Questions and Answers

Question:  Which is better term or whole life?

Answer:  We are under the opinion that whole life insurance does not make sense for the vast majority of people.  Given its low cost and ease of purchase, term insurance gives you a lot of temporary insurance.  Not only is term insurance inexpensive but it also offers you the ability to get more insurance coverage.

Question:  Should I buy life insurance for my children?

Answer:  Our general opinion on this is no.  In general life insurance is needed on the people that make money and provide for their children. We advise that both parents (working or not) procure term policies and to not insure the children's lives.

Question:  Should I buy life insurance right out of college?

Answer:  It may or may not make sense to get term insurance right out of college depending on your need and income. If you do not have a job, it might not make sense.  If you are planning on starting a family, I would consider buying it ASAP.

Question:  Should I buy life insurance is I am out of work?

Answer:  Perhaps it depends on the details of your life.  If you are out of work and cannot afford a term policy than it may be a moot point.  Although if you have a need for life insurance and have money saved up you may still consider buying it.

Question:  When was the first life insurance policy written?

Answer:  According to wikipedia the first life insurance policy was written in the 1700s by the Amicable Society for Perpetual Assurance Office in London England.

Question:  Who was the first company to write life insurance policies?

Answer:  Again According to wikipedia it was Amicable Society for Perpetual Assurance Office in London around 1706.  The first life insurance tables were established around 1750.

Question:  Who was the first US Life Insurer?

Answer:  More than likely it was a company that had affiliated with Benjamin Franklin, the Presbyterian Ministers' Fund.  This company may have written the first United States Life Insurance policies.

Question:  Why is Life Insurance Needed?

Answer:  Life Insurance is needed for numerous reasons. Often it is used to assist in protecting loved ones from financial ruin in the event of an untimely death.  It can also be used for business purposes such as to protect a company from the loss of key individual through key man insurance or via buy sell agreements.

Question:  What are the different types of life insurance?

Answer:  There are lots of different types of life insurance. These include, but are not limited to: Group Life, Term Life, Whole Life, Universal Life, Whole Life.  Many of these types have their own sub types.  As an example there are three major sub types of Universal life insurance.

Question:  Is there only one type of term life?

Answer:  No, most life term insurance is technically called Level Term Life insurance.  In theory there are few other versions.  One is Decreasing Term and Increasing Term. The reality is that few of these other types of policies are really available any more.  Level term has mostly gobbled up the market.

Question:  Why is life insurance so heavily advertised?

Answer:  Life Insurance is so heavily advertised because so many people need it and because its a very competitive market.  Studies have shown that probably not enough Americans have it in place.  Hence is is somewhat heavily advertised.

Question:  How come life insurance advertisements don't talk about medical exams and health classifications?

Answer:  This is great question that I do not know the answer to.

Question:  How come insurers tend to advertise preferred plus rates?

Answer:  This is a good question.  I do not know what insurers tend to do this. I prefer to show rates for all levelf of insurance health classes.

Question:  Why can't I buy term insurance at a bank machine?

Answer:  Perhaps one day you will be able to buy term insurance through an ATM machine.  Currently there is too much underwriting involved for this to happen.

Question:  Should I buy a life insurance policy from Costco?

Answer:  Possibly, maybe, it depends.  Without seeing the details of the exact offer its hard to say if it makes good sense to buy a insurance policy from Costco.

Remember life insurance is sold in health classifications, so in general a preferred plus policy from most insurers beats a preferred policy from another insurer.

Question:  Can I have More than one life insurance policy?

Answer: Yes, you can have more than one life insurance policy for certain.  There is often a limit to the total amount of insurance coverage that some carriers will allow you to have.  In other words they do not want you to take out more insurance than they feel is reasonable.

Question:  Does Everyone Need Life Insurance?

Answer:  No, not everyone needs life insurance.  If you have no dependents and no need for the financial coverage and you do not plan on having a family then you might not need it.  

Question:  Why are you such a big proponent of buy term and invest the rest?

Answer: I am a huge advocate of Buy Term and Invest the Rest because the numbers demonstrate that Whole and Universal life rarely beat them.  Yes its possible for a whole life policy to beat out a BTITR concept, but almost 40% of people that buy whole life policies cancel them in the first ten years, therefore the staying power just does not seem to be there.

Question:  My Insurance agent tells me that Buy Term and Invest the Rest does not work?

Answer: Really?  What does your agent suggest that you do instead?  Buy a whole life policy?  Can he introduce you to multiple successful clients that have become rich by buying (not selling) a whole policy?  Can this agent demonstrate in black and white the financial costs and rates of return and how these beat the market over a 40 year average?  Does this agent know your lifetime budget? Is your agent aware that about 40% of the people that buy whole life insurance cancel it in the first ten years.  Has your agent shown you a guaranteed return chart?

Question:  If I already have an Employer Sponsored Life Group Plan, Do I need a term policy of my own?

Answer: Its depends on your life insurance needs.  Often employer plans will cover one or two times earnings and often that does not include bonuses or commissions. Many people need a separate policy on top of this in order to come up to the rule of thumb number of ten times earnings.

Question:  How do I find out if I have Group Life from my employer?

Answer: Often the best way to find out if you have group life insurance through your job is to ask your human resources department (HR.)  Human resources typically fields these types of questions.  If your company does not have a HR department, ask the owner of the company. The owner or HR department may only know general number and may refer you to the company offering the group life.

Question:  What happens to my group life insurance policy if I quit my job.

Answer: If you quit your job you may or may not be able to port your group policy with you.  You should consider asking your HR department this question. 

This is one of the many reasons though, that although group life can be great, that consumers should consider holding their own independent term life policy.

Question:  Where does my company get group life insurance from?

Answer: Usually group life insurance is offered by the same company that offers your employee benefits. 

Question:  Is group life better than an independent term policy?

Answer: No, not necessarily.  Often group life carries a free amount of insurance with your job, more is extra.

Question: Why is Life Insurance regulated by my State Insurance Regulator?

Answer: The world of insurance is older than most other financial products and that it has always been that way. Each state regulates their own insurance industry.

Question: What are the different types of Universal Life Insurance?

Answer: The three major types are IULS, GULS, and VULS.  These stand for Indexed Universal Life, Guaranteed Universal Life, and Variable Universal Life.

Question: What do you think of Universal Life Insurance?

Answer: I am not much of a fan.  This site had dedicated itself to helping consumers calculate and understand the differences and benefits of term and whole life.  Whole life is complicated enough and Universal life even more so. We have written about what we feel are the major issues with Universal Life Insurance which are that they are too confusing, not often understood by the client, and that they tend to lag market performance.  But there are more issues with them.  In general it is hard to beat the Buy Term and Invest the Rest Philosophy.

Question: My question about term insurance is: How Much Should I get?

Answer: Contrary to much of what you read on the internet there is no easy way to know how much life insurance that you need.  The simple ten times earning rule is helpful....but... its far from perfect.  A better method is to assess your assets, liabilities, and time frame.  See the article above for information about life insurance needs.

Question: Ten times my earnings shows me that I need $3,000,000 in term insurance, does this sound right?

Answer: It may, the need for multi million dollar policies has grown tremendously in recent times as peoples wages have gone up.  In certain expensive areas of the country - such as New York, Los Angeles, San Jose, Seattle - $3 Million dollar 30 year term policies are starting to become more and more common.  However there are less companies that write them than $1MM policies and special care should be taken with the underwriting.

One final note here - people that make this amount of money often do not need to fully insure for ten times because they often have more money saved.

Question: Ten times my earnings shows me that I only need $250,000 in insurance - can I get more?

Answer: The short answer is that you probably can get more life insurance, but this will depend on numerous things including but limited to our age and the carrier that we choose.

Question: Can I buy less than ten times earnings for term coverage?

Answer: Sure, yes you can buy less than ten times earnings with life insurance.

Question: Do you ever recommend people buy less than ten times earnings with term?

Answer: Yes, somewhat frequently. It depends on peoples situations.  If people make loads of money or if they have saved lots of money it can make sense to have far less than ten times earnings.

Question: You seem to echo things that I have heard Dave Ramsey and Suze Orman said?

Answer: Interesting - thanks for the statement. I somewhat agree with Dave Ramsey and Suze Orman in that term insurance is the way to go for most Americans. I do differ with them on numerous other things.

Question: Is it possible to purchase too much life insurance?

Answer: Sure its possible to purchase too much life insurance.  However it does not happen often.  The most common reason that people end up with "too much life insurance" is that they buy a correct amount at a certain age and as they age and pay down their bills and save they no longer need as much term coverage.

This is one reason that laddering life insurance can be so effective.  As an example a consumer purchases a ten year and a twenty year policy.  Eleven years later their ten year policy naturally expires when they need less term coverage.

Question: Can I pay a life insurance policy yearly or monthly?

Answer: Depending on the carrier you choose you can generally choose to pay a term policy either monthly or yearly.  Often it is slightly more expensive to pay monthly. Many insurers have more payment modes than this.

Question: Who are the parties to a Life Insurance Contract?

Answer: There are four parties to a life insurance policy: the Insured, the owner, the Insurer,and the Beneficiary. Usually the owner and insured are the same person, but not always.

Question: As a follow up to that previous question, how can the owner and the insured be different people on an insurance contract?

Answer: This is not all that common.  A policy owner could in theory be a business taking a policy out on a key individual.  Or an individual' Revocable Trust could be the owner of a policy take out on the revocable trust's owner's life.  There are numerous other ways that this could happen.

Question: Can I name my trust as a beneficiary to my life insurance policy?

Answer: Yes, usually you can add your trust as a term policy beneficiary.

Question: Can my trust own my life insurance policy?

Answer: Depending on the type and kind of the trust, it may be able to be the owner of a term life insurance policy.

Question: What types of trusts cannot be listed?

Answer: This is better question for a one on one conversation with your agent and possibly an attorney.

Question: Can I name my grandchildren as my beneficiaries?

Answer: Yes, generally you can add your grand children as beneficiaries to a life policy.  However there are some individual states whereby you may have to have the approval of your "spouse" to do this.  It is a bit complicated as to why, but make sure you ask your insurer.

Question: Can I name a friend as a beneficiary?

Answer: Generally yes.  However in certain states your spouse may have certain rights that may need to be signed away in order to establish your friend as a beneficiary.  Speak with your insurer.

Question: Should I name my child, my wife, or my revocable trust as the beneficiary for my life insurance policy?

Answer: Please see at an estate attorney in regards to this.  We really do not have an opinion on which is best due to the confusing nature of estate law and taxes.

Question: Can my small business buy me a life insurance policy?

Answer: Sure, generally.  A small business can buy life insurance for its employees.  However this gets complicated and has numerous tax implications.  Who owns and who is the beneficiary are crucial considerations. Speak with an expert.

Question: Are the proceeds from life insurance taxable?

Answer: The death benefit from a typical life insurance policy is usually not taxable from income tax. However that is not always the case.  Speak with your attorney and or tax professional about your specific situation.

There are numerous other types of taxes, such as inheritance taxes and state taxes.

Question: How can the proceeds of a whole life insurance policy become taxable?

Answer: There are at least two major ways that we are aware of whereby a Whole life insurance policy can become taxable.  

One involves having the policy designated an Modified Endowment Contract.  This happens if too much money is placed in the product within a limited span of the first couple of years.

The second instance is if too many parties are involved in the policy.  This gets complicated and is not simple to explain to consumers.  If a policy is owned by one person and taken out on another parties life this can possibly happen.  This situation, often known as the Goodman Triangle happens when all three major parties are different.   

Question: What taxes are there with life insurance?

Answer: I am not an accountant.  It depends on numerous things.  Some taxes may pertain to your situation and some taxes may not.  Income tax in some cases, both state and federal.  Inheritance taxes, both state and federal, Estate taxes, both state and federal. 

Also some localities have taxes.

One additional tax that can be involved in the so called premium tax.  Premium taxes are too complicated to get involved with here but they do exist and they can slow down your growth in a cash value policy.

There may be numerous other taxes.

Question: But I was told that there were no taxes with life insurance?

Answer: I am sorry that you were told that. In general a properly created and used life insurance policy will often have no federal income tax due to the beneficiaries. However Estate and Inheritance and various State taxes, its pretty hard to determine.

Premium taxes are based on the state level.

Question: With Whole life insurance and Universal Life Insurance - What is the difference between Guaranteed and Assumed Value Charts?

Answer: Simply put a guaranteed chart is the guarantee that the insurer is making to you.  An assumed value chat "assumes" a given dividend or pay ratio.   Guaranteed value charts are the one that we recommend that consumers of permanent policies focus on.

Question:  Why are life insurance rates more expensive as I age?

Answer:  Basically as you age you get closer to your eventual death.  This is true for all of us.  Therefore it is only natural and logical the yearly premiums will increase as you age.

Question:  Why do you need a Date of Birth for a Quote?

Answer:  We require a date of birth because insurers require it.  The insurers use tables and formulas to derive their rates and hence need your date of birth.

Question:  If I put in my correct year but wrong month and year the quote will be the same right?

Answer:  Not exactly.  It may be the same with one insurer, but in general it will not be the same as all of them.  Some life carriers use different versions of calculation methods to compute term rates.  So you month is actually pretty important as well as your year. It is possible the exact day of the month will matter, but less so.

Question:  How Much Life Insurance Should I buy?

Answer: There are a number of financial models or tools that can assist you in determining the ultimate amount needed.  The old ten times rule is amongst the very best simply because it is easy to use.  An eye should be geared towards your budget.

Question:  What is this Health Class Question on the Life Insurance Quote?

Answer: The Health class on a life insurance quote is one of four ranges: Preferred Plus, Preferred, Standard Plus, and Standard that are used in partially determining your life insurance quote rate.  Preferred plus is the lowest rate and obviously standard the lowest of these four.  There are table ratings that exist below these four options.  We have written an entire article on this subject: Life Insurance Health Class.  Please read that full article for more details.

Question:  How Long Does it Take to Get a Quote?

Answer: A simple life insurance quote can be had by filling out the information to the left.  A simple quote will re returned almost instantly.  A more accurate quote can come back in about a few hours if you contact us.

Question:  I have a question about life insurance quotes - do they (the quotes) mean that that is the final price?

Answer: No, not at all. Unfortunately life insurance quotes are really just estimates.  A firmed up quote received from an insurance agent after you speak about your health and lifestyle may be more accurate, but until the application processed is completed, they are all just estimates.

Question:  What does Level refer to in Term Life Insurance?

Answer: Level refers to what is now considered the standard form of term insurance = Level Term Life Insurance.  In theory there are three different types of term insurance, Increasing, Decreasing, and Level. However both decreasing and increasing term insurance are hard to very difficult to find.  The level specifically refers to the the level death benefit.  With level life insurance the premium and death benefit are the exact same for the life of the term length.

With decreasing and increasing term insurance the death benefit can decrease / increase.

Question:  Why do life insurance agents always want to know your height and weight?

Answer: Life Insurance agents want to know your height and weight because its usually the health related question to start off with. Overweight people tend to be at risk for multiple diseases.  Also insurance companies all have height weight charts that they use to rate people on.  Insurance agents want to also know all sorts of other information for a life insurance quote: Birth date, Smoking Status, Insurance Type and Term... etc.

Question:  Why is there this question about smoking?

Answer: Smoking can be responsible for all sorts of health related ailments including breathing issues and post operative recovery time.  It is have been demonstrated on numerous occasions that smoking shortens your life, therefore carrier charge smokers more. Smoking is the number one cause of cancer. Even a little smoking can be dangerous.

Question:  What if I only smoke a cigar once per year, does it matter on my life insurance application?

Answer: Yes and Possibly Not.  First off there is a huge difference between someone smoking a pack of cigarettes per day and someone that smokes a cigar when they have a child or get married.  Second off, insurers know this.  Some insurers...but not all have allowances for this.  The general best practice for this is to be honest and ask your insurance broker.

Question:  Do you really need my name, phone number, and email address?

Answer: Only if you want us to follow up with you.

Question:  Does my gender change my life insurance quote?

Answer: Yes, gender definitely changes the price estimate on the term quote.  Women pay less and Men pay more in the world of insurance on our lives.

Question:  How accurate is a life insurance quote?

Answer: The more accurate information that goes in, the more accurate information that comes out.  A term life insurance quote, generally is just an estimation and there are any number of reasons that it can be incorrect.  Let me summarize it this way = Life Insurance Quotes are a great starting point.

Question:  When I fill out a life insurance quote is the insurance put into force?

Answer: No, filling out a life insurance quote does not put life insurance into force.  It just shows you some estimated numbers.

Question:  A quote I got from someone else had a different estimate.  Why is that?

Answer: For all sorts of reasons.  Perhaps you inputted different pieces of information.  Perhaps it was with different companies.  Perhaps its because the system recognizes you as being that much older...

Question:  Should I buy life insurance If I am pregnant?

Answer:  If you are planning on having children its best to get it before your are pregnant.  However if you are currently pregnant you are best to buy it as soon as you can.

Question:  Who Can Qualify for Life Insurance?

Answer:  With today's modern health services, more and more people are able to qualify for term life insurance. However not everyone can get life insurance.

Question:  Why are life insurance rates higher if I am overweight?

Answer:  Your BMI and height weight are one of the very first things that an insurance agent will ask you about.  The reason for this is that overweight people tend to suffer from all sorts of health related issues.  Your BMI is a simple way for insurance agents to being to price your best term product for you.

Question:  What Questions do Life Insurance Companies Ask?

Answer:  Life Insurance companies will ask lots of questions.  They will want to know your date of birth, full name, address, contact details, your social security number, height & weight, health history, medications take (prescriptions and other),your driving history, your bankruptcy history, your arrest record, life insurance in force, life insurance denied coverage for, your family health history, your job, your income, your net worth, your beneficiary information, the things you like to do for fun. There are numerous other things as well.

Question:  What Questions should you ask your life insurance company before signing?

Answer:  There are lots of questions to ask your term life insurer before signing.  These might include:

• Date the policy will be in force
• Confirmation of Coverage Length and Amount
• Confirmation of Premium
• Cost for the insurance once term expires
• Understanding on two year incontestability clause.
• Their Financial Strength Rating.
• The Proper Name of the Insurer.
• Rules for late payment of premium.

There are numerous other items to consider asking your insurer, these are just a few suggestions.

Question:  Why are life insurance rates higher when you have high cholesterol?

Answer:  Cholesterol is linked with heart related issues and because of this is a higher risk of heat disease and other health conditions.  Having high cholesterol may require you to pay more for life insurance or it may not. 

Question:  Will Taking Medications such as Statins preclude me from getting life insurance?

Answer:  No - not at all.  Statins are medicines often used to treat high cholesterol.  For some consumers the use of statins may actually help them get life insurance.  The insurer will need to know all of the medications and dosages and the reason they have been prescribed.

Question:  How does a life insurance company know if I smoke?

Answer:  There are generally two main ways that a future potential insurer will know if you smoke.  The first method is in the application, you will be asked do you smoke?   The second method is a paramedical exam.  Often insurer will test for signals that you smoke.

Keep in mind that if you lie about your smoking history this could have serious implications with regards to your policy.  It is not in your best interest to lie.

Question:  Does it ever make sense to lie on a life insurance application?

Answer:  No, it is never in your best interest to lie during any part of the life insurance quoting or application process.  Even if you were to somehow lie and it went undetected, your life insurance coverage might end up being in jeopardy.  

Its makes much better sense to share with your insurance your true situation and get a life insurance contract that takes these considerations into account.

Please do not lie during the life insurance process!

Question:  What happens if I realize that I made a mistake on my life insurance application before I sign it?

Answer:  As soon as you become aware of the "misstatement" contact either your insurance agent or the insurer themselves.  This sort of thing does happen and its not necessarily the end of the world.

Question:  Can I take out a life insurance policy on someone else without them knowing it?

Answer: Generally you cannot take out a standalone life insurance policy on someone else's life without them knowing about it.  Generally you cannot do this because the insurer requires policy owners to sign documents, answer questions, and often undergo an underwriting exam.

Perhaps its possible with a group life insurance policy, where you add a spouse for a small guaranteed amount of coverage.  (This I cannot say with any certainty.)

Question:  Will Taking Medications that my psychiatrist gave me, cost me more for term insurance?

Answer:  It depends on the medications.  The rise of some types of medications for things such as depression has skyrocketed and many of them are not that big of a deal for underwriters.  But as usual it depends on the medications, the dosages, and the reason it is prescribed.

Question:  I have been declined for insurance - What should I do?

Answer:  It depends on why you have been declined. I suggest you call us and walk through your underlying issues.  Just because insurer A denied you does not mean that insurer B will also.

Question:  My question about life insurance is based on age.  Is it ever too old to buy term insurance?

Answer:  Term insurance often can be had until the 60s or 70s depending on the person and their health.  Each insurer has their own rules regarding this, so there is no one single age at which you can not get term insurance. For many that no longer qualify for term life insurance though they may be able to buy Final Expense Insurance.

Question: Can you be too young to buy term insurance?

Answer:  Yes, term insurance typically is not offered till age 18.  Before that certain kiddie whole life insurance policies can be sold for children's lives.  A better way to protect your child's lives though is to attach a rider to an adult's term policy.

Question:  I got Sleep Apnea can I still be insured?

Answer:  Thank you for your insurance question, yes clients with well treated sleep apnea can get life insurance.  Some carriers are better to deal with others. Tell your insurance agent on the phone everything about your condition.

Question:  I have asthma, will I be denied Insurance?

Answer:  Its always possible to be denied a life insurance policy for any number of health related issues.  However if your asthma is well treated and you are under a doctors care, its not likely that it will happen.

Question:  How Long does it take to get life insurance for a fully underwritten product?

Answer:  A fully underwritten term insurance product often takes 4-6 weeks for the policy to go into force.  This does vary depending on the carrier and insured.

Question:  How Quick can you get a fully underwritten product with accelerated underwriting?

Answer:  We never really know with certainty if something will be accelerated or not.  However if you qualify for it, it can sail by in one to two weeks.  This is very fast.

Question:  How Long does it to get life insurance for a accelerated underwritten product?

Answer:  An accelerated underwritten policy is not for everyone, but sometimes the policies can go through in ten days or two weeks.

Question:  What is No Exam Term Insurance?

Answer:  A Non Med or No Exam Term Insurance product is a life insurance product whose underwriting does not require a paramedical exam.  These policies are becoming more and more common.

Question:  Do I need to tell you about all of the prescription medications that I take on a life insurance application?

Answer:  Yes, full disclosure about all medicines that you take is required on a life insurance application.  In fact discussing these meds / leading with them with your insurance agent is the suggested route.  Often this can end up saving you lots of money.

Question:  Will it cost me more to get term if I have Asthma?

Answer:  You may or may not pay more for having asthma when you go to apply for life insurance as it depends on your situation.  It is often more difficult for consumers to qualify for preferred plus pricing, but we see plenty of standard non smoker and some standard best non smoker pricing with well treated asthma.

Question:  Will it cost me more to get a life insurance contract if I have COPD?

Answer:  Typically it will cost you more with COPD. However the central question is how much more.  This is where it is SO important to work with an experienced agent.  Tell them about your condition and the medications that you take.  Ask lots of questions.

Question:  Do points on my drivers license impact my life insurance rate?

Answer:  Yes tickets on your driving record in theory cost you more money for life insurance.  The more specific answer is that there are limits to the how many tickets for each carrier.  Some insurers will be OK with one minor ticket.

Question:  What other health conditions will cost me more on my life insurance?

Answer:  The list is truly endless.  If it requires a medication it can cost you money.  If it causes you pain, it may cost you more money.  In general though its better to have something diagnosed and treated than have it pop up in your paramed exam.

Question:  While I am waiting for my insurance application to be processed is there a way to be temporarily insured?

Answer:  Possibly, some insurance companies allow the existence of temporary life insurance.  The rules concerning this are a bit complex.  Please speak with an agent.

Question:  Am I automatically covered with temporary life insurance when I apply for a fully underwritten term insurance plan?

Answer:  No, most fully underwritten policies do not offer this standard, but it may be available.  Please ask your agent before you apply for a fully underwritten contract.

Question:  While I am waiting for my insurance application to be processed is there a way to be temporarily insured?

Answer:  Possibly, some insurance companies allow the existence of temporary life insurance.  The rules concerning this are a bit complex.  Please speak with an agent.

Question:  What should I look for in a participating permanent insurer?

Answer:  If you are truly considering buying a participating whole life insurer than care should be taken.  Carefully research their Financial Strength Rating, look at the corporate hierarchy, and review past dividend history.  Also obviously work with a knowledgeable insurance agent / broker that you trust. I would focus on A+ and A++ AM Best companies.

Question:  Which Term Life Insurer is the Cheapest?

Answer:  This question is far more complex than it sounds.  The cheapest term insurance product is specific to you and your situation.  There is no one cheapest product.  What you see in the rater as coming up as the cheapest will only be the least expensive if you meet all of their underwriting criteria.

Question:  My future insurer has multiple operating entities, What do I do?

Answer:  Many insurance companies house various entities into their own sub corporations, this is not uncommon.  It is advised that you research to some extent each entity and check for their financial strength rating.

Question:  A friend of mine is pitching me to buy a Whole Life Insurance policy that is rated B++, Should I buy it?

Answer:  I would caution you against buying any life insurance policy that is not at least AM Best A-.  Additionally whole life insurance is not cheap in comparison to term insurance.  If you were not already looking for a whole life permanent policy I would be careful buying one.  In general using life insurance for any purpose other than pure insurance might no be the best use of your money.

Question:  Someone told me to only buy a permanent policy from an A++ rated carrier - does this make sense?

Answer:  Yes, it makes perfect sense to only consider A++ insurers when looking at whole life policies.  More than likely A+ is also fine for most situations.  When you are buying a life insurance policy for the rest of your life you really want to make sure the policy will be around.

Question:  Are AM Best A+ rated insurers good enough to purchase whole life insurance from?

Answer:  Although A+ rated insurers are technically not rated as high as A++ rated insurers, we generally feel that given the dearth A++ companies that A+ companies are acceptable for permanent insurance policies.  

Question:  Which Insurer offers the Best Convertible Term Policy?

Answer:  There are several great convertible term life insurance policies.  One that we often use is Ohio Nationals because they have great whole life options and because of their A+ rating.  However there are really lots of good options and it will depend on your situation. One important thing to ask yourself with convertibles is if you DO convert it, what type of policy would you convert it to... such as IUL or a Whole Life policy?

Question:  Which Insurer offers the Cheapest Convertible Term Policy to a Universal Policy?

Answer:  Great question, assuming you would want a universal policy, than the cheapest policy could possibly come from Banner Life Insurance.  However as with all of these general questions, it will depend on your exact details.

Question:  My life insurance question is about ratings - Would you buy a life insurance policy from (an AM Best) B+ rated company?

Answer:  In general I would not buy an AM Best B+ rated life insurance policy unless no quality A- or higher rated insurers would sell me a policy.  I would be especially concerned about buying a whole life or universal (IUL, etc) policy from such a carrier.

Question:  How fast is the fastest insurer to issue a policy and who is it?

Answer:  Some life insurance policies can be issued in ten minutes.  These policies typically are slightly more expensive though.  Most fully underwritten policies about the fastest that they can go (and they usually do not) can go in seven days.  It does depend.

Question:  Is Life Insurance a Scam (and a waste of my money)?

Answer:  Life insurance is a risk transfer tool for those that have others that depend on them.  It is certainly not a scam. It may or may not be a waste of your money depending on its need. Some forms of life insurance though can be sold in a method that 'may' be considered unethical or pushing the trust.  This sometimes happens with certain cash value life insurance being sold to do everything under the sun.  Therefore in some situations the methods that some insurers and agents use is may actually be scammy.

Question:  Why do you keep saying that people should be honest when applying for all forms of insurance?  I have lied before and its never been a problem

Answer:  Lying on your insurance application and it now being an issue is one thing if you don't have to file a claim, but if you lie on an application and you have to file a claim this can be a very bad place to be.  

With Life Insurance, you do not want to lie whatsoever.  I advise clients to come clean on manners.  Answer each question, as it is asked.  If a material misstatement is made it could have a negative affect, especially in the first two years of the life insurance contract life.

Question:  What happens if I make a mistake on my life insurance application?

Answer:  This is a tricky question.  The short answer is that it depends on what type of mistake it is (as in did you intend to deceive the insurer) and what the mistake was regarding.  For a complete answer contact your current life insurer.  You should attempt to be as accurate and correct whenever you apply for any form of life insurance.

Question:  Should I buy life insurance from my home auto insurer?

Answer:  Perhaps - we are all about what the numbers demonstrate and if your home auto insurer can provide you the best insurance policy at the best price with the best financial strength rating - than Yes!  However even when considering for the so called home auto life discount this is often not the case when you are buying more than $100,000 in term insurance.  Check the rates, check the ratings, and do the math yourself.

Question:  Which home insurers also sell life insurance?

Answer: I do not have a complete list, but I believe that many home insurers sell life policies as well:  State Farm, Farmers, Allstate, Liberty Mutual.  Sometimes this makes good solid financial sense.

Question:  What is the home - auto - life insurance discount for carriers such as State Farm and Farmers?

Answer: I do not work for those companies so I cannot say.  I have seen indications that it can save you maybe 2% in some situations.  However often their life policies are high to begin with and the discount does not compensate for this.  Sometimes it can make sense if they are very small ($25,000) life insurance policies. Again it depends on the situation.  Run the numbers for yourself. 

A footnote to this answer: you will want to find out Where the discount gets applied, as in exactly which policies. Does the Life insurance discount get applied to your home and auto or just your home policy?

Question:  Do all life insurance agents have licenses?

Answer: They are supposed to.  Every insurance agent in the country should have a insurance producer license from the state in which they do business in.  Some states call them insurance agents licenses and others have different names.  Regardless they should have some version of a license.  Some states make it easy to look up licenses for the general public.

Question:  Are all life insurance companies licensed to sell life insurance?

Answer: Every insurance company in the United States needs to be licensed by various entities to sell life insurance policies.  Typically the State Insurance Regulators are write the rules and regulations for your state.  

Question:  How many life insurers are there in the United States?

Answer: I do not know with certainty.  The numbers change and many of the insurers are not available in most states.  The III states that there are around 870 life/ annuity insurers in 2016.  A different statistic from a different source states that "[b]etween 1990 and 2000, the number of life insurance companies in the United States fell by 42%, from 2,196 to 1,269."

Question:  Does every insurer operate in every state?

Answer: No, many insurers only operate in a few states.  Many insurers operate in all of them. Most reputable insurers will list which states they are licensed to do business in on their website.

Question:  Why do Insurance Companies have to be licensed in each and every state?

Answer: Every insurance company needs to be regulated in each state they do business in, because insurance is regulated at the State Level, mostly.  This is true for most insurance, even health insurance.

Question:  How come the company that marketed an insurance product to me has a different name on the policy?

Answer: I do not for certain.  In my experience most insurance companies have numerous names and it can be very complicated, especially if are looking up Financial Strength Ratings.  The Application that you sign should have the proper name of the carrier that is listed with the state, on it.

Question:  What exactly is an annuity?

Answer: Loosely defined an annuity is a contract between two parties (where one is known as an insurer) whereby the insurer agrees to pay the other party via an agreed upon payment schedule once the product has been annuitized. Annuities can be purchased via a lump sum or via a yearly or monthly installments.  Annuities can be both qualified and unqualified.

Question:   I have heard that annuities are complicated?

Answer: Yes, annuities are very complex investment / insurance products.  Whole Vs Term does not specialize in annuities.

Question:  Who regulates insurers?

Answer: Insurers are regulated by multiple regulatory bodies.  All US states regulate insurance.  This is generally done at a department or bureau level.

Question:  Has a Life Insurance Company gone out of business before?

Answer: Yes, numerous life insurers have gone out of business many times.  During the Great Depression some life insurance companies went out of business.  Some data shows that between 5%-6% of life insurers went out of business, and other data may show more.

However: these days it is fairly uncommon for an insurer to go out of business.  It does still happen.  These days when an insurer becomes unable to meet and pay claims the situation is not nearly as dire as it used to be.

Question:  Have Property and Casualty Insurers been liquidated before?

Answer: Yes - Many times Property Casualty insurers have gone out of business and or been liquidated. According to the Wall Street Journal, "13 insurers were ordered liquidated after Category 5 Hurricane Andrew in 1992..."  This of course is just one example. Large scale events can take out insurers and this is a good reason to consider Financial Strength Ratings when choosing any insurer.

Question:  What happens if an insurer goes out of business?

Answer: This question is very complicated.  Most (or all) admitted insurers participate in what are known as State Guarantee Funds.  These funds are funded by gross receipts from insurance transactions.  These state guarantee funds may be able to step in to assist a failing insurer.  Usually the State Insurance regulator will take over before the insurer goes under.

One Very important note here:  State Guarantee funds limit how much they will cover any contract and or person for.  Typically these are for coverage amounts of either $100,000 or $250,000 cash value and $3000,000 in insurance coverage.  This number is state dependent though and there are limits to the resources.  There are numerous other restrictions to these programs.