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.: Life Permanent & Term
   & Disability

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Frequently Asked Questions
Life & Disability


What kind of Life Insurance policy is best for me and what will it cost?

There are two basic types of life insurance, Term (no cash value) and Permanent (cash value). Which type is best for you, depends on the purpose and length of time you want coverage. The cost depends on the type and plan chosen, your age, gender, use of tobacco, medical conditions, etc. but generally, Term Life has the lower premium.

Will you explain Term Life Insurance and why it is called that?

Term Life is just that, life insurance designed to last for a certain term (period) of needed coverage, such as 5, 10, 20 years. Failure to make timely premium payments on a term policy will result in a policy termination. It is basic coverage and requires the lower premium of the two main types of life insurance (Term & Permanent). Term Life may be a good choice if you have a 15 or 20 year mortgage, for example, and therefore know the length of time you require coverage.

Will you explain what Permanent Life Insurance is? 

Examples of these policies are Universal Life (UL) or Whole Life. They are designed to have a cash accumulation or 'cash value' element that might provide advantages, such as the ability to borrow from it, use as collateral, use against required premiums, or simply withdraw for some use such as college tuition. Permanent policies can remain in force for as long as you live if proper premium payments are made. Permanent insurance premiums are higher but policies may have paid-up features or be designed to require no additional premium after a certain number of years.

Why should I choose a Permanent Life policy over a Term Life policy?

Difficult as it might be to face, death is inevitable so choose a Permanent policy if you are not independently wealth and your need for coverage will not go away. If you choose a Term policy make sure you will not need life insurance after the "term" ends. While the premium may be less expensive at first, the Term policy will either terminate at some point or the premium become too expensive to afford. Permanent policies have cash value elements that might prove valuable but most important is they remain in force as long as you pay the proper premium or at least up to the actuarial estimated life span. If premium is an issue but your need for insurance will continue, consider a combination (Ex: $500,000 needed - $250,000 Term policy and $250,000 Permanent).

What examples might illustrate when it is best that I own a Permanent life insurance policy?

This is the right kind of policy for Estate Planning purposes, or when having the cash value element is important to you for collateral, or future borrowing, or withdrawals, when there is a Special Needs beneficiary or a surviving spouse to protect, or any other situation when it is important that the policy continue until your death.

Why might I choose Universal Life (UL) over a Whole Life policy?

UL is usually a more flexible policy. Later on you might not need as much coverage, for example, and your UL policy will allow you to reduce the face amount, thus reduce your premium. With UL, or VUL, a premium payment might be delayed or even skipped, provided the policy cash value is sufficient. 


What does Disability Insurance cover? 

This coverage is designed to replace your wages or to provide income to you when you are ill or injured, usually due to a non-work related injury, and you are unable to work or only able to work part-time. 

How much Disability coverage might I need to buy?

You can usually purchase amounts to replace 60% or more of your salary but may choose to purchase less, such as enough to cover your necessary monthly expenses, mortgage, food, utilities, etc. 

What criteria do insurance companies use to determine my eligibility and the amount of Disability Insurance protection I may purchase?

Your wages, Schedule K-1 (IRS form), etc. are the first criteria. However, the insurance company will also look at additional income available to you, such as, investment income and other non-earned income or prior retirement and pension benefits. Your occupation is an important element but your health is one of the most important. 

Does Disability Insurance cover me if I become pregnant and am unable to work?

It depends upon the type of Disability policy you purchase and when. Short Term Disability plans usually cover maternity, "as any other illness," beginning with a specified trimester and duration. Long Term Disability on the other hand typically requires a longer waiting period for benefits to be payable and therefore, only complications of pregnancy may become eligible.

Can I get a Disability Policy if I am Self Employed?

Yes and it is most important that you, a Self Employed person, have Disability Insurance to replace income in case of illness or injury. There are several policies available for the Self Employed individuals. Typically, to qualify for a policy you must have been in business for a few years or have extensive experience in that same industry. If it is your first year or so in business you still may qualify for a policy if, for example, you are a contractor and hold signed contracts that show potential income.

How long will a Disability policy pay benefits if I become disabled?

The maximum length of the benefit period is determined by the benefit period you purchase. Typically the length of time or period you choose will, in part, determine your premium. For example, to keep your premium low you may choose a short period of coverage, such as 5 years but you may prefer to choose coverage until age 65 or the national adjusted retirement age for a higher premium.



Frequently Asked Questions :: Glossary of Common Terms

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