Purchasing life insurance is a significant personal and financial milestone. While most people understand the basic concept of a policy, they often hesitate to ask specific, practical questions out of embarrassment or concern about policy approval.
Here are honest, clear answers to nine questions you might have been hesitant to ask.
1. Can I get life insurance if I have existing health problems?
Yes, in many cases. Advances in modern medicine allow people with managed conditions (such as high blood pressure, type 2 diabetes, or controlled asthma) to lead long lives, and underwriting standards reflect this.
If your health prevents you from qualifying for a standard plan, you can opt for a Guaranteed Issue policy. These require no medical exams, though they carry higher rates and offer lower coverage limits (usually up to $25,000 to cover final expenses).
2. What happens if I have dangerous hobbies?
You can still obtain coverage, but the insurer will evaluate the risk of your hobby (like skydiving, rock climbing, or scuba diving). The underwriter might:
- Approve the policy at standard rates if the hobby is rare.
- Charge an extra fee (known as a "rating") to cover the increased risk.
- Issue the policy with an exclusion rider (meaning the policy pays out for all deaths except those caused by that specific hobby).
3. Am I too old to purchase life insurance?
No. Most permanent life insurance policies are available to purchase up to age 85. While premiums are higher for seniors, many people in their 60s and 70s buy coverage to handle final costs, offset estate taxes for heirs, or leave a tax-free legacy.
4. How do I know if I have enough coverage?
Your coverage needs change as your life does. Major milestones—such as getting married, having children, buying a larger home, or taking on a business loan—increase your financial responsibilities.
Working with an advisor can help you calculate your needs. Many term policies offer riders that allow you to increase your coverage without undergoing a new medical exam when these major life events occur.
5. Is it suspicious if I want to buy a large policy on my spouse?
Not at all, as long as it is reasonable. In reality, you cannot insure another adult without their active consent and medical participation. The insurance amount must align with their income.
As a guideline, insurers limit coverage for individuals under age 40 to about 25 times their annual income. For ages 50 to 60, this limit drops to around 10 times their annual income to reflect the shorter duration of their remaining working years.
6. Do I have to name my spouse as my beneficiary?
No. Your beneficiary can be anyone you choose—a spouse, children, a close friend, business partners, or even a registered charity.
7. What happens when my Term policy expires?
Once the term (e.g., 10, 20, or 30 years) ends, the coverage stops. Some policies offer automatic renewals at the end of the term, but the new premium will be significantly higher to match your current age. Alternatively, you can convert many term policies into permanent ones without a medical exam before the term ends.
8. Can I buy life insurance on someone who is not related to me?
Only if you possess an insurable interest in their life. This means you would suffer a direct financial loss if they passed away (for example, a business partner or a co-signer on a mortgage). You still require their written consent to initiate the policy.
9. Will my beneficiaries receive the money in time to pay for my funeral?
Yes. Simple, undisputed claims are typically paid out within 10 to 14 business days after the beneficiary submits the claim form and a death certificate. Most funeral homes are accustomed to this timeline and will gladly wait for the insurance payout.
