Coverage and Amount Questions
- How much life insurance do I need? Use DIME: Debt + Income (20× annual) + Mortgage + Education = gross need
- What is a death benefit? The tax-free lump sum paid to beneficiaries when the insured dies
- What does life insurance cover? Natural death, accidents, illness — everything except suicide in first 2 years and fraud
- How many life insurance policies can I have? As many as you’re approved for with justifiable insurable interest
- Can coverage be too high? Yes — insurers limit coverage to 25–30× annual income to prevent moral hazard
Type and Cost Questions
Life insurance type and cost quick reference
| Question | Quick Answer |
|---|---|
| Term vs. whole life? | Term for most people; whole life for specific estate/business needs |
| How long a term? | Until youngest child is independent AND mortgage is paid off; usually 20–30 years |
| Average cost? | $30–$100/month for most healthy adults under 45 for $500K–$1M coverage |
| Smoker premium increase? | Typically 2–3× non-smoker rates |
| Can I buy life insurance on anyone? | Only with their consent and insurable interest (financial stake in their life) |
Beneficiary and Claims Questions
Critical beneficiary facts:
- Beneficiary designations supersede your will — update them after every major life event
- Don’t name a minor as direct beneficiary — they can’t receive large cash directly
- Name both primary and contingent beneficiaries
- Claims typically paid within 30–60 days of receiving all required documentation
- No tax on life insurance proceeds for individual policyholders (estate tax may apply to very large estates)
1) Store the policy documents securely and tell your beneficiaries where to find them. 2) Set premiums on automatic payment. 3) Review coverage annually or after major life events (birth, death, divorce, home purchase, income change). Life insurance is not truly set-and-forget — it requires annual review to remain appropriate.
Health and Underwriting Questions
Key underwriting facts: applies differently for term vs. permanent, varies by amount, and health conditions have widely varying impacts. Most conditions (properly managed) result in higher premiums, not automatic denial. No-exam policies are available (at higher premiums) for smaller coverage amounts. Shop multiple insurers — underwriting standards vary significantly.
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