In the life insurance process, there are many questions you will ask or be asked. I want to cover the common life insurance questions I see clients asking, as well as questions companies and agents will or may ask you.
Questions you may ask about life insurance
Do I need life insurance?
There is one key word in this question and that is life. As in, are you alive, if so then there are others that would be affected when you pass away? So, yes, life insurance is definitely beneficial at any age.
Life insurance can be broken down into two types, death benefit only and living life insurance. Term insurance is commonly described as the best option, though I say it’s the least profitable for you. If you want protection and don’t have much for premiums, ok it’s a good option.
While alive you can use life permanent life insurance as a means to help fulfill your need for financing. Using a whole life policy you can grow cash value that is protected from creditors, and tax-advantaged. You can then use a portion of that cash value to purchase assets (or just consume with like a car purchase). Whether they are assets or consumption to can then pay yourself back to increase the cash value of the policy.
This is a different kind of loan though. You see most loans mean that you withdraw the funds, that’s not how it works. Instead what occurs is that the insurance company keeps your money in your own account, continually earning interest, and they instead send you money from the carrier’s general funds account (so their money basically). The loan doesn’t “have” to be paid back. You can alter the payments to yourself if need be. This essentially lets you make money in two places if you buy a real estate investment (for example).
What’s the difference between permanent and temporary life insurance?
Permanent life insurance has a 100% guarantee to pay as long as premiums are paid even if you don’t die, in the form of the cash value eventually equalling the death benefit. Permanent policies generally cover someone until age 100 or higher.
Temporary life insurance, often called term insurance, is only good for a specific short period of time, going up to 30 years. Term insurance does not build cash value, and is only good for the death benefit to your beneficiaries after you pass away.
Check this article out to if you’ve ever asked “what is a viewpoint?”
How do I buy life insurance?
The most efficient route of purchasing a new life insurance policy is by finding a reputable agent or company and getting an illustration done based on what you want. If you are just starting out then maybe speak with several agents, research how to use life insurance, and improve your financial education. Have you read Rich Dad Poor Dad? Have you read Killing Sacred Cows, Wealth Of Nations, Live Your Life Insurance, or Become Your Own Banker? Yes no? That’s a lot of reading I know, so if you haven’t then work with someone that has YOUR best interests in mind not their own.
What’s a “Free Look” period?
Period of time you can test out a policy and return it for a full return premium.
For a list of other definitions that have to do with a life insurance check out this article to better understand your policy.
What does “fully paid up” mean?
It means that you have paid enough premiums that no more is required and the policy is fully paid for the rest of your life.
An application is designed to gather multiple pieces of information for an insurance carrier to evaluate the potential risk of an individual is for dying. Are they a higher risk due to hobbies, bump in premium, do they have a scary occupation, also bump in premium. Each carrier has a different risk profile they work with and evaluate people slightly differently to determine if they are worth the risk, if so they are accepted.
Some common reasons applications are denied include:
Dishonesty: this can be in the form of outright lying on an application or just withholding information. This can occur either on your application or during phone interviews or requested documentation.
Lifestyle: smoking, tobacco, occupation, hobbies.
Age: some companies only approve an application up to a certain age. Even if you are denied there’s usually another carrier that will accept you, though you may need to alter the kind of coverage you are seeking.
Illness: Your chances of getting denied coverage go up considerably when you have an illness. Whether it’s a chronic diagnosis or simply a standard one, depending on the carrier they simply may not accept applicants with that diagnosis.
What to do if denied?
Speak to your agent and they will explain what caused the application to be denied. Often times you can apply with a different carrier and be accepted, though perhaps with not as great a premium.
Sometimes in order to be approved, it will require some lifestyle changes, ie. losing weight, getting your diagnosis under control, and/or having a treatment plan in place. If all else fails you can look into group life insurance options from your employer.
Questions life insurance companies will ask you
Basic information
Common information required includes name, age, height, weight, address, social security number, number of children and dependents, marital status, and if you smoke.
Other common medical questions may include the use of drugs, alcohol, medical diagnoses, prescription medications, past or current treatment being received, medical history including surgeries, do you have a history of strokes or diabetes.
The information you give is then verified through the medical information bureau. The MIB has information from doctors all over the country so it’s a convenient location to check. The MIB group can also be used to get information on past information you provided on past life insurance applications.
Other basic information asked on an application is going to vary slightly for each carrier. There will be more health history-based questions like the history of cancer, kidney, liver, or heart disease and other questions.
Occupation and hobby questions
Having a high-risk occupation makes your life insurance premiums higher. They can be a reason for being denied life insurance depending on the insurance company.
In addition to high-risk occupations, some hobbies put applicants in a higher risk category as well. I think it’s pretty obvious that people who skydive or free climb is a potentially at higher risk of dying. This simply means that a life insurance company has to take that risk into consideration when assigning a risk table to an applicant to determine how much they will pay for their life insurance.
Do you have your driver’s license?
When filling out a life insurance application an agent needs to verify that you are who you say and this is often done by looking at a driver’s license. It also helps with the application process so the insurance company knows how to follow up. If you say you got their driver’s license number for example over the phone but didn’t look at it, then the insurance carrier has procedures they have to follow as opposed to if you had looked at it.
Being honest and open
The more open and honest you are with a life insurance agent the better they are able to create an appropriate illustration to fit you and your situation. Not only that but the vaguer and stand-offish you are the more time is going to be taken up.
If you find yourself not wanting to talk to an agent but pretend as you do by continuing the conversation without saying not interested, the more valuable time of yours and you take up. I get how it is these days tough, many “professionals” don’t take a no well, not right now, etc.
I suggest that instead of playing nice, you be direct. For example, I hear often “Can you all me back”, or “Let me think about it” and then they never pick up again. See the truth was they weren’t interested, wanted off the phone, but didn’t have the gall to say “That’s too expensive”, or “That’s not what I thought it was”, or “I don’t feel comfortable for some reason”.
As an advisor, I’m not interested in this game of cat and mouse trying to win the sales conversation. If it’s not a win for both of us I don’t want to move on. Let’s figure it out, do I need more info, a different illustration, etc. As the saying goes, “Help me, help you”.
Questions to ask your agent
Many questions you want to ask a life insurance agent will be best answered with at least a quote if not a full illustration. Insurance is so individualized that an agent really does need at least some basic information to get quote information. Illustration information on how to maximize the use of an infinite banking policy for example requires knowing more about your finances. Here are some normal questions I hear.
What is my premium?
Term insurance is the lowest premiums, whole life offers the most useful for higher premiums.
What does it cost?
Referring to the above, what does it cost if you die without coverage for your loved ones?
What can I get when older?
Not working but want to cover your funeral costs, get a final expense policy, or burial policy. Want to invest, get some permanent life insurance for yourself or someone else.
What happens if I get in an accident?
Depending on the riders you have and the extent of the injury, you may get wages paid for(disability rider) or double coverage(accidental death rider).
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