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Life Insurance FAQs

Life Insurance is necessary to protect the financial well being of your family. The right policy will transfer the financial uncertainties resulting form a death to a financially strong insurance company. Your family will be able to carry on with their lives and reach their goals without the financial hardship that could result from a lack of life insurance.

  1. How much Life Insurance do I need?
    Everyone's situation is unique to that individual. Some financial experts recommend 6 to 10 times your annual salary. This is an estimate and no substitution for working through your own unique situation. There are a number of factors to take into consideration:
    Martial Status
    Number of children and their ages
    Mortgage, college tuition
    Current level of investments and savings
    What type of legacy/estate do you want to leave to your heirs
    How much can you afford to pay for the insurance

  2. How is my "Health Class" and resulting rate determined? Each company uses their own criteria to determine your health class and your resulting rates. In fact it is entirely possible for the same person to be rated as "Standard" with one company and "Preferred" with another! Some factors such as smoking will have an impact on your rating class. For you to get a "Preferred" rate requires excellent overall health and a healthy lifestyle. Each company's guidelines determine limits on weight to height, cholesterol, blood pressure, and family/personal health history. Please note that all insurance companies require a medical examination at their expense prior to determining your health class and final rates. This health class could be different from rate quoted prior to the medical exam. This is why it is important to have a professional insurance broker search the marketplace and secure the best policy for you.

  3. I have a health problem. Can I get coverage?
    There are many companies available in securing coverage for you. Even if you have been declined in the past, you may be able to obtain coverage. It is always best to try to obtain coverage.

  4. What is the difference between term insurance, whole life, universal life and last to die insurance?

    Term Insurance
    is typically the least expensive of all policies and allows you to obtain the maximum coverage for the lowest cost for a fixed period of time. In the majority of cases it is often the best way to go. The rate can be guaranteed for 5, 10, 15, 20, 25 or even 30 years!

    Whole Life
    is also called "permanent" insurance. It protects you for your entire life. As long as you continue paying the premium it will always be there to provide a death benefit. It can also build up cash value that can be borrowed from the policy.

    Universal Life is also called "permanent" insurance. With this type of policy, there is the potential for cash value to build up over time. The real focus is to provide a guaranteed death benefit to age 100 or beyond! It is very similar to a term policy that never ends. Many people find a combination of term insurance and universal life meets their need for protection for a period of time and leaving a legacy for their children.

    Last to die Insurance is insurance on two lives that would pay upon the second death. These policies are used in estate planning to pay estate taxes.

  5. Does it make sense to replace an existing policy?
    It always makes sense to shop the marketplace. If you stopped smoking or improved your health status you may qualify for reduced rates. If you do shop around you should never let your existing policy lapse until the new coverage is in effect.

  6. When will the policy begin?
    If you decide to purchase the insurance, the insurance becomes effective when you have accepted the policy and the home office has received all necessary documents and premium required.

  7. What is involved in the application process?
    The process starts with submitting an application and taking a medical exam. The medical exam can be scheduled at your home of office. The exam typically consists of medical history questions, blood/urine specimen, height/weight reading and EKG. It is better to have the exam done in the morning. Once the exam and application are received it usually takes between 4-8 weeks to get an offer from the insurance company.

  8. What is the tax treatment of life Insurance?
    Life insurance death benefits are generally free of all federal and state taxes. The proceeds may be subject to estate taxes unless proper planning has been taken place. There is way to avoid this with proper planning by using trusts. You should always contact an attorney who specializes in estate planning to review the proper way to handle this.

  9. Should I buy insurance on my spouse?
    In most circumstances, yes. If the spouse has an income from working insurance can replace the possible loss of wages. If the spouse is a homemaker, the life insurance will be needed to cover daycare and other costs associated with the running of a home.

  10. What is return of premium term life?
    This is a form of term insurance where you get all the money back from the insurance company after the specific term of the contract ( 10,15,20, or 30 years). These policies generally cost about 30% higher than term insurance. The money returned is tax free as it is return of the money you put in.

Estate Planning FAQs

  1. What is estate planning?
    Estate planning involves the planning of the transfer of your estate to your heirs. Proper planning is important as if you do not have a will the state will decision how your assets are transferred.

  2. What is a will?
    A will is a legal document that set forth how your assets are transfer after death.

  3. What is a trust?
    A trust is an agreement between 2 parties for the benefit of a 3 party.

  4. The basics of the irrevocable life insurance trust
    This trust is set up so that life insurance is not part of your estate and subject to the estate tax which can be as high as 47%. For married couples a last to die policy is generally used to fund the estate taxes due upon the death of the second spouse. Generally the trust is first established and then the trust would be the owner of the policy and the beneficiary of the policy so that it is excluded from the gross estate. You should always seek the advice of a lawyer who specializes in estate planning in setting up the trust.

  5. Marital deduction
    If you are married you can leave an unlimited amount of assets to your spouse without any estate taxes. When the remaining spouse dies then estate taxes are due to the IRS. Taxes are due within 9 months after your death. Life insurance if properly planned can play an important role in paying the estate taxes due.