, you might still want coverage. The same might be true if you feel your parents will someday depend on you financially. The larger the financial load you carry, and the more people depend on you in this way, the more you need life insurance.

How much life insurance do I need?

A fairly good rule of thumb offered by the National Insurance Consumer Organization is that you need coverage equal to at least 7 years of current annual income, assuming you are married and have two or more children. Another way to look at it is to add up debts and future expenditures, such as your mortgage, other loans, college and weddings for your children. If, for example, you'd like your spouse to have enough of a life insurance death benefit to be able to pay off half of your mortgage and half of your children's college education, then simply add half of your mortgage amount to half of their estimated college costs and buy that amount of life insurance. Of course, it is always best to ask an insurance agent, financial planner or other expert to help you determine how much life insurance coverage is adequate.

What is adjustable whole life insurance?

Adjustable whole life insurance allows you to vary your coverage as your insurance needs change. You normally choose the face amount you need and the premium you want to pay, and the company calculates a plan that provides coverage for your request. The result could be any plan from a term policy with a short period to a limited-payment whole life policy. You can also choose the type of plan and face value you want, leaving it to the company to calculate the premium rate needed.

What is the 30-day grace period on a life insurance policy?

The 30-day grace period is required by law to be in every life insurance policy sold. It allows the insured to pay the policy premium any time during the 30 days following the due date of the premium without incurring a policy lapse. After the 30-day period expires with the premium still unpaid, the company may require evidence of good health before accepting the payment and reinstating the policy, since it has technically lapsed.

Should I use cash-value life insurance plans?

Cash-value life insurance will pay your beneficiaries when you pass away, but it also builds up value that you can either cash in or borrow against while you are still alive. There are all sorts of different cash-value life insurance plans. They generally fall into five categories: traditional whole life, interest-sensitive whole life, universal life, variable life, and combination whole life/term life policies. If you want life insurance that also doubles as an investment vehicle, a cash-value life insurance policy may be for you. But if you simply want to insure your family against your own death, you will almost certainly save money by purchasing term insurance. Term insurance will only cover you for the number of years specified in the policy, and it has no cash value. However, premiums for term insurance can easily be less than half those of a cash-value policy, depending on how long coverage is needed.

Is there a difference between a joint-life insurance policy and a second-to-die life insurance policy?

Many people confuse joint-life insurance policies with second-to-die policies. Although both types of policies insure more than one person, there are major differences between how the policies work and the reasons why different consumers choose one type of policy over the other. Joint-life policies name two or more people as the insured parties, with the death benefit payable upon the first death among the insured parties. Most often a joint-life policy involves spouses or business partners providing for the security of the survivor. Last survivor policies, or second-to-die policies, pay the death benefit only when the survivor dies. Such policies are popular for several purposes, the primary one being estate settlement for couples. In short, a joint-life policy pays off as soon as the first person dies; a last survivor or second-to-die policy pays off only when the last person dies.

Do life insurance proceeds go through probate?

Whether proceeds from your life insurance policy will have to go through probate depends on who you have named as your beneficiary. If you name an individual (other than yourself) or a trust as the beneficiary of the policy, the money is transferred outside of probate directly to the beneficiary, saving time and money. This works well if you want to make your assets available to your family to cover expenses. Conversely, if you have named your estate as the beneficiary of the policy, or if you have chosen no beneficiary at all, the proceeds will become part of your estate and must go through probate. The insurer will issue the check to the probate court, which will then distribute the proceeds, net of probate fees and attorney fees, according to your will.

How can I find out if a deceased relative had life insurance

What if you know someone was insured, but you can't find the policy, and don't even know what company he or she had it with? This is not an unusual problem, and there are no easy solutions. Of course, it is best to find out about life policies while the insured is still alive.

Places to look:

If I have been told I am uninsurable, is it still possible for me to purchase life insurance?

Just as you can be turned down for auto insurance, so can you be turned down for life insurance. Applications can be rejected for a variety of reasons, although most rejections are based on something worrisome about the applicant's current health or medical history. If you are denied life insurance, ask the insurer why your application was rejected. It's possible the insurer simply made a mistake or misinterpreted something on your application. Next, request a copy of your medical information file from the Medical Information Bureau, P.O. Box 105 , Essex Station, Boston , MA 02112 . The bureau keeps medical records on more than 10 million Americans, much as credit bureaus keep records on consumers' credit histories. If there's a mistake on your MIB records, you have the right to correct it. Finally, if one insurer turns you down, keep looking elsewhere. Some insurance companies understand certain medical conditions better than others, and some firms actually specialize in policies for people who have had trouble getting coverage elsewhere. An independent insurance agent, who works with several different insurers instead of only one, will be happy to help you with your search.