9 questions for your life insurance agent
Key takeaways
- Ask your agent which type of life insurance, term or permanent, best suits your needs.
- Confirm with your agent if your policy offers living benefits, like access to cash value or critical illness riders.
- Discuss potential exclusions, like the contestability period or high-risk activity exclusions, so there are no surprises.
- Review options for adjusting coverage in the future and confirm if a term policy has a conversion option.
Having to consider life insurance can be unpleasant, but it’s essential to have a policy in place to provide a sense of financial security for your loved ones. If you are just beginning your journey in learning about life insurance or shopping around for a new policy, it is worth meeting with a licensed life insurance agent or financial professional to ask questions about life insurance and determine what kind of policy is right for you and your situation. In order to help facilitate this process, Bankrate has put together questions to ask your life insurance agent to guide you on the path toward securing a policy that works for you and your family.
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Whole life insurance combines life insurance with an investment component.
- Coverage for life
- Tax-deferred savings benefit if premiums are paid
- 3 variations of permanent insurance: whole life, universal life and variable life include investment component
Term life insurance is precisely what the name implies: an insurance policy that is good for a specific term of time.
- Fixed premium over term
- No savings benefits
- Outliving policy or policy cancellation results in no money back
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1. What kind of life insurance policy should I get?
Choosing a life insurance policy starts with understanding what kind of coverage aligns with your goals and stage in life. Your agent can walk you through the essentials, but here’s a quick overview to help you feel prepared for that conversation.
There are two primary types of life insurance policies: term life insurance and permanent life insurance.
- Term life insurance: This is a straightforward option that provides coverage for a set period — usually 10, 20 or 30 years. If you pass away during the term, your beneficiaries receive a death benefit payout. Many choose term life to cover a specific need, like paying off a mortgage or supporting children through college. Term life policies don’t build cash value but are often the more affordable option, making it ideal if you need protection at a manageable cost.
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Permanent life insurance: Designed to last a lifetime (as long as premiums are paid), permanent policies offer lifelong coverage, though maximum coverage ages range from 95 to 121, and the added benefit of cash value accumulation. The cash value component can grow over time, creating a sort of savings you can access or borrow against while still living. Permanent insurance comes in several forms:
- Whole life insurance: This type offers fixed premiums, guaranteed cash value growth and coverage up to a maximum age — typically 95 to 121. Some whole life policies can also earn you dividends. Its predictable structure makes it a reliable option, though it generally has much higher premiums than term life.
- Universal life insurance (UL): UL policies provide flexibility in premium payments and the death benefit amount. They have fewer guarantees, but the cash value can grow based on interest rates. With UL, you can adjust premiums or even skip payments if there’s enough cash value to cover costs, which can be helpful as financial needs change.
- Variable life insurance (VL): VL policies allow you to invest the cash value in various subaccounts, which are often tied to stock or bond funds. While this can lead to growth, it also involves market risk, making the policy’s cash value and death benefit fluctuate based on performance.
Ultimately, your choice will hinge on your coverage needs, budget and comfort level with fixed vs. flexible options. Talking to your agent about how each option fits your plans can clarify what suits you and your family best.
Choosing the right insurer for a medical condition
If you have a pre-existing condition, discuss this with your agent. Not all insurance companies evaluate risk factors in the same way, so getting quotes from multiple providers can be beneficial. For instance, while one insurance company may categorize an applicant with mild sleep apnea as a Standard risk class, another may be willing to offer Preferred — which can impact the cost of coverage significantly over time.
2. How much life insurance do I need?
Determining how much life insurance you need is a common life insurance question many people look for guidance on. It’s really about understanding your unique goals and responsibilities. Think about it — what financial support would your family need if they couldn’t rely on your income? Here’s a breakdown to help guide you:
- Everyday expenses and lifestyle needs: Think about the monthly bills, groceries and expenses that keep life running smoothly. What would your family need to maintain their lifestyle? Life insurance can offer that safety net, ensuring your loved ones don’t have to worry about covering these basics.
- Outstanding debts and long-term obligations: Do you have a mortgage, car loan or other debt? Consider life insurance that’s sufficient to pay off these big expenses so your family isn’t left carrying them. For families with mortgages or children heading to college, higher coverage amounts may be needed for added peace of mind.
- Future financial goals: Perhaps you want to fund a college education, help your kids start their own families or leave a small legacy behind. Life insurance can be a powerful tool to make those dreams happen for the people you love.
Preparing with these factors in mind can help jumpstart and make your conversation with a life insurance agent much more productive. They’ll help you turn your vision into a specific coverage plan that meets your needs, both now and for the future.
How long should my coverage last?
If you’re considering term life insurance, choosing the right term length is equally important. Think about your family’s timeline:
- 10- to 15-year term: A shorter term might be enough if you’re primarily covering children until they’re grown or working to pay off a car loan or other short-term debt.
- 20- to 30-year term: This could be ideal if you’re thinking long-term, like covering a mortgage, raising kids through their school years or simply ensuring extended financial security for your spouse or dependents.
Making sure your coverage length aligns with your family’s life stages can add a lot of reassurance. The best policy is one that truly feels like it was designed with your life in mind — so don’t be shy about discussing every goal with your life insurance agent.
3. How much does a life insurance policy cost?
Life insurance costs can feel like a mystery, but understanding what shapes your premium is empowering. From the type of coverage you select to personal factors unique to you, a range of elements contribute to the final cost. Whether you’re exploring term life for budget-friendly, temporary coverage or a permanent policy that offers lasting protection, knowing what influences your premium can help you find a policy that aligns with your financial goals.
Here’s a closer look at the main factors that impact the price of life insurance, so you can go into your search prepared.
| Cost factor | What it means | How it impacts your rate |
|---|---|---|
| Age and health | Age, overall health and lifestyle habits play a large role. | Younger applicants typically pay lower premiums; those with health conditions or risky lifestyle choices (for example, smoking) will likely see higher rates. |
| Type of policy | Term: Temporary coverage, typically more affordable. Permanent: Lifetime coverage with cash value, offering long-term protection. |
Term life is generally less expensive due to its limited duration, while permanent policies carry higher premiums for lifelong benefits and cash growth. |
| Coverage amount | The amount your beneficiaries would receive in a payout. | Higher coverage results in higher premiums; finding the right balance between cost and coverage is important to the overall cost of your policy. |
| Policy duration | How long you want the policy to last. | Longer-term policies (or lifelong coverage) increase costs, as insurers take on greater risk with age and a longer coverage period. |
| Customizable riders | Additional features like critical illness or accelerated death benefit riders. | Adding riders may increase premiums but can provide valuable benefits, especially if you’re concerned about specific health risks or want added flexibility. |
| Medical underwriting | Depending on the policy, a medical exam or health questionnaire may be required. | Policies with full medical underwriting may offer lower rates for healthy applicants; no-exam options provide convenience but tend to cost more. |
Each of these factors influences your premium differently, so consider what coverage and features are most meaningful to you. Knowing what drives the cost can help you make informed decisions, ensuring you’re protected and stay within your budget.
4. Will my life insurance provide living benefits?
While life insurance is often thought of as a way to protect loved ones after you’re gone, many policies offer valuable living benefits that you can access during your lifetime. These benefits fall into two main categories: cash value (available only in permanent policies) and policy riders that may be available with either term or permanent insurance. Here’s a quick breakdown of what you might expect:
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Cash value (permanent policies only)
With whole, universal and other types of permanent life insurance, your policy can build cash value over time. This cash value can be borrowed against or withdrawn, allowing you to access funds if you need them for personal expenses. Keep in mind, though, that loans or withdrawals reduce the policy’s death benefit, so it’s wise to approach these options carefully. -
Living benefit riders
Riders are add-ons that enhance your policy (whether term or permanent), and several living benefit riders are designed to support you financially if certain life events arise. Common ones include:- Accelerated death benefit for terminal illness: If you’re diagnosed with a terminal illness, this rider lets you access a portion of your death benefit early to help cover medical costs or other needs.
- Chronic and critical illness riders: If you’re unable to perform daily activities due to a chronic condition or suffer a critical illness, these riders can provide funds to support your care or recovery, giving you flexibility during difficult times.
- Waiver of premium for disability: Should you become disabled and unable to work, this rider waives your premiums, allowing your policy to remain in force without adding financial strain.
Living benefits can be a lifeline, but it’s always important to weigh the pros and cons. For example, using a rider or accessing cash value can reduce the death benefit your beneficiaries receive, impacting the original purpose of your policy. Additionally, riders may increase your premiums slightly, but they can offer crucial support when life takes unexpected turns.
5. What life insurance benefits are guaranteed?
Life insurance is built to provide security, but it’s important to know which benefits come with guarantees and which may fluctuate. Here’s a quick look at what you can rely on and what may vary:
- Death benefit: The primary guarantee in any life insurance policy is the death benefit, which your beneficiaries receive if the policy is active when you pass away. However, there are exceptions to keep in mind:
- Contestability period: Typically within the first two or three years of the policy, insurers can deny a claim if there was any misrepresentation in your application or if certain exclusions, like suicide, apply.
- Policy lapse: If premiums aren’t paid, the policy may lapse, resulting in the loss of coverage. Keeping payments up-to-date ensures the death benefit remains intact. For cash value policies, policy lapse can also occur if the policy doesn’t perform as well as expected or loan balance erodes the policy.
- Guaranteed cash value in whole life insurance: With whole life insurance, cash value grows at a guaranteed rate set by the insurer. This steady growth can be a reliable asset over time and can be accessed via loans or withdrawals, but these will reduce the death benefit if unpaid. It’s important to note that not all products have cash values that are guaranteed. For instance:
- Universal life: Cash value growth depends on the credited interest rate set by the insurer.
- Indexed universal life (IUL): Cash value growth depends on the performance of an underlying market index, which means your cash value may rise or stagnate based on the market.
- Variable life: Investments in subaccounts tied to stock or bond funds can lead to fluctuating cash values, providing growth potential but without guarantees.
6. When can I expect returns?
Life insurance with a cash value component can offer a unique benefit: the potential for funds you can access while still alive. However, understanding how and when you might benefit from this cash value requires careful consideration, especially since growth rates, surrender charges, fees and interest can vary widely by policy type. Remember, while cash value is an appealing feature, life insurance is foremost a safety net for your loved ones, not an investment product.
Let’s look at some essential factors to consider when thinking about cash value and accessing those funds.
| Aspect | What it means for you |
|---|---|
| Cash value growth and volatility | Cash value growth varies by policy type. Whole life insurance offers steady, guaranteed growth, while indexed and variable universal life policies may fluctuate based on market conditions. If you have a policy tied to an index or investments, you could see both ups and downs over time. A clear understanding of your policy’s growth structure is crucial. |
| Understanding your cost basis | Your cost basis reflects the premiums you’ve paid into the policy. Withdrawing cash beyond this amount could trigger taxes, and policy loans will typically accrue interest. Both withdrawals and loans reduce your death benefit if not repaid. Knowing your cost basis and the rules around accessing funds can help you avoid unintended taxes. |
| Requesting in-force illustrations | An in-force illustration is a helpful tool from your insurer, showing the projected cash value, death benefit and premium payments over time based on actual values. By reviewing this regularly, you’ll have a clearer picture of your policy’s financial status and can make well-informed decisions about withdrawals or loans based on up-to-date projections. |
| Considering long-term coverage impact | Cash value loans or withdrawals directly impact your death benefit, reducing what will be available to beneficiaries unless repaid. Excessive loans and withdrawals can erode policy performance. Balancing the desire for short-term access to cash with your long-term goal of financial protection for loved ones ensures you’re using the cash value thoughtfully and strategically. |
7. Are there any exclusions or limitations in my policy?
Exclusions and limitations can play a big role in what’s actually covered in your policy, so it’s important to get a clear picture upfront. One common rule to know is the contestability period — usually lasting two years from when the policy begins. During this period, the insurer can revisit the application details. If they find any discrepancies or omissions, they might deny a claim. Another is the suicide clause: if the insured dies by suicide within those first two years, the insurer generally won’t pay the death benefit but may refund premiums.
For those with high-risk jobs or hobbies — think skydiving, piloting or deep-sea diving — some policies cover you but exclude any claims related to these pursuits. In other words, if the high-risk activity is the cause of death, the insurer may not pay out. Some companies, however, offer riders or adjusted premiums to cover high-risk activities more fully. So be sure to ask your life insurance agent questions about potential exclusions and ways to tailor your policy for complete coverage.
8. What if my health changes?
Once your life insurance policy is active, any changes in your health won’t affect your premiums — meaning you’re protected from rate increases even if your health declines. But what if a serious health change leaves you wanting more flexibility in your policy? This is where term convertibility and renewability options can make a difference.
If you’ve opted for a convertible term policy, you may have the option to transition your term coverage to a permanent policy without a medical exam, offering peace of mind that coverage can continue beyond the initial term, regardless of your health status. Similarly, some policies come with renewability options that allow you to extend your term insurance after its expiration, although often at higher rates, which can still be helpful if health changes have made new coverage costly or difficult to obtain.
And, if your policy includes a waiver of premium for disability rider, your premiums may even be waived if a serious health issue leaves you unable to work. This ensures that you keep your coverage intact during challenging times. Be sure to ask your agent about options like these since they offer valuable flexibility that can ease financial concerns if health setbacks arise.
9. What if I need more coverage in the future?
The final life insurance question to ask an agent focuses on the future and what happens if your coverage needs change. As life evolves, your life insurance policy might need to adapt with it. Perhaps your family has grown, or you’ve taken on new financial commitments. Fortunately, many term policies include conversion riders that allow you to convert your term policy into permanent coverage — usually without needing to go through a medical exam. This flexibility can provide valuable options if you find yourself needing longer-lasting coverage.
If you’re considering a brand new policy to boost your coverage, be sure to keep your current policy active until your new one is fully in force. This will ensure that there are no gaps in coverage, protecting your loved ones in case of the unexpected during the transition.
Also, remember, it’s never too late to review your life insurance with your agent. A quick policy check-up can confirm that your coverage still aligns with your needs or uncover new options to support you and your family’s future.
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