Frequently Asked Questions About Life Insurance

The common types of life insurance are term, whole and universal. Learn more

No, not anyone. You have to have an insurable interest in the person. Parents would qualify. To prove you have an insurable interest, you have to show the life insurance company that you would suffer financially if that person died and that there is no incentive to shorten someone else’s life. Other examples of insurable interest include your spouse, former spouse, children, siblings, business partner, and key business employees.

Yes, BUT not without their approval. They will need to sign a consent form and likely undergo a medical exam before the policy is approved.

The cost of life insurance will depend on the type of policy you purchase, as well as your age, gender, and health. For example, as of 2023, the average annual rate for a 40-year old man is around $334 and $283 for a woman (based on a $500,000, 20-year term). Here is a useful life insurance estimator to get you started.

The cost of life insurance will depend on the type of policy you purchase, as well as your age, gender, and health. In general, the average monthly payment for a $100,000 20-year term is as follows:

• Healthy 40-year old averages $12/month

• Healthy 50-year old averages $25/month.

• Healthy 60-year old averages $40-60/month

Get your FREE no-obligation quote

As with all states, the five things not covered by life insurance are preexisting conditions, accidents that occur while under the influence of drugs or alcohol, suicide, criminal activity, and death due to a high-risk activity, such as skydiving, and war or acts of terrorism.

NOTE: Most life insurance policies include a suicide clause that prevents the insurer from paying out the claim if the insured's death was due to self-inflicted injury within a certain period from the start of the policy (typically two years).

Life insurance covers death due to natural causes. If you die of a heart attack, cancer, an infection, kidney failure, stroke, old age, or some other natural cause, your beneficiaries will receive the insurance payout.

Modified whole life insurance is a type of life insurance policy that combines elements of both whole life insurance and term life insurance. It is designed to provide coverage for the entire lifetime of the insured, but with certain modifications or changes to the premium structure.

In a traditional whole life insurance policy, the premiums remain level throughout the policyholder's life, and the policy builds cash value over time. However, modified whole life insurance introduces changes to the premium structure for a specific period, typically the first few years of the policy.

During the initial years, the premiums for modified whole life insurance are typically lower than those of a standard whole life policy. This can make it more affordable for individuals who may have budgetary constraints early on. However, after the initial period ends, the premiums typically increase to a higher level, often referred to as the "modified" premium. Still have questions? Contact us today for expert advice

Generally, Medicaid cannot take a life insurance payout from a beneficiary. That's because the life insurance company will send the funds of your death benefit directly to the beneficiary. It is critical to name a beneficiary on your life insurance policy.

However, a life insurance policy could have potential impact on eligibility for Medicaid benefits.

It's crucial to consult with a qualified attorney or a Medicaid specialist in your state to understand the specific Medicaid rules and regulations that apply to life insurance and its impact on eligibility and potential asset recovery.

Whole life insurance can be used as a tool to accumulate cash value over time, which can provide you with certain banking-like features. Here are a few ways you can potentially use whole life insurance as a "bank":

1. Cash Value Accumulation: Whole life insurance policies have a cash value component that grows over time. As you pay premiums, a portion goes towards the cost of insurance coverage, while the remaining amount is invested by the insurance company. This cash value grows on a tax-deferred basis, meaning you don't have to pay taxes on the growth as long as it remains within the policy. Over time, you can build up a significant cash value within the policy, similar to accumulating funds in a bank account.

2. Policy Loans: One of the key benefits of whole life insurance is the ability to take out policy loans against the cash value. You can borrow money from the insurance company using your policy's cash value as collateral. The loan proceeds can be used for various purposes, such as financing a business, education, or any other personal expenses. The loan typically accrues interest, which is charged by the insurance company. However, the interest you pay on the loan may be lower than what you would pay for a traditional bank loan, and the interest you pay goes back into your policy, not to a separate lender.

3. Withdrawals: Another way to access the cash value is through withdrawals. You can withdraw a portion of the cash value, typically up to the amount you have paid in premiums, without incurring taxes. However, any withdrawals beyond the premiums paid may be subject to taxes. It's important to consult with a financial professional or tax advisor to understand the tax implications of withdrawals from your policy.

4. Estate Planning: Whole life insurance can also be used as part of an estate planning strategy. The death benefit paid out to the beneficiaries upon the insured's death is generally tax-free. This can be beneficial in providing a tax-free inheritance to your loved ones or covering estate taxes or other expenses.

While whole life insurance can offer some banking-like features, it's essential to consider the associated costs, including premiums, fees, and interest on policy loans. It's recommended to carefully evaluate your financial goals, compare the potential benefits and drawbacks, and consult with a financial advisor who can provide personalized advice based on your specific circumstances.

A type of life insurance policy that generates immediate cash value is called a "single premium whole life insurance" policy. With this policy, you make a lump sum payment of a single premium upfront, and the policy immediately has cash value.

Here's how it works:

1. Lump Sum Payment: Instead of paying regular premiums over time, you pay a single large premium upfront. This premium is typically larger than what you would pay for a traditional whole life policy.

2. Immediate Cash Value: Since you've made the lump sum payment, the policy has an immediate cash value. The cash value starts to grow right away, and it can be accessed through policy loans or withdrawals.

3. Death Benefit: The policy also provides a death benefit to your beneficiaries in the event of your death. The death benefit is typically higher than the initial premium paid and is determined by the policy's terms and conditions.

It's important to note that single premium whole life insurance policies are designed to provide both cash value and death benefit. However, they are not suitable for everyone. The upfront cost can be substantial, and it may tie up a significant portion of your assets. Additionally, single premium whole life policies may have higher fees and commissions compared to other types of life insurance.

Before considering a single premium whole life insurance policy, it's essential to evaluate your financial situation, long-term goals, and liquidity needs. Consulting with a financial advisor or insurance professional can help you determine if this type of policy aligns with your specific needs and financial objectives.

An up-to-date life insurance policy does not have to go through probate. Because a beneficiary is designated within the policy, the life insurance is paid out directly to the beneficiary upon the death of the policy owner.

Life insurance companies generate revenue and make money through several key mechanisms:

• Premium Payments: Policyholders pay regular premiums in exchange for coverage.

• Investment Income: Life insurance companies invest premiums to generate additional income.

• Policy Fees and Charges: Fees cover administrative and policy management costs.

• Mortality Profits: If fewer claims are paid out than predicted, the company retains the difference.

• Policy Lapses and Surrenders: Terminated policies may result in financial gains for the company.