Q. What type of policy should I buy, Term or Permanent?

Q. How much coverage do I need?

Q. What additional options are available on my policy?

Q. What are the requirements to qualify for coverage?

Q. Am I covered during the underwriting process?

Q. What type of policy should I buy, Term or Permanent?

When trying to decide whether to purchase a term life or permanent life product, it’s first important to understand each policy type and what they’re ideally designed to do. Most people in their middle years, or more “debt heavy” years, typically buy term life insurance policies. The reason for term in many cases is to keep the cost down. Term life is the lowest cost insurance product that you can buy. They cost less because they offer a death benefit for a fixed premium guaranteed in most cases for varying periods up to 30 years. However, these products do not build an internal cash account in the policy that a policyholder can draw money out of in the future if they chose to exercise that option. The example that many people use to describe term insurance is that the policyholder is “renting” the coverage. The policyholder is making the scheduled payment to have the death benefit in place should they die prematurely and at the end of the period they walk away from the policy. Again, no cash value was developed during the life of that policy. Because term insurance is significantly less expensive than permanent insurance, most people buy term life when they need large amounts of coverage to provide for the family in their more debt heavy period. Most commonly, people purchase death benefits of $100,000, $250,000, $500,000, $1,000,000, etc.

Permanent insurance on the other hand is a little different. People typically buy permanent insurance with smaller death benefits because of the cost. Large death benefit permanent insurance policies can be very costly compared to the same death benefit for a term life insurance product. You buy permanent insurance when you want a policy that’s going to last the length of your lifetime, well into your later years. These products do build an internal cash account that policyholders can draw from in the future through a couple of different methods if they need money in case of an emergency and so on, but the policy needs to be slightly “overfunded” to make those funds available without jeopardizing the longevity of the policy. When the policy is set up at a lower scheduled premium amount such as the minimum premium or slightly above, the cash value needs to remain in the policy to run the policy out to it’s intended maturity. If you “borrow against” an “underfunded” policy during the life of the contract, that money will need to be paid back in at some point in order for the policy to remain in force up to its intended maturity date. Permanent insurance policies are all about flexibility. Flexibility is very important when you need an insurance program to be in force for 40+ years because an awful lot can happen during that period of time. Again, you purchase permanent insurance when you have a long-term insurance need and those programs carry a little higher price tag because they’re designed to do more than just a basic term insurance product. Ask your Mortgage Protection Solutions Inc..representative for complete details.

Q. How much coverage do I need?

This is a question that only really you can answer, but there are certain guidelines that are almost always followed when choosing a benefit amount. Just know that the amount of coverage you need today can and often does change in the future. Your insurance needs are an ever-changing thing and a good agent should always work closely with you over time to ensure that you’re adequately covered. The most common method of selecting a death benefit is the “multiple of current income” rule. This is a very simple and very effective way to select a death benefit amount. Remember, insurance is designed to restore an individual to their pre-loss state after a loss. The loss in this case is obviously your death and if your current income is establishing your family’s current standard of living, they’ll need your income to be replaced for a period of time after your death to sustain them. Many insurers will allow you to replace up to 9 or 10 times your current annual income for personal life insurance. For example, if you make $50,000 per year today you can purchase a policy up to $500,000. Don’t forget that life insurance death benefits are completely tax-free. Your Mortgage Protection Solutions Inc. representative will assist you in selecting a benefit amount that is right for you and most importantly they’ll make sure that it fits within your current budget.

Q. What additional options are available on my policy?

The optional benefits are called riders. Many insurance companies offer a lot of the same “standard” riders. These include Waiver of Premium, Accidental Death, Children’s Term Insurance, and more. Several of the insurance companies in the industry today offer a lot of new or “non-standard” riders such as a Spouse or Other Insured Rider, Disability Income, Return of Premium, Critical Illness, and many, many others. Be sure to ask your Mortgage Protection Solutions Inc. representatives to go over optional the riders that may be available on your policy.

Q. What are the requirements to qualify for coverage?

The requirements for coverage vary greatly by company. A lot of it depends on your individual factors such as age, health history and the amount of coverage you’re applying for. Some products require what they call “full underwriting” which usually includes a blood draw. Other products you can qualify for without a blood draw and some programs require no medical requirements at all. Be sure to ask your Mortgage Protection Solutions Inc. representative for complete details.

Q. Am I covered during the underwriting process?

A temporary insurance agreement (conditional coverage) can be issued if all requirements of the application have been satisfied including receipt of the full initial premium. Requirements of the temporary insurance agreement vary slightly from company to company, so be sure to ask your Mortgage Protection Solutions Inc. representative for complete details.