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Life insurance can be purchased as either whole or term life and it is necessary if you have family that relies upon you. Whole life insurance will cover you for the rest of your life and term life will cover you for a specific period of time.
Life insurance can pay out a lump sum or an annuity (in installments) if:
- You pass away. A benefit will go to your loved ones in the event of your death.
- You become terminally ill. If you are diagnosed with a terminal illness (you are likely to pass away within 12 months).
What can a benefit be used for?
Every day living expenses
Other outstanding debts
The process of comparing different policies is actually quite easy if you follow some of these steps:
What is the minimum and maximum coverage amount?
What are the restrictions regarding age and the term of the policy?
Consider how age will affect when you can no longer apply and when your policy will stop covering you.
If you are a senior looking for life insurance, age limits and when your policy will end can vary between insurers.
Can I purchase additional insurance without having to get another medical check?
What are the policy features?
Can I combine the policy with other types of insurance?
How is your occupation covered?
How flexible is the policy?
Considered speaking with a consultant?
Everybody’s situation is different so theres no perfect answer. Generally, you want to determine an amount that will cover the immediate and ongoing costs if you pass away so that your family or other financial dependents can continue their current way of life.
1. Outstanding debt you don’t want to leave behind
- Outstanding mortgage payments
- Any personal debt you still have (personal loans, car loan, credit cards)
2. Financials you already have that your family can fall back on. Determine how many years you would need to cover these living expenses and offset it against any savings/assets that could be used in the event of your death. This may include:
- Savings you have accumulated
- Assets that may be sold
- Investments (property, stocks, etc.)
- Life insurance you already have in your 401K
3. Your families ongoing living expenses
- Rental payments
- Vehicle and transport costs
- Food and other everyday expenses
- Education/child care costs
- Entertainment and vacations
4. Length of coverage to choose. Some things to consider when determining your length of coverage include:
- Your age and the age of your partner
- Earning capacity of your partner now and in the future
- Number of children and their ages
- Advance payment for funeral expenses
- Global coverage if there are no countries excluded on your plan
Minimum age: None Maximum age: 85
- Pays until you can return to work or the age of 65 (retirement) if you are unable to return to work
- Premiums are generally tax-deductible
- Additional benefits provided to cover rehabilitation expenses
Minimum entry age: 15 Maximum entry age: 65
- Can be bundled with life cover policy or purchased separately
- Most policies cover up to 40 different medical conditions
- Advance payment for certain conditions
- Partial benefit provided for some conditions
No age requirements listed
- Replaces 50-80% of your income if you can’t work because of an accident or illness
- Short-term and long-term policies cover benefits for two years, five years or to age 59
- Most policies include benefits for complete, partial, recurring and specified medical problems
- Typically monthly payments but lump sum payments are possible, especially for total disability
- Can be bundled with a life insurance policy or purchased separately
Minimum entry age: None Maximum entry age: 64
- No medical tests required
- Choice of coverage between $5,000 and $25,000
- Many companies offer fixed rates
Minimum entry age: 50 Maximum entry age: 85
- No medical or blood tests required
- Simplified, more affordable form of income protection insurance
- If covered internationally, insured for accidents anywhere, 24 hours a day, 365 days a year
No age requirements listed
Accidental Death and Dismemberment Insurance
- Affordable form of life insurance
- No medical or blood tests required
No age requirements listed
Should I buy insurance from an adviser or straight from the insurer?
Both options have benefits to consider so it really comes down to your own personal preference.
Purchasing coverage with an adviser
- Access to wide range of products to give you greater choice.
- Can use their knowledge of the market to help you find coverage suitable for your situation.
- Can help you assess your situation to determine what type and how much coverage you require.
- Can offer advice regarding life insurance and annuity.
- Advice-based products generally offer higher coverage levels and greater range of features.
Purchasing coverage direct from the insurer
- Usually no medical exams are required on direct products
- Coverage can be put in place entirely online or over the phone.
- You know right away if your application is successful.
- Immediate death coverage once application is received.
- Direct products are beginning to become more and more competitive – with some coverage amounts up to $15 million.
- A number of general insurance products are now offering coverage for involuntary unemployment.
Most retirement plans will provide members with a default level of coverage which can be increased, decreased or cancelled altogether. If your employer is making contributions through a 401K, you most likely have a default level of coverage. The coverage provided may be sufficient for your situation, but you need to weigh up the benefits and drawbacks of this option and whether you require an additional level of protection.
Benefits of investing through your retirement plan
- Generally cheaper as coverage is purchased in bulk.
- Premium payments may be tax-deductible if paid with pre-tax dollars.
- Self-employed workers under the age of 75 may be eligible to claim a tax deduction for personal contributions.
- In some cases, employees can arrange for an employer to make contributions directly to their 401K for an amount that will include the premium of life or disability coverage.
- Payments are made automatically and directly from your 401K and not your after tax income.
- Reduced requirement for health checks.
Drawbacks of investing through your retirement plan
- The types of coverage available are limited.
- Benefits paid to non-dependents can attract tax.
- Payment of benefits can be more complicated and drawn out as the benefit is paid to a trustee first who then distributes funds.
- Coverage is generally more comprehensive and flexible for policies .
- Coverage expires around age 70 (most policies outside of a retirement plan will continue to provide coverage until age 90 or 100).
- I am a non-US resident? Yes. There are a number of insurers willing to provide life insurance if you are a non resident. You must have a purpose for being in the US, whether it be work or family. Also, you must apply for the policy in the US and be willing to take a medical exam in the states.
- I am over 70? Yes. Most insurers provide life insurance to applicants up to age 75. There are a number of insurers that offer coverage for applicants up to age 80 or even 90. Most brands will reduce the level of coverage that older applicants are eligible to receive.
- I have a pre-existing condition? It will depend on the nature of the condition and any treatment you have or are currently receiving for it. The insurer will either exclude the condition from coverage, request you submit more details about the condition or automatically accept it. Requirements for how long ago you experienced the condition will vary between different companies so it can be worth speaking with a consultant to find options suitable for your situation.
- I work in a high-risk job? Yes. You will probably be required to pay a higher premium for coverage than an office worker – but it is still possible to get coverage. Again, it’s worth discussing your occupation with an insurance consultant to give yourself the best chance of finding an insurer willing to offer competitive coverage for your occupation.
Here are some tips to get quality coverage that won’t break the bank.
- Buy young and lock in a competitive rate. Taking out coverage when you are younger and likely in good health means you can lock in a more competitive rate as opposed to when you’re older and more prone to pre-existing conditions.
- Find out how much coverage you actually need. Take the time to properly assess what will need to be covered in the event of a death or serious injury and how this figure could change in the future.
- Find out what coverage you already have. You may already have some coverage in place from your annuity or employers 401K program. Find out what you stand to receive in a claim and if extra coverage is necessary.
- Take the time to shop around. Comparing policies with a consultant from a range of insurers will give you a better chance of finding something tailored to your needs that is well priced.
- Keep an eye out for special offers. Competition among insurers has resulted in an increase of special offers to help you save further on your coverage. This may include free coverage for the first year, access to health rewards programs and premium discounts.
Whether you need it
Q. I’m young, single and no one is dependent on me...why get life insurance?
- A. You may not want to pass on outstanding mortgage debt, personal debt or final expenses like funeral costs to your family and friends. Income protection or disability insurance protects you if you suffer a serious injury and can’t work for a few months or longer.
Q. Am I better off just putting funds into a high interest savings account?
- A. Most people are not fortunate enough to have adequate funds invested in a high-interest account that would be enough to cover their outstanding debts and give their family support for the future. With some life and disability claims reaching up to $2 million, it’s a fair amount of cash to just have sitting around!
Q. Aren't I already covered by my health insurance for illness and injury?
- A. Not exactly. Health insurance covers medical expenses that are associated with sickness and injury but does not provide support for bills, debts or loss of income if you can’t work for an extended period or ever again. Life insurance covers the gap between the expenses covered by health insurance and additional costs of ongoing treatment, rehabilitation and loss of income.
Receiving a life insurance quote
Q. How do I receive a quote?
- A. You receive a quote for coverage by calling or going to a providers website and disclosing your personal details. A certified insurance consultant will discuss further or call you to talk about different policy options and provide you with a preliminary quote based on these details.
Q. Why can't I receive a quote online?
- A. Life Insurance and Income Protection are not straightforward types of insurance and the coverage that is available to you and what you will pay for it is greatly impacted by your own personal characteristics. Based on your gender, smoking status, age, type of protection, occupation, income and level of protection required a consultant can provide you with a preliminary quote.
This preliminary quote can then change based on a number of factors including;
- Any pre-existing medical conditions that you may have.
- Nature of activities carried out in your occupation.
- The policy you choose.
- Style of premium you choose.
- The policy fee charged
Q. What companies can I receive a quote for?
- A. The insurance consultants that finder.com work with have access to major life insurance brands in the US and may have access to smaller specialist insurance groups as well. You can view the main panel of insurance brands that you can receive a quote for here.
Applying for coverage
Q. Who can apply?
- A. United States citizens, US permanent residents (those residing in the US at time of application) and non-residents. Age restrictions vary between brands and cover selected.
Q. What if I already have coverage in place?
Q. What are the classifications of a smoker?
- A. Insurers classify anyone that has smoked tobacco or any other substance in the last 12 months as a smoker.
Q. Can I take out coverage with my spouse/partner?
- A. Yes. Generally, two people can be covered under a single policy. Discounts for multi-policies are offered by some brands.
Q. Can I add my partner later?
- A. No, generally they will be required to take out a separate policy.
Q. Do I need to do a medical or blood test when applying?
- A. Most insurers will only require medical or blood tests at application if the insured has a pre-existing condition that needs to be assessed further. Additional evidence may be required in the event of a claim.
Q. Can I get coverage if I have a medical condition?
- A. It depends on the condition and treatment. Every insurer has different conditions for pre-existing conditions so it is best to check the terms and conditions before taking out cover. If the insurer decides that your pre-existing medical condition presents too great a risk for them, they will generally exclude it from your coverage. As an example, if you are applying for coverage and have a history of back problems, your insurer may exclude all claims related to back conditions from your policy.
Q. Is there anything I can do if I have taken out coverage and my condition is not covered?
- A. There are generally two options available to you:
- It might be worth speaking with an insurance consultant to see if there are any other companies out there that are willing to provide you with coverage. Assessment criteria is not the same for all insurers so it’s always worth looking around if you have struggled to get coverage due to a medical condition.
- You may also be able to have your current insurer review your condition when it comes time to renew your policy to see if the exclusion can be lifted if your situation has changed.
Q. When won't I be paid for life insurance?
- A. Generally all deaths are covered except for suicide within one to two years of the policy. Accident only life insurance will only provide coverage for death that is the result of an accident. Some policies may exclude death related to pre-existing medical conditions for a set number of years from the start date of the policy.
Q. When won't I be paid for disability, critical illness or income protection?
- A. Most policies will not pay a benefit for claims arising from:
- Intentional self-inflicted injury or self harm.
- Acquiring HIV, AIDS, Hepatitis B or Hepatitis C unless if through performing duties of the your occupation.
- Disability caused during engagement in armed forces of any country.
- Claims related to pregnancy, uncomplicated childbirth or miscarriage.
- Claims caused by your engagement in unlawful acts.
- Claims from aviation activity unless you are a fare paying passenger on a scheduled flight.
Q. Can I increase or decrease my level of coverage?
- A. Yes. You can apply to increase or decrease your coverage at any stage to meet your needs. It’s worth noting that you will be required to undertake another round of assessments with your insurer.
Q. Can I add/remove beneficiaries from my policy?
- A. Yes. You can update beneficiaries at any stage.
Q. Can I cancel my policy?
Q. Do life insurance brands still offer surrender value for policies?
- A. No. Life insurance is not an investment product and is designed to pay a benefit for death, terminal illness, injury or illness.
Q. Am I covered overseas?
- A. Some do. Policies are out there that provide coverage 24 hours a day anywhere in the world. Countries that have been advised against travel are generally not covered.
Making a claim
Q. If I pass away, how is my claim paid?
- A. In the event of your death, your life insurance brand or 401K trustee will pay out the nominated death benefit to one or more of your financial dependents or to your estate. A “binding nomination” can ensure the benefit from the coverage in your 401K is paid to the beneficiary of your choice. You should make sure your estate has the necessary documentation so that they can claim on your behalf (see below).
Q. What does a beneficiary need to provide to claim a benefit from a deceased policyholder?
- A. Generally, the beneficiary will need to provide:
- A completed claim form.
- Original policy document and policy schedule.
- A copy of the deceased’s birth certificate.
- A certified copy of the deceased’s will.
- Probate or letters of administration.
Q. Do I have to keep paying premiums if I make a claim for injury or illness?
- A. If you claim for injury or illness on a life cover policy, your benefit will be reduced by the amount paid and your premiums adjusted accordingly.
Q. What happens if I can't make a life insurance payment?
- A. If you’re premiums are becoming to expensive or if you’re going through financial hardship, there are options to freeze premiums for a short period of time.
Q. How many people can I nominate to receive a benefit on my policy?
- A. Most policies allow you to nominate up to 5 beneficiaries on your policy.
Q. What happens if I don’t nominate anyone to receive the benefit?
- A. The claim will be paid to your estate.
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