Frequently Asked Questions About Life Insurance

Many people have questions about life insurance.

I have put together some of the most common questions that people ask about life insurance along with the answers.

If you’re wondering what life insurance is all about and how it works, then this FAQ is a great place to start.

Why Should I Buy Life Insurance?

Life insurance is purchased by people for a variety of reasons.  The following is a sample of some of the most common reasons why people buy life insurance, but there are many more:

·         Income replacement for lost wages if you’re the major breadwinner

·         Paying off a mortgage or personal debts such as credit cards and loans

·         Funeral, burial and medical expenses

·         Retirement and savings

·         Money used to fund your child’s education

·         Estate reasons, trusts and charitable donations

·         Business reasons

What Types of Life Insurance Policies Can I Buy?

There are 2 types of life insurance policies which you can buy and they include term insurance and permanent insurance. Permanent insurance is broken down further into whole life, universal life and variable life.

How much Life Insurance Do I Need?

This is dependent on your individual situation and actual needs.  Ideally, most experts state you should get 10 times your annual gross salary. It also depends on your reasons for buying life insurance. You need to take into account your current savings, investment plans and other assets plus any other plans such as what you might receive from your employer or Social Security.  Then, consider what you might consider the financial shortfall for your situation and you can use that as a guideline.

What is Term Insurance?

Term insurance policies cover you for life but are purchased for a specific length of time such as 5, 10, 15, 20, 25 or 30 years.  These policies cover lump sum, non-taxable death benefits only.  The premiums for the term you select are fixed for the term you select. These policies are also renewable or can be converted into a permanent policy, often without having to take a medical exam

What is Whole Life Insurance?

Whole Life insurance has both death benefits and a tax sheltered cash value accumulation feature.  Premiums and the rate of return on the cash value accumulation are guaranteed. These policies have a higher premium initially than a term policy, but the coverage is for your lifetime.  Whole life premiums can be paid-off in a limited number of years.

What is Universal Life Insurance?

Universal Life insurance is similar to whole life as it has both death benefits and a tax sheltered cash value accumulation component.  You have more flexibility with this type of policy as you can change your death benefits and how you pay the premiums.  Some policies allow you to choose your investment options.

Is Life Insurance Tax-Free?

Yes, in most instances your named beneficiary will receive a non-taxable lump sum payment on your death benefits.  However, if you name your estate as beneficiary, or buy a policy as a third party, there may be possible tax implications at both the state and federal levels.

Can I Change My Beneficiary?

Yes, and all you would have to do is contact your insurance company or agent and request a ‘Change of ‘Beneficiary’ form.

Can I Pay My Life Insurance Premium By Installments?

Yes, you can pay your premium as a lump sum, and most companies allow you to choose either monthly, quarterly, semi-annual or annual payments.  Payment options may vary from company to company.continue page 2……

Sample Life Insurance Quotes Ages 36 to 40

Young Married Couple Needing Life InsuranceWelcome to Huntley Wealth Insurance, where we offer affordable term and whole life insurance coverage to individuals of all ages.

In this article, I’ll be discussing the cost of life insurance for individuals ages 36 to 40. 

We’ll also cover the factors that influence your premium, how much you need, the appropriate type of insurance, and how to apply.

Sample Cost of Insurance, $500,000 Life Insurance, 36 to 40 Years Old

Age                                    10 Year Term             20 Year Term             30 Year Term
Male Age 36                          $14                                $24                             $39
male Age 37                          $16                                $25                             $42
Male Age 38                          $16                                $27                             $45
Male Age 39                          $17                                $28                             $49
Male Age 40                          $17                                $31                             *$53

*All Premiums per Month – and based on rates available as of June 1st, 2013, and are subject to change.  Rating class quoted above is Preferred Best Non Tobacco.

Factors Affecting Cost of Insurance – Ages 36, 37, 38, 39 and 40

The primary ingredients built into a life insurance premium are your age, sex, health, and type of policy you purchase.  Males cost a bit more, generally, than females, since on average, they die younger.  Age should be easy to understand.  A man who is 40 years old will pay a bit more than a male age 37 for the same amount of coverage.

Generally speaking, the healthier you are, the lower cost of life insurance you’ll pay.  So a 36 year old male with no medications and no history of health issues should be approved at a better health classification than the male, age 36, who applies for guaranteed term life insurance, but has a history of a seizure disorder, just as one example.

We routinely help clients purchase low cost life insurance between the ages of 36 to 40 with varying medical histories.  So please don’t be intimidated to apply for coverage if you have a history of high blood pressure or cholesterol, obesity, heart disorders, diabetes, cancer, any many other ailments.

Importance of Independent Agency

The most important factor in getting life insurance at age 36 or 37, or any age for that matter, is using an agency who can shop your case amongst many insurance carriers.  As independent agents, this is our specialty.  Some insurance companies may penalize you for certain medications, family history, or other medical issues.  The key is applying to the company who will offer you the most attractive rate classification.

For example, let’s say you’re a 38 year old seeking 10 year level term insurance, male with sleep apnea and use a CPAP.  Most insurance companies will rate you at standard non tobacco, even if the apnea is under good control, but if you apply to Pruco Life Insurance, you’ll have a fair shot at a Preferred rate, assuming you can otherwise qualify.  If you used an agent who was a captive agent for, say, MetLife, you would probably end up being approved at Standard rather than Preferred, and would pay approximately double the premium for the same amount of coverage.

But if you’re not careful, you might even be penalized for a family member’s health history.  Assume you are a 39 year old man applying for 30 year term life insurance, who takes no medications, completely healthy, but your father had prostate cancer at age 56.  Most companies will not allow you to qualify for their best rating, since cancer is proven to be passed genetically, but we do know of at least one company who won’t even ask about your family’s cancer history on the application, making them the ideal company to apply to for this 39 year old healthy man.

So no matter where you purchase your life insurance, be sure to ask your life insurance agent if he or she is an independent broker or captive to one life insurance company.

Which Type of Insurance and How Much?

Ninety percent of our insureds in their late 30’s will need term life insurance.  In most cases, I’ll recommend 20 or 30 year level term.  This means your premium will stay level during the initial 20 or 30 year term, and prices are guaranteed not to increase until after the initial term has ended.  Term insurance is the most affordable type of coverage, making it ideal for young families who simply need the death benefit protection at a low cost.

There are types of life insurance that provide additional benefits, such as guaranteed coverage throughout your entire life and building cash values, such as whole life insurance or universal life insurance.  We do offer these plans, but we find them inappropriate for most of our clients age 36 to 40.

To calculate how much life insurance you need, please use our income replacement calculator.

Applying for Life Insurance

Simply get started by getting a quote using our instant quote form to the right or calling us toll free at 877-996-9383.  In some cases, a medical exam will be required, as well as authorization for the insurance company to obtain your medical records.  We handle all of this and there’s no cost to you to apply.

How to Buy Life Insurance

There are a few ways to explain how to buy life insurance.  Some people prefer using their local insurance agent from State Farm, Farmers, AAA, etc.  Others needing life insurance might see an advertisement from an insurance carrier such as Met Life, and call the company directly.

How to Buy Life Insurance

The best way to buy life insurance, in my opinion, is to get multiple online life insurance quotes from a company that offers quotes from several different carriers.  For example, a company such as Select Quote or Accuquote will be able to provide quotes from multiple companies.

Selecting the Amount You Need

The two questions you need to know before purchasing life insurance are “how much do I need?” and “what type of insurance is right for me?”  We’ll first address the amount of death benefit needed.

Most people purchase life insurance to cover a specific financial need.  One of the most common is when an income producing spouse and/or parent wants to protect against his or her loss of income due to an unexpected death.  This is a wonderful reason to have life insurance in place on your life.

Say you make $60,000 per year and you’re a 38 year old male.  You might be working for another 20 to 30 years before you’re able to retire.  Just imagine how much future income is lost if something happens to you before reaching retirement age!

Since income replacement is a very common reason to purchase life insurance, we provide an income replacement life insurance calculator on our site for free.  Just go to: How Much Life Insurance Do I Need?

If the life insurance calculator is too complex for your needs, a good rule of thumb is to carry 5 to 10 times your annual income on your life.  Of course you’ll need to take your current assets and debts into account.  The individual who has $500,000 in a personal IRA may have a decreased life insurance need in comparison to an individual with nothing in the bank and $100,000 in credit card debt, all things equal.

Other valid insurance needs are to cover debts, a mortgage, a business loan, to cover a key employee (known as key man insurance), to pay for estate taxes or death taxes, and to pay for death and funeral  expenses.

Which Type of Life Insurance is Right for Me?

Please read the section above before this section.  If you’re need is for income replacement, you almost certainly need term insurance and nothing more.  Term life insurance covers you for a specific period of time, and is typically much less expensive than whole life or universal life insurance.

On the other hand, if your need life insurance protection for the rest of your life, or if you are interested in the ability to grow cash value (from which you can borrow or withdraw funds), then you will need to consider a whole life insurance or universal life insurance quote.

If you’ve read the sections on selecting the amount you need and what type of insurance to buy and are still confused, call us at 877-966-9383 to tell us your situation and we’ll help you.

How Much Will I Pay?

This question depends on several factors.  Life insurance companies charge different rates to males and females of the same age and health status, so sex is the first variable.  They take mortality risks into account such as health problems (heart disease, cancer, diabetes, high blood pressure, etc) or other risks not related to your health such as occupational risks, hobbies and activities, and family health history.(continued on page 2)

Life Insurance Ages 76 to 80

Senior Couple Married Needs Life InsuranceOne of the more common questions we get here at Huntley Wealth Insurance is whether or not you can purchase life insurance between the ages of 76 to 80, and if we can help.

Yes, you can qualify for coverage at this age, and even all the way up to age 90, and yes, we will help you find the best life insurance for seniors over 75 at the best rates for your needs.

How Much Does Life Insurance Cost at Age 76-80?

The cost of life insurance at age 76, 77, 78, etc., really depends on your health.

Some of our clients have never experienced health issues, who will be candidates to qualify for preferred health ratings, and lower premiums.

Sample Term Quotes for $25,000 Coverage

Type of Insurance             10 Year Term               To Age 121

Male Age 76                          $113                                $124  (ALL QUOTES PER MONTH)
male Age 77                          $125                                $132
Male Age 78                          $143                                $143
Male Age 79                          $161                                $159
Male Age 80                          $183                                $180

Quotes based on premiums for a male in Preferred Non tobacco health classification as of 11/21/11.

Please use our quote form on the right for a quick quote, but please understand that these quotes should be used as a general guideline, and be sure to read the section below titled “Your health affects your premium” to understand the pricing better.

Your Health Affects Your Premium

When you think of an individual at age 78 or age 79, it’s pretty rare to find one who does not at least take a couple medications, even if it’s for something as mild as hypertension or osteoporosis.  With a minor issue such as these, affordable coverage is not hard to find.

If your medical impairment is not too complicated, you may be able to be approved at preferred or standard rates.  This means you’ll pay a lower premium for the same amount of coverage than a policyholder who is approved at a substandard health rating.

How Much Life Insurance Do I Need if I Earn $50,000, $70,000 or $100,000 Per Year?

Let me teach you a quick trick I commonly use to calculate how much life insurance my clients need.

(Annual Income Needed) divided by .05

So if you make $70,000 per year, and need to know how much life insurance is needed to generate a $70,000 income to your spouse upon your death, the calculation looks like this.

$70,000 / .05 = $1,400,000  –  You need 1.4 Million

With 1.4 Million coverage, your spouse could take the death benefit and invest it.  If your spouse can earn on average 5%, it will generate $70,000 every year, and he or she could live off of the interest.

Other Income Replacement Calculations

Income Per Year Needed                 Amount of Life Insurance Needed

$30,000                                                 $600,000

$40,000                                                 $800,000

$50,000                                                 $1,000,000

$75,000                                                 $1,500,000

$100,000                                               $2,000,000

Please note with this method, your spouse could theoretically live off the interest without the principal ever depleting.  I realize this may sound a bit excessive to some people, so if you want to calculate how much life insurance is needed to replace your income for a fixed number of years, such as for 10 or 20 years, please use our life insurance calculator.

Now, I realize 5% is a bit optimistic for where interest rates are current day, but I’m talking an average over a long period of time.  If you want to calculate a more conservative current interest rate, divide the annual income needed by .03 or .04.

What about Investments, Funeral Expenses, and Mortgage?

I realize some of you may have retirement funds, pension money, or other insurance to factor in.  If that’s the case, simply subtract the amount of liquid assets available upon your death from the amount of life insurance needed.

Perhaps you’re trying to accomplish a different goal than replacing income, such as paying for funeral expenses, paying of debt, or a home mortgage.  This gets a bit complicated, and I don’t think there’s any objective way to calculate the exact amount any person needs.

A simple rule of thumb here, though, is to add up the bills you want paid off, and then use the chart above to calculate how much additional life insurance would be needed for income replacement.  Obviously, if you leave your spouse with no debt and no mortgage payment, the amount he or she will need per year to replace your income is lower.

Adjusting Life Insurance Needs for Inflation

Inflation puts a wrench in things.  If you desire to provide a guaranteed income stream for life, obviously the longer that income stream stays fixed, the less buying power that money will have.

The simple way to adjust your life insurance need, using the first calculation we learned, is to subtract the inflation rate you expect from the interest rate you expect to earn.  So if you think your beneficiary can earn 5%, but inflation will be 2.5%, then you will only net 2.5%, and that’s the number to use in your calculation.  Using our $70,000 income need:

$70,000 / .025 = $2,800,000 life insurance needed (adjusted for inflation)

If you need life insurance to accomplish a specific goal that’s not covered above, such as key man life insurance or life insurance to pay estate taxes, it’s best to give us a call for an individualized needs assessment.  877-996-9383

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What Women Need to Know about Life Insurance

Life Insurance for WomenAt Huntley Wealth Insurance, we help males and females alike purchase affordable term and whole life insurance to provide valuable protection for their families, businesses, and estates.

While the name of this particular website intends to attract a male audience, we DO provide quality advice and pricing for women needing life insurance as well.

Why Women Need Life Insurance – And Why They Typically Don’t Have It

At Huntley Wealth, approximately 30% of our life insurance clients are women.  This statistic speaks to the importance of the working wife and/or mother in modern times.

Today, many women provide a valuable, irreplaceable income for their families, which, if lost due to sudden death, would leave these wives’ and mothers’ families having to cope with one less income.

That’s where life insurance comes to the rescue.  Life insurance is commonly used to insure future earnings.  For example, if a woman earns $75,000 per year, and will do so for the next 20 years, she might purchase a 20 year term life insurance policy with a death benefit in the range of $1 Million to $1.5 Million.  If the death benefit earned 5%, her surviving husband or children could draw 50K to 75K from the death benefit to pay bills, the mortgage, and provide for needs without the funds ever depleting.  What would the surviving family have done without these funds?

The problem with modern families is that women generally have less life insurance than men, according to MetLife’s most recent “Employee Benefits Trends Study” in 2011.  The study also showed that women are more concerned about the impact their sudden death could have on their families than men, which is wonderful, and in my opinion, as a man with a wonderful, loving wife, I can certainly understand that.  So why aren’t females properly insured?

The key problems, or myths, I think, revealed in this study and others have to do with cost and simplicity of the life insurance process.  A study from Nielsen/Claritas proved that 44% of high income women (earning in excess of 50K per year) believe that life insurance costs more than they can afford.  Furthermore, 67% of the same women believe that selecting a life insurance product is a complicated process.

Life Insurance Costs Too Much

In most cases, life insurance is very affordable… dirt cheap even!  First, women pay less than men for life insurance, since their life expectancy is longer on average.  If you are in good health, let’s just say you can probably afford life insurance at some amount.  For example, I’ve provided quotes below for $500,000 of coverage.  Of course, your coverage could cost even less if you purchase a lower face value.

Quotes for Female, Excellent Health, $500,000 Coverage, Non Tobacco User

Age                                    10 Year Term             20 Year Term             30 Year Term

Female Age 30                          $13                                $18                             $27 – Per Month

Female Age 40                          $16                                $26                             $42 – Per Month

Female Age 50                          $35                                $59                             $97 – Per Month

Female Age 60                          $78                                $148                           $213 – Per Month*

*Note that these quotes are available as of 12/15/2011 and are subject to change.  Rates quoted would apply to female, non smoker, who can qualify for best class health classification.

The Life Insurance Process

For those of you who believe selecting a life insurance product is complicated, please allow me to outline the steps to selecting, applying for, and purchasing a life insurance policy.

  1. Speak to a knowledgeable independent agent about your health history.  If you take any medications or have a history of medical conditions, a good agent will know which companies will rate you at the best health classification, which will save you money.  Your agent should also be able to quickly and clearly explain the types of life insurance and how much is appropriate for your needs.  This should take about 10-15 minutes over the phone.  Call an agency like Select Quote, Accuquote, or our agency, Huntley Wealth.
  2. The application process is straight forward.  At our agency, we take information (address, drivers license, legal name, beneficiaries, etc.) over the phone and send the application to our clients to sign.
  3. After completing and signing the application, most insurance policies require a medical exam.  The cost of the exam is paid by the insurance company.  The exam typically includes blood and urine specimens.
  4. After the medical exam, you’ll be approved typically in 2 to 6 weeks.  The time it takes to approve you primarily depends on whether or not medical records will be ordered from your attending physician’s office.
  5. Once approved, your agent will forward your policy to you.  You send payment, and sign a form showing you received the policy.  Once all requirements are received by the insurance company, your policy will be in force, or effective.

The Met Life study reported women who do have life insurance typically are unaware of the type of coverage (i.e. term, universal life, or whole life) that they possess, and undervalue the amount needed to properly insure their lives to meet their families’ financial needs.  Please don’t fall into this category.  If you have a policy and aren’t sure what benefits it has, or if you need life insurance, please call us to review your needs at 877-996-9383.

Chris, How Much Coverage Do You Have? My Case for Life Insurance!

As a life insurance agent, I’m constantly telling others why they need insurance.

How about this for a twist?

Here’s why life insurance is important to me and my family, and how much we own.

Why We Need Life Insurance for My “Income-less” Wife

My wife works part-time, just one day a week in fact. We have two children, ages 2 and 4, and one on the way. We own a home in San Diego with a 30 year mortgage. We’ve made it a priority for her to stay home with the kids, while I work full-time, something very important to us.

While my wife doesn’t earn much, but that doesn’t mean we don’t need life insurance on her. I currently have $350,000 of coverage on her.

If something were to happen to her, God forbid, I know our financial future is still secure. With the proceeds from her life insurance policy, I would have the necessary funds to help pay for daycare, housekeeping, and so on.

You can’t even begin to measure all the things all the ways my wife is irreplaceable to our family, as mother, soccer coach, errand runner, and everything she does at the house, so there’s no way to put an exact dollar amount on what someone’s life is worth, but I do know my family and I would be a hundred times better off with $350,000 in the bank than without it.

How Much Coverage Agent Chris Huntley Has… and Why

As for insurance on my life, I have 4 policies: (A $500,000, 10 year term policy (Banner), a $750,000, 30 year term policy (Genworth), a $100,000 universal life insurance policy, and a 10 year term business policy for $500,000, with my partner as the beneficiary, so she could buy out my wife if I were to pass away unexpectedly.)

There are a few goals I’m trying to achieve with my policies, but the most important is replacing my income. I’m a young man, 32 years old at the time of this writing, and probably have 30 more years of income producing years ahead of me.

These years will be crucial for me to continue earning income to pay down our mortgage, raise our girls, put them through college, and continue putting away money for retirement.

Imagine if my income were lost.

That’s why I have life insurance. I know that if I don’t come home one day, my wife will continue to be able to pay the bills, raise our children without having to work full-time (something important to us), or end up moving in with her parents.

If you’re wondering how much life insurance you should have on your life use this calculator on our site, or I would recommend a minimum of 5X your annual income, and if affordable, 10X is even better.  This depends on your age.  If you’re in your 30′s you can actually qualify for up to 30 to 40X your income.

… And without revealing my exact income I make, let’s just say the $1.85 Million on my life would replace my income for many, many, many years, which makes me feel great!

I don’t always write such personal articles, but am today in honor of the Life Insurance Movement, orchestrated by Jeff Rose, a fellow life insurance agent and CFP. Today, Aug. 22, 2012, hundreds of other bloggers are writing about why life insurance is important to them.

Another use for life insurance? As a sleeping pill.

I don’t know what it is about my house, but it makes a lot of noises. We’ve never had a break-in, and own a shotgun for defense, but I’m still a very light sleeper, and often wake up at the tiniest of noises. And with God as my witness, I do occasionally think about what would happen if the worst were to happen in my home, and it helps me to know if I were to die defending my family, they would be protected with life insurance.

If you’re on the fence about buying life insurance, I suggest you at least consider buying a small policy. How much better off would your family or business be with $100,000 upon your death? You can get started with the process with a quick quote on the right or by calling 877-996-9383.