When it comes to life insurance, your clients may have a lot of questions that seem like common sense to you, but, in reality, represent knowledge gaps for them. This is especially true for first-time life insurance clients.
To help walk clients through the process, it may be advantageous to have a fact sheet on-hand that covers the most common life insurance FAQs. When it's time to chat about life insurance, copy and paste the questions and answers below into an email, newsletter or other resource you can provide to your clients.
How does life insurance work?
The process is pretty straightforward. Once you apply for coverage, the life insurance company will assess your health and some other key factors. From there, the insurance company will determine how risky you are to insure, which helps set the premium. If you're approved and a policy is issued to you, you pay your premium and when you pass — as long as the policy is still in force — the death benefit will go to your designated beneficiaries.
How much life insurance do I need?
This really depends on your personal situation, including health, finances and the policy coverage period. In general, you want to consider things like:
- Any debts you might have that will need to be paid off after you pass
- The costs of a funeral and burial
- Expenses, such as bills, mortgage or kid's tuition
- Your loss of income and the impact on your family
- An overview of your full financial picture, including retirement savings, assets and other liabilities and where life insurance can fit, which is something to discuss with your financial professional
How much does life insurance cost?
Something you might be surprised to find out is that many life insurance policies cost much less than people often realize. Keep in mind, in general, the younger and healthier you are the lower the premium. Since there are a variety of options for coverage out there, it's a good idea to sit down and check out the different plans and decide what's best based on your needs and budget.
Will my family have to pay taxes on my benefit?
This is a common fear for a lot of people. In most cases, your family won't have to pay taxes on your death benefit. The death benefit should pass to their beneficiary tax-free.
I have life insurance through work, isn't that enough?
In most cases, employer-sponsored life insurance might not have enough coverage for your long-term needs. Also, it's important to know that if there's a change in your employment situation, if you get laid-off for example, that life insurance policy could end. Many people supplement their employer-sponsored insurance with additional coverage.
I don't have any kids, do I still need a policy?
You might not have children or dependents. However, what you do need to know is your other family members, such as senior parents, could be left to pay certain debts of yours after you pass. There are policies available that can help cover debts, plus funeral and burial costs to help ease that burden on your loved ones.
Should I have life insurance if I own a business?
It can make sense for business owners to look at how a life insurance policy can help defray costs and establish business continuity — especially if you pass unexpectedly, which could derail the business. Options such as buy-sell agreements and key person insurance are avenues you can explore and discuss with your financial professional as well as your business partners, if you have any, to help determine if it's the right move for your business.
Do I need a medical exam?
There are some cases where you might not need a medical exam. However, typically these policies might have coverage limits, depending on the carrier.
What happens during the medical exam?
The medical exam is typically very straightforward and often lasts less than half an hour. In general, basic health information such as height and weight, blood and urine samples, and medical records are requested. Some carriers will cover the cost of the exam.
I have a medical condition, can I still get insurance?
You might have concerns that if you have a medical condition, you won't be able to get coverage. This depends on a few factors, including but not limited to your medical condition, carrier and the policy. Also keep in mind, in many instances having a medical condition could just mean you will still get coverage, but have to pay a higher premium.
Focusing on your clients' needs
Once your clients have a better understanding of life insurance, work with them to get a full look at their financial picture, plus how their passing could impact their family's financial situation.
Life insurance can be an uncomfortable topic, so the more you keep the lines of communication open and focus on your client's needs, the better your relationship will be. This life insurance FAQ can help start the conversation and ease some of the common concerns your clients might have about the process. Helping tackle these concerns up front can go a long way to building trust and developing a great relationship with your clients.
Looking for more ideas on how to better educate your clients about life insurance? Check out this life insurance glossary.
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