Frequently Asked Questions About Life Insurance
The following is a list of frequently asked questions about mortgage insurance, income protection insurance, health insurance and life insurance. Get answers to your questions by clicking on the frequently asked questions below. If you have specific questions, contact us.
- How much life insurance do I need?
- Is my pre existing health conditions can effect my insurance rate?
- I have a health problem. Can I get life insurance or health insurance?
- What's the difference between term insurance, whole life insurance, and universal life insurance?
- Does it make sense to replace a life or health insurance policy?
- When will the policy begin?
- How to ensure My Loved Ones are taken care of?
- How can I plan for My Children's Education?
- What is life insurance?
- Must I pay a fee to an independent insurance Agency?
- What are my options if my application for insurance coverage is denied?
- Why should I use an independent insurance Agency?
How much life insurance do I need?
If you are providing financial support for people who are depending on you, you need life insurance. To determine how much you need to replace your lost income, deduct the total income that would be lost upon your death from the sum required for your family's ongoing financial stability. Beyond that, it depends on your particular circumstances (e.g., whether you have considerable net worth or few backup resources, number of children, etc.) and whether you want insurance for other purposes, such as educational funds. An old (and dated) rule of thumb was to use a factor of your income, typically 5-10 times your income. In today's environment, a detailed needs analysis will factor in your income, assets, survivor needs, education needs, retirement needs and more and will provide you with a custom tailored plan. You can then choose the amount of coverage for you. Return to Questions
My pre existing health conditions can effect my premium?
Each company uses their own criteria to determine which health class you will qualify for and your resulting life insurance rates. In fact, it is entirely possible for the same person's health class to rate as "Standard" with one company and "Preferred" with another! Some factors such as smoking can have a direct impact on determining your health class. Here are some health class rating guidelines for non smokers.
"Preferred" rates require excellent overall health and a healthy lifestyle. Each company's guidelines determine limits on weight to height, cholesterol, blood pressure, and family and personal health history. You must not have a history of alcohol abuse or drug use. You may not be involved in hazardous activities.
Please note that some insurance carriers require a simple medical examination prior to determining your actual health class and resulting rate. This determination may differ from the initial health class or rates you were quoted during the application process. Return to Questions
I have a health problem. Can I get life insurance?
There are many companies available that specialize in getting you coverage. EVEN if you have been declined in the past, you may be able to obtain coverage. It definitely pays to try. We can help. Return to Questions
What types of cover are available?
Our products have the flexibility to provide cover for a variety of needs at an affordable cost. We can provide a complete risk protection solution in one package – this will include a number of features (and benefits to you!) that are not provided elsewhere with a range of premium guarantees for the insured person to 100 years of age. Premiums can be paid annually, or through regular monthly/fortnightly payments.
Provides a lump sum payment upon the death of the insured person. Cover can be purchased in one of two formats – one specific to individuals with businesses, and the other for individuals with families, depending on the type of cover. They include, at no extra cost:
- Special events increase - enabling the insured to increase cover in the event of:
- taking up a new mortgage, or an increase to cover an existing one
- the birth or adoption of a child
- taking full time care of a dependant.
A Bereavement Support provides an immediate payment of $5,000 in the event of a claim – this will immediately assist the family or business whilst the claim is being processed in full.
Provides a monthly income to the insured individual's family (as opposed to a lump sum payment) in the event of death. This monthly payment will continue for a pre-determined period of time.
Not all insurers in New Zealand provide this very popular product.
Is a low cost life insurance policy that pays a lump sum only if death is a result of an accident. This product should only be purchased in circumstances where Life Cover can not be considered.
The short and the long of it
There are two types of cover options, short term and long term cover. Each type has its advantages and is appropriate for different people, depending on their needs.
So what's right for you?
Short term Insurance is designed for short term needs. It is cheaper initially but works out to be more expensive in the long term (think longer than 8 years).
Long term Insurance is more expensive initially but works out to be cheaper in the long term - it is ideal for those people that are likely to want insurance for more than 10 years.
Ask your adviser what is right for you. Return to Questions
Does it make sense to replace a policy?
It ALWAYS makes sense to shop around, and it may make sense to replace your policy if:
- Your premium increases each year. Even though you are older now then when you first purchased your policy, a term policy with level premiums may be less expensive than the increasing term premium policy. It pays to shop.
- Your original policy was issued at a higher rate due to health issues. Each company uses different underwriting guidelines, if you are with the wrong company you may be able to save.
- Your health status has improved: If your health has improved through exercise, weight loss, better blood pressure or cholesterol control, etc. you may be able to obtain a better rate.
- You quit smoking or changed your smoking habits. If you are a former cigarette smoker, you should definitely shop around for a better rate. As soon as you have been a non-smoker for 12 months or more, non-smoker rates are available to you. If you have always been an occasional cigarette smoker, there is now a company available that will offer you non-smoker rates.
If you do shop around for a new policy, NEVER let your existing coverage expire until the new coverage is effective. Return to Questions
When will the policy begin?
The date that insurance goes into effect could be different from the date the company issues the policy. If you decide to purchase the policy, the insurance becomes effective when you have accepted the policy and the company has received all necessary documents required.
To ensure My Loved Ones are taken care of ?
For most of us, there's nothing more important than family. We work hard and save money in order to share a comfortable life with our loved ones. Return to Questions
But have you ever thought about what they would do if you weren't around? Do you know how much your life insurance will provide for them? Would taxes take a majority of your assets and savings? Did you realize that in order to transfer your wealth, you must do more than draft a will?
Create a Plan
Providing for your loved ones - which includes everything from acquiring life insurance to drawing up an estate plan to having a team of professionals in place - can be a daunting task. It's an emotional decision, and one that's not easy to discuss. What's more, we always believe "there's plenty of time." But with so many aspects to consider, it's important to get started today. After all, it's not just protecting your loved ones after your death, it's also important in case you become incapacitated and can't make financial decisions.
What exactly should you be thinking about?
- Choosing life insurance
- Lowering your tax bill
- Proper titling of assets
- Designating beneficiaries
- Drafting a will
- Setting up durable power of attorney (general and healthcare)
- Leaving a legacy
Reviewing Your Needs
Once you have a plan, you're not necessarily finished. You'll want to review it every 3-5 years as your financial picture changes with time. You might have a new child, a change in health conditions, an increase in net worth, or you might want to alter your plan based on external circumstances, such as new tax laws. Like other financial investments, it's important to actively monitor your needs and manage your allocations.
Because providing for your loved ones is very personal, there is no one-size-fits-all strategy. But we can help you start identifying your needs and putting together the pieces that will protect you, your assets and, most important, your loved ones.
To learn how FAC can help you establish a well-rounded plan, contact us. We'll not only talk to you one-on-one about your needs, we'll also provide a complimentary personal portfolio review.Return to Questions
How can I plan for My Children's Education?
Children are always asked what they want to be when they grow up. Doctor, Lawyer, Astronaut. And as a parent, you want to make sure nothing stands in their way, especially something like finances.
The Cost of Learning
Funding an education savings plan is one of the most valuable gifts you can give a child or grandchild, but unfortunately, it can also be one of the most expensive.
You're not alone if you think a financial goal like this seems intimidating or out of reach. But with careful planning and early saving, it doesn't have to be.
Your Savings Plan
The first step in creating an education savings plan is to estimate how much money you'll need. To reach this number, you should take into consideration the type of college or university your child may be interested in, your time horizon and, of course, inflation.
Starting early and investing consistently are two key factors to reaching your goal.
This is not to say that the only way to reach your goal is to start saving when your child is a newborn. And we also understand that not everyone is able to save hundreds of dollars a month - but that doesn't mean sending a child to post-secondary school is any less realistic. If your savings won't be able to cover all of your education costs, other family members may be able to help and you can also consider student financial aid, scholarships, grants, loans and other programs.
Your Next Step
We can't stress enough the importance of early planning, but if you haven't started yet, don't panic. Contact us
. Return to Questions
What is life insurance?
Life insurance is a unique financial asset which can be used to both protect future income in the event of death or disablement.
Life insurance can be used to:
- Recover loss of future income.
- In the event of an untimely death of a wage earner, spouses and dependants can be protected from financial loss by purchasing sufficient life insurance coverage to meet your expected monetary needs.
- Pay death taxes and estate settlement costs.
- Depending on the size of your estate, estate taxes may be substantial. Life insurance is one way to preserve an estate intact for future generations.
- Pay debts and meet financial responsibilities.
- Pay off your home and other debt obligations.
- Protect business assets.
- Key person life insurance protects a business from financial loss of a vital employee. The cost to hire and train key employees can be substantial and difficult to overcome.
- Shelter business entities.
- Businesses can be protected from breakup after the death of an owner by purchasing life coverage on all owners with the remaining stockholders as beneficiaries. This will allow the remaining owners the financial ability to purchase the business from spouses, dependents or other beneficiaries.
- Estate Planning.
- Proper estate planning frequently includes the purchase of life insurance. When considering life insurance as part of a trust, feel free to contact us for a competitive quote.
Here are some of the things to consider when buyinglife insurance:
- Who will own the policy?
- Ownership can vary greatly depending on need. The owner will be the only one allowed to authorize policy changes including beneficiaries. Trusts both irrevocable and non-irrevocable may also own policies in order to facilitate estate planning.
- Who will be the beneficiary of the Policy?
- Life insurance proceeds are paid in accordance with the schedule of beneficiaries. Choosing them properly along with good tax planning is necessary.
- Determining amount and term of life insurance?
- This can be the most difficult and frustrating part of the process. At FAC Insurance, we are trained to assist you in this difficult process. Contact us for guidelines and suggestions in meeting your needs.
- What type of policy should be purchased?
- Please feel free to contact us to speak with an agent who are trained in life insurance and can explain the many different policies and assist in selecting the one which best fits your needs. Return to Questions
Must I pay a fee to an independent insurance Agency?
No. An independent insurance agent is paid a commission by the insurance company. No additional fees are added to your insurance cost. Return to Questions
What are my options if my application for coverage is denied?
You can apply to another insurance company, we can help. Different insurance companies use different underwriting standards. You may obtain coverage the second time around. It depends on the specific health conditions at issue. Return to Questions
Why should I use an independent insurance Agency?
Because an independent Agency is not an employee of insurance company, the independent agent can more objectively recommend the best health insurance company for your situation. In addition, an independent agent will be familiar with insurance company bureaucracies, which can save you a lot of aggravation. Further, if your circumstances change, an independent insurance agent can recommend a more appropriate insurance plan for you.