Frequently Asked Questions (FAQ) About Life Insurance in General

Q: DO I NEED LIFE INSURANCE?

Your answer depends on whether you have dependents (partner, business partner, children, family, spouse) or other people who depend on you now, or in the future, for financial help or support. If you have no debts or responsibilities, and your final expense is provided and paid for, your answer probably should be, NO.

Q: HOW MUCH LIFE INSURANCE SHOULD I HAVE?

This answer depends on the amount of loss or financial support your dependents and loved ones will suffer, should an untimely death come upon you. Big question? Sure, but the answer is fairly easy to figure out.

First, you need to realize that life insurance is designed to fill the financial gaps that will be caused by your death. This immediate and future financial loss experienced by your dependents, family, and business can be eliminated by buying a life insurance policy.

Make a list. If you have or will have any of the following, you should consider getting life insurance.

• Home or business mortgage.
• Auto loan, lease, personal or credit card debt.
• Business partners or associates who depend on you to keep the business active and profitable. Could they (or could you) afford to replace or hire someone to take your place or provide your special knowledge and talent, in the event of unexpected death?
• Spouse, Partner, Children. Could he or she find a way to fill the financial gap created by your absence?
• What about final expenses? Medical, hospital, and legal fees? And taxes? Who will be responsible for your funeral and cemetery expenses?

As unpleasant as it is to consider how much your survivors' life and quality of life would change upon your death, it is necessary to calculate the amount of life insurance needed to fill that financial gap. The length of time your survivors or business will require income will have a crucial effect on the amount of life insurance protection you need. Will an immediate lump sum provide for their needs? Or, will the need continue for a certain number of years? 5, 10, maybe 20 years? Will the need for an income stream continue for life?

Life insurance is usually purchased in coverage blocks of ten or twenty five thousand dollars. If you find that a death benefit of, say $142,000 is enough to cover your needs, then you should "round up" to $150,000, not down to $125,000. The people you are trying to protect are important. (The rule of thumb is five times your annual income.) It is always prudent and wise to "round up" to a slightly larger benefit, than to be a bit short at the time of need. Don't forget, inflation, and the long arm and sticky fingers of Uncle Sam will have a significant impact on the size of the estate you leave your dependents and family.

You can also get information, or even apply on line for term life insurance at www.cci.justerm.net. If you have a pre-existing medical condition and have been refused life insurance check out our information about GUARANTEED ISSUE LIFE INSURANCE.

Q: WHAT IS TERM INSURANCE?

Term insurance is usually the least expensive type of life insurance available. Term insurance is purchased for a "term of time." For example, one year, five years, 10 years, 20 years, 30 years. Term insurance is generally purchased to protect a family, a business, or any loved one who may depend on the income from the family breadwinner or principal business associate.

Q: SHOULD I BUY TERM LIFE INSURANCE OR PERMANENT LIFE INSURANCE?

The type of life insurance you need depends upon your individual needs. Term life insurance is usually more cost-effective for temporary needs which may be a period of anywhere from 1 to 30 years. Permanent life insurance may be better to meet long-term needs, and in some cases, a mix of both term life and permanent life insurance may be appropriate and cost effective.

Q: WHAT IS THE DIFFERENCE BETWEEN WHOLE LIFE AND UNIVERSAL LIFE INSURANCE?

Whole life and Universal life insurance are both permanent types of life insurance. Whole life insurance premiums are fixed and level, the death benefit is not adjustable. Universal life insurance offers the insured the choice of an adjustable death benefit and flexible premiums. As your life insurance requirements change, you may increase or decrease these benefits. The other difference between universal and a whole life is that with the universal policy the cash value built-up in the policy is interest sensitive. If interest rates go up, so will the cash values. With a whole life policy the cash value is not interest sensitive and remains fixed.

Q: WHEN IS LEVEL TERM INSURANCE USUALLY MORE APPROPRIATE THAN ANNUAL RENEWABLE TERM LIFE INSURANCE?

With level term life insurance, the premiums remain level over a specified period of time. With annual renewable term life insurance the initial premium is usually lower, however with each renewable year the premium rises. Annual renewable term life insurance is usually cost-effective if the insurance protection is only needed for a few years (One to four years).

Q: WHAT IS A RIDER ON A LIFE INSURANCE POLICY?

A rider added to life insurance policy is usually considered an extra benefit. An example of this could be an accidental death benefit over and above, and in addition to, the death benefit of the basic policy. A waiver of premium rider may be added to a policy and usually will pay the monthly premiums if the insured is unable to work due to accident or illness. Another type of rider is the additional insured rider. The additional insured is a person or persons who are also insured under the same policy. The additional insured can be a spouse, a child, or a business associate.

Q: SHOULD I PURCHASE LIFE INSURANCE ON MY SPOUSE?

In most situations, yes. If both spouses contribute to the family's income, than adequate protection should be provided to supplement and replace the income lost in the event of death. If only one spouse works and the other stays home to take care of the home and family, than life insurance protection also may be needed a to cover the cost of day-care and other expenses associated with the death of a parent.

Q: IS A LIFE INSURANCE BENEFIT TAXABLE?

In most cases, life insurance benefits are not subject to income tax, provided they are paid in a lump sum. If the life insurance benefits are paid to the beneficiary over a period of time (annuitized) than the interest earned on the principal death benefit is usually taxable.

Q: WHAT IS UNDERWRITING?

After submitting an application to a life insurance company (and usually the results of a medical exam, and a copy of your recent medical history from your doctor), the underwriting department at the insurance company will review the information and will decide if the company is willing to issue a life insurance policy on the life of the proposed insured. The cost of the medical exam, doctors' reports, blood or urine specimens and any other lab work etc. will be paid for by the insurance company. The underwriting process usually takes four to six weeks. Once your life insurance policy is approved it will be issued and usually delivered to you by your agent or possibly it could come in the mail.

These are only a few things to think about. When you determine you need more information or you would like to make an appointment with a independent licensed professional, to figure out your Life Insurance needs, get in touch with Jim Rakvica at Correct Coverage Insurance, 954-561-8297. We can help you with any type of life insurance protection. From $500. to $5,000,000.

WHICH TYPE OF INSURANCE IS RIGHT FOR ME?

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