A slim majority (52%) of Americans have some sort of life insurance coverage, according to LIMRA’s 2023 Insurance Barometer Study. They can sleep easy knowing that their death won’t cause a financial burden for their loved ones.
On the other hand, 48% of Americans aren’t covered by life insurance.
Maybe you’re one of them. Maybe you buy into the persistent life insurance myth that only certain people need coverage, or you’re put off by medical underwriting, which often requires a medical exam. You also might just be overwhelmed by life insurance jargon — riders, premiums, death benefits, and on and on — and don’t know where to turn for answers.
The key to finding the right life insurance is knowing the questions to ask a life insurance agent. Check out this guide to be the most informed on how to discuss your needs with life insurance companies.
1. How Much Does Life Insurance Cost?
One of the most common questions to ask your life insurance agent is how much life insurance costs.
An agent can’t give you a one-size-fits-all answer but can estimate the costs based on your criteria. You won’t know the exact cost until your application goes through underwriting because numerous factors affect life insurance premiums. The most important include the type of policy, your age, length of coverage, your overall health, smoking history, and driving record.
2. How Much Life Insurance Do You Need?
Like the total life insurance cost, how much you need depends on your personal factors. However, asking an agent how much you need starts the conversation and helps them understand what you want or need to cover.
“Ten times your current income” is a rough rule of thumb that works for many life insurance applicants. Under this rule, someone earning $75,000 per year would need $750,000 in life insurance coverage.
However, you could mistakenly underestimate your life insurance needs, so talking to a life insurance agent is critical. They’ll look at your annual income, current debts, expected expense increase, and current assets. They also consider the future value of your assets to determine the right amount of life insurance.
3. What’s the Minimum Amount of Coverage You Offer?
Life insurance coverage minimums vary by policy type and insurer.
The typical minimum amount of coverage for an individual term life insurance policy is $50,000 or $100,000, although some insurers may offer coverage in lower amounts. This is one of the most important questions to ask your life insurance agent because you must know if they offer coverage that suits your needs.
4. Can You Convert a Term Life Insurance Policy to a Permanent Life Insurance Policy?
Many term life insurance policies include a conversion rider that allows you to change to a permanent policy during what’s known as a conversion period. The conversion period generally extends from five years after the policy is purchased through the end of the policy term.
Your premium will increase significantly when you convert a term policy to a permanent one. However, you may be able to reduce your death benefit and partially offset the increase. Ask your agent about the details of the conversion to ensure it’s right for you.
5. Do All Life Insurance Applications Require a Medical Exam?
No-medical-exam life insurance policies (or “no-exam policies”) do not require a medical exam during the application process. However, some no-exam policies do consider the applicant’s answers to health- and lifestyle-related questions and may review their medical records for evidence of potential health issues. Ask a life insurance agent if they offer no-medical-exam policies and their requirements to determine if it’s a good option for your coverage needs.
6. What Happens During the Life Insurance Medical Exam?
Each insurance company handles the life insurance medical exam differently.
Depending on your insurer, your life insurance medical exam might take place in an exam room at a public medical testing center or in your home. It’s usually conducted by a licensed nurse. They’ll take your weight, height, blood pressure, pulse rate, and possibly other vitals.
Ask your life insurance agent what tests they require, how long the results take, and how they use the results for underwriting the policy.
7. How Long Does the Life Insurance Policy Last?
Always ask for important details about a policy you’re considering. Typically, a term life insurance policy lasts at least as long as its initial term. Life insurance terms typically range from five to 30 years. Terms of 10, 15, and 20 years are common as well. During this initial term, the premium remains fixed or “level” and doesn’t rise.
At the end of your initial term, you may have the option to renew your policy for one or more shorter terms, usually lasting one year each. Your premium will be much higher if you choose to renew because you’ll be older. Ask your life insurance agent if they offer the option to renew or if you must reapply for new insurance.
Permanent life insurance policies don’t have fixed terms. As long as you pay premiums, your permanent life policy remains in force until you die or cancel the policy.
8. Are There Policy Exclusions?
It’s imperative to ask your life insurance agent what exclusions apply to the life insurance policy. They will have standard exclusions that apply to everyone, and they may put some exclusions on your policy after it goes through underwriting.
Asking your agent upfront what exclusions apply ensures there aren’t any unpleasant surprises if you die and your beneficiaries are left with no benefits because of an exclusion you didn’t know existed.
9. Can You Access Your Term Life Policy’s Death Benefit Before You Die?
Some life insurance companies offer living benefits or an accelerated death benefit rider, so you may be able to access a portion of your death benefit before you pass away. The allowed percentage varies but can be a majority of the death benefit (up to 75%) depending on the policy type and insurer.
The accelerated death benefit rider kicks in only when the policyholder is diagnosed with a terminal illness likely to result in death within a defined period of time. This period can vary but is often two years. Like regular death benefits, accelerated death benefits are tax-free. Ask your life insurance agent if this option is available on your coverage.
10. Can I Cancel a Term Life Insurance Policy?
Most policies have a “free look” period, usually lasting 30 days or fewer, but ask your life insurance agent if that’s the case. During this window, you can contact the insurer to cancel your policy for a full refund of any premiums paid.
After the “free look” period, you can cancel a term life policy simply by no longer paying the premium. After the grace period ends, the insurer will cancel the policy with no further action required from you.
Final Word
Most working-age Americans need some amount of life insurance coverage. But many never get around to buying it. They’re busy and worry it’ll take too long to apply, or they’re intimidated by medical underwriting, or they just don’t know where to start.
If you’ve put off buying life insurance until now, hopefully, this guide puts you at ease and prepares you to take the next step with the right questions to ask your life insurance agent. Our guides to the best life insurance companies overall and the best no-medical-exam life insurance companies stand ready to assist if and when you do.
