Life Insurance: What Every Budget Shopper Should Know

Matt King Life Insurance Editor

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If you're reading this article — or joining my discussion as I like to say, you're most likely not just any ol' online budget shopper. You probably have significant financial responsibilities; like a family or a house. If you justed the process looking for life insurance, I bet you're wondering: how much life insurance should you purchase? How can life insurance funds be used? What is the difference between term life insurance and permanent life insurance? Is there a medical exam to qualify for life insurance? Will your life insurance policy ever be canceled for health reasons? What happens if you become disabled? Should you get coverage for my spouse and/or children? You have questions, I may a be able to provide a little bit of clarity.

Remember: As long as you keep your premiums current, your policy will never be canceled because of a change in your health, and you will not be asked to provide evidence of good health in order to renew your policy each year.

How much life insurance should you purchase?
If you have a family, many insurance experts suggest that you need an amount equal to 5 to 10 times your annual salary. However, many people own higher coverage's to provide more income for their family.

How can life insurance funds be used?
You can use your life insurance funds for a number of needs, including:

1. Any immediate needs at the time of death, such as final illness expenses, burial costs and estate taxes.

2. Funds for a readjustment period, to finance a move, or to provide time for family members to find a job.

3. Ongoing financial needs, such as monthly bills and expenses, day-care costs, college tuition or retirement.

What is the difference between term life insurance and permanent life insurance?
Term life insurance provides you with coverage for a specific period of time. It pays a benefit only if you die during that term. Some term insurance policies can be renewed at the end of the period. Others give you the ability to reenter. Premium rates will increase at each renewal date or each reentry. Many policies require you to provide evidence of insurability at reentry in order to qualify for the lowest available rates. Because term insurance premiums are generally lower than permanent insurance premiums, you can usually afford a higher level of coverage. Term insurance is good for covering responsibilities that will diminish or end over time, for instance, mortgages or car loans.

Permanent life insurance is designed to be a lifelong policy and is known by a variety of names. As long as you pay the necessary premiums, the death benefit will always be there. These policies are designed and priced for you to keep over a long period of time.

In addition, permanent life insurance policies can build cash value over time. This is money that can be borrowed against and, in some cases, withdrawn to help meet future goals. Please note that assessing your cash value may reduce the death benefit and increase the risk of lapse.

What's the difference between standard and preferred rates, and how do I qualify for preferred rates?
Most often preferred rates require you to be in excellent overall health. Specifically, that means you must:

1. Be within strict limits on height, weight, cholesterol, and blood pressure.
2. Have no family history of any significant health impairments.
3. Not use tobacco in any form.
4. Have no history of drug or alcohol abuse.
5. Not be engaged in any hazardous activities.

Is there a medical exam to qualify for life insurance?
In most cases, a smalllife insurance mediacal exam is required. A certified technician will come to your home or work and simply verify your health according to the information on your application. These medical exams can include: taking your blood pressure, taking a blood sample, taking a urine sample, and verifying your height and weight.

Will your policy ever be canceled for health reasons?
As long as you keep your premiums current, your policy will never be canceled because of a change in your health, and you will not be asked to provide evidence of good health in order to renew your policy each year. However, you have the right to cancel your policy at any time.

What happens if you become disabled?
Many policies include a rider that provides a "waiver of premium" for total disability. In the event you become totally disabled for a certain period (generally six months or longer), then Farmers will pay your premium for you until you are no longer disabled.

Should you get coverage for my spouse and/or children?
Coverage for both spouse and children can be a very good idea. The financial strain on a family after the loss of a spouse can be significant, even if the deceased wasn't earning an income. Often the surviving spouse will want to take time off work or change jobs in order to spend more time with the children. Coverage for children is also available to cover final expenses. It can also guarantee insurability for the child's future.

Important terms from this life insurance article: life insurance, term life insurance, universal life insurance, variable life insurance, benificiaries, permanent life insurance, whole life insurance, life insurance quotes, life insurance medical exam

Additional life insurance resources online: MetLife, InsWeb.com