1. What is life insurance, and how does it work?

Life insurance is a contract between you and an insurance company.

• You pay premiums (monthly or yearly).

• In return, the company pays a death benefit to your beneficiaries when you pass away.
  This money can be used for anything—funeral costs, mortgage payments, education, or income replacement.

2. What are the main types of life insurance?

Life insurance falls into two broad categories:

Term Life Insurance

• Covers you for a specific period (10, 20, 30 years).

• Lower premiums.

• No cash value.

• Best for income replacement during working years.

Permanent Life Insurance (lifetime coverage)

Includes:

• Whole Life: fixed premiums + guaranteed cash value growth.

• Universal Life: flexible premiums and death benefits.

• Variable Life: cash value tied to market investments.

Permanent policies combine protection with long-term savings/investment.

3. What factors affect life insurance premiums?

Your cost depends on:

• Age: younger = cheaper

• Health history: conditions like diabetes or heart disease may increase rates

• Lifestyle: smoking, alcohol, risky hobbies

• Occupation: hazardous jobs cost more

• Coverage amount & term length

• Gender: women often pay slightly less due to longer life expectancy

4. How much life insurance do I need?

A common formula:

10–15 times your annual income

But also consider:

• Mortgage or rent

• Loans (education, personal, car)

• Number and age of dependents

• Future needs (college tuition, retirement for spouse)

• Existing savings or employer insurance

I can calculate your ideal coverage if you want.

5. What is a beneficiary, and how do I choose one?

A beneficiary is the person or entity who receives the payout.
You can choose:

• Spouse or partner

• Children or family members

• Trusts

• Charities

• Businesses (in certain cases)

You may also assign:

• Primary beneficiaries

• Contingent beneficiaries (backup if the primary passes first)

6. What happens if I die during the term?

Your beneficiaries receive the full death benefit, tax-free in most cases.

7. What happens if I outlive my term life policy?

You have options:

1. Renew year-to-year (usually more expensive)

2. Convert to a permanent policy (no exam required)

3. Purchase a new policy

If you take no action, coverage ends.

8. What is cash value, and how does it grow?

Cash value is a savings element found in permanent life insurance.
It grows through:

• Guaranteed interest (whole life)

• Market performance (variable life)

• Flexible crediting rates (universal life)

You can:

• Borrow against it

• Use it to pay premiums

• Withdraw it (may reduce death benefit)

9. Can I get life insurance with pre-existing conditions?

Yes, but:

• Premiums may be higher

• You may need a medical exam

• Some insurers specialize in high-risk applicants

There are also no-exam or guaranteed issue policies with higher premiums but easier approval.

10. Is life insurance payout taxable?

Generally:

• Death benefits are not taxed

• Cash value withdrawals or loans may have tax consequences

• Estate taxes may apply for very large policies

Consulting a tax adviser is recommended for large estates.

11. What is a rider, and should I add one?

A rider is an optional add-on to customize coverage.

Common riders:

• Accidental Death Benefit

• Critical Illness Rider

• Waiver of Premium (if disabled)

• Child Term Rider

• Return of Premium

• Long-Term Care Rider

Riders increase coverage but may raise the premium.

12. Do life insurance policies cover suicide?

Most policies include a two-year suicide exclusion period.
If suicide occurs after that period, the claim is typically paid.

13. What happens if I stop paying premiums?

• Policies usually have a grace period (30–31 days).

• Term life will lapse if not paid.

• Whole life may use cash value to keep the policy active temporarily.

14. Can I change my beneficiary later?

Yes—unless the beneficiary is “irrevocable,” in which case their written consent is required.

15. Does life insurance cover accidental death?

Yes, unless specifically excluded.
Many people add an accidental death rider for extra coverage.

16. What is underinsurance and overinsurance?

• Underinsurance: Coverage too low to support dependents or debts.

• Overinsurance: Paying too much for coverage you don’t need.

A proper financial needs analysis helps determine the right balance.

17. Is employer-provided life insurance enough?

Usually not.
Employer policies typically offer 1–3× salary, which is far below the recommended coverage.
Plus, it often doesn’t follow you if you leave the job.

18. How long does a life insurance payout take?

Most claims are paid within 7–30 days, assuming clear documentation and no disputes.

19. Can life insurance be used for estate planning?

Yes. It can:

• Provide liquidity to pay estate taxes

• Equalize inheritance among children

• Fund trusts

High-net-worth individuals commonly use it for this purpose.

20. How do I compare life insurance companies?

Evaluate:

• Financial strength ratings (A.M. Best, Moody’s)

• Claim settlement record

• Customer service reviews

• Policy flexibility

• Premium costs.