Q. Do I need Life Insurance?
There are several reasons why you may need life insurance. The most important reason is to have enough money to provide for dependents such as young children, non-working spouses or elderly parents, should you die and be no longer able to provide for them.
Also, your survivors may need funds to pay for extra expenses that may arise due to your death, such as funeral expenses, or other expenses to pay off bills and debts.
If you have no dependents or have adequate financial resources, you may not have an actual need to purchase life insurance. However, some people who do not “need” life insurance still purchase it anyway. This can be a means to leave money to a beneficiary or beneficiaries while minimizing tax consequences.
Another category of people who might want life insurance are business owners or people with substantial estates. Since these people have needs that require more planning, they should usually consult with professionals or specialists in insurance-related law, accounting or estate planning because legal business agreements or trust documents may need to be drawn-up.
Q. How much Life Insurance do I need?
There are many different way of calculating how much Life Insurance is enough but a ‘rule of thumb’ that is commonly used is to have enough to cover all of your debts including funeral expenses as a bare minimum. Further to that you should make provision for things such as children’s education expenses and a further sum that can be invested to generate an income for your surviving dependants. For a full assessment of your Life Insurance needs you should contact a suitable financial adviser.
Q. I’ve heard it’s hard to get Life Insurance, is that true?
Life insurance companies do not issue life insurance to all people who want it, in any amount they want to buy. If they did, people who are very sick -- and thus have a very short life expectancy -- would buy lots as they'd only pay premiums for a very short time, then die, and their beneficiaries would collect the face amount.
If you have any health impairments, before you apply for any insurance, be cautious. Just applying to a company that claims to have the lowest price is usually NOT the answer. If that company does not accept you or "rates" your policy as "non-standard" it may harm you when you apply to another company. Speak with a good insurance adviser (such as ourselves!) that specializes in dealing with people who have health impairments as we will be able to recommend a company that has a favorable view of people with your health condition.
Q. What about all of the ads that advertise no medical exams?
Life insurance is sometimes sold with the promise that no physical exam will be necessary. Such policies are often offered through newspaper or television ads. The amount of coverage may be limited to small sums. As with other life insurance policies, there will be a period of a year or two (called the “contestable period”) when the company can modify or cancel the policy if it finds that the application did not fully reveal any relevant medical problems. Because the rates are sometimes rather high and the available coverage low, these plans are often used to supplement existing coverage, rather than provide the basic insurance.
Q. I am a smoker. Will that affect my premiums?
If you are a smoker, you should expect to pay a little more for your life insurance than a non-smoker of a similar age and health.
Of course, if you also have a smoking-related medical condition, then the life insurance company would take that into consideration when deciding whether to sell you life insurance and what rate you should be charged.
Q. What can Income Protection do that Workers Compensation can’t?
The main point of difference between Workers Compensation and Income Protection is that Workers Comp will only cover you if you suffer an injury or illness at work. Income Protection will cover you regardless of the where or when the incident occurs. (Be sure you know your individual Policy so you are aware if there are any limitations to your Income Protection cover).
Q. What if I miss a premium payment – do I lose my Insurance?
You have a grace period on life insurance policies to pay your premium. The grace period is typically 30 days. After that, the company may or may not allow you to pay back premiums and reinstate the policy. Sometimes this may depend on whether you can provide evidence of good health. But if you are beyond the due date and grace period, you are at the insurance company’s mercy – each company exercises its discretion a bit differently. Of course if you die and the premium has not been paid, and there is no residual value to pay premiums in the policy and the beneficiary would not collect.
If you have any questions that are not covered here, please contact us and we will be happy to answer any questions you have.