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Friday, April 19, 2013

What to Know Before Speaking With an Insurance Agent

Are you ready to buy life insurance? Just because you know that you need a life insurance policy does not mean that you are prepared to speak with a life insurance agent. There are a variety of different types of life insurance, different riders, and terms that you should know before you pick up the phone and a request a quote. While your life agent can educate you and recommend a suitable policy, knowing what you are talking about before you start discussing options will make the process of applying and buying a policy all the easier.

Terms That May Come Up When Applying for Insurance

You do not have to be a licensed life insurance agent to understand some of the industry terms that are used to describe policies, terms, and riders. This is important because if you do not understand the terms, you might not know how to answer the multitude of questions that an agent will ask you to match you to the right product.

What to Know Before Speaking With an Insurance Agent

Permanent Insurance - Permanent insurance, which may also be called whole life, is a life insurance policy that is made up of life insurance with an investment component. Unlike term policies, these policies do not expire.

Term Insurance - Term insurance is a temporary policy where rates will remain fixed for a specified period of time. Terms typically last 1, 5, 10, 20, or 30 years. Once the term expires, policyholders may have to re-apply for coverage.

Beneficiary - The individuals or entities that will receive your death benefit if you pass away.

Accident Insurance - Unlike traditional life insurance, an accident insurance policy will only pay out from death or disability that result from an accident.

Death Benefit - The death benefit is the stated amount on the policy that the insurer will pay the beneficiaries on the policy if the insured passes away. Both term and permanent plans have a death benefit, but cash values may be added to a permanent policy.

Cash Value - If you purchase a permanent insurance plan, the cash value is the value that has accrued in the investment component of the policy and is separate from the death benefit. This value can be withdrawn or borrowed against.

What to Know Before Speaking With an Insurance Agent

Guaranteed Renewability - If you purchase a term policy, you may have the option to add a rider that guarantees that you can renew the policy once the term expires, no matter how healthy you are.

Re-entry - When your term plan expires, you will be asked to complete a re-entry application and possibly a medical exam to qualify for coverage. Premiums will be based on your age at the time of your re-entry application.

Children or Spouse Rider - If you have a child or a spouse and you want to cover them on your policy, you may have the option to pay for this rider and cover them for a minimal premium without the need to complete a medical exam.

Medical Exam - When the insurer requires you to complete a medical exam to verify your health, you may have your vitals taken or undergo a more thorough exam depending on your age and medical history.

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