1) What is term insurance?
Answer: Term insurance is a type of life insurance that provides coverage for a specific term or duration, typically without a cash value component, and pays a death benefit if the insured passes away during the policy term.
2) How does term insurance differ from whole life insurance?
Answer: Term insurance provides coverage for a specific period and lacks a cash value component, whereas whole life insurance offers lifelong coverage with a savings element.
3) What is the purpose of term insurance?
Answer: The primary purpose of term insurance is to provide financial protection to your beneficiaries in the event of your premature death.
4) How long can a term insurance policy last?
Answer: The policy term for term insurance can vary, typically ranging from 5 to 30 years, depending on the policy you choose.
5) Do term insurance premiums remain constant
throughout the policy term?
Answer: Yes, in most cases, term insurance premiums are fixed for the duration of the policy term.
6) Can you renew a term insurance policy once the initial term ends?
Answer: Some term insurance policies offer renewal options, but premiums upon renewal are often significantly higher.
7) Is it possible to convert a term insurance policy into a whole life policy?
Answer: Some term insurance policies offer a conversion option that allows you to convert to a permanent life insurance policy without a medical exam.
8) What is the death benefit in term insurance?
Answer: The death benefit, also known as the face amount, is the amount paid to your beneficiaries if you pass away during the policy term.
9) Who can be named as beneficiaries in a term insurance policy?
Answer: Beneficiaries can be individuals, such as family members, or entities, like a trust or charity, depending on your preferences and circumstances.
10) Is there a cash value component in term insurance policies?
Answer: No, term insurance policies do not have a cash value or savings component. They are focused solely on providing a death benefit.
11) Is term insurance suitable for seniors or older individuals?
Answer: While term insurance is generally more affordable for younger individuals, there are term insurance options available for seniors.
12) Can you purchase multiple term insurance policies at the same time?
Answer: Yes, individuals can have multiple term insurance policies to provide additional coverage or address specific needs.
13) Is there a medical exam required to obtain term insurance?
Answer: The need for a medical exam depends on the insurance company’s underwriting requirements, the insured’s age, and the coverage amount.
14) Is smoking status a significant factor in determining term insurance rates?
Answer: Yes, smoking status often affects term insurance rates, with non-smokers typically paying lower premiums.
15) Can term insurance be used for estate planning purposes?
Answer: Yes, term insurance can be part of an estate planning strategy to provide liquidity for estate taxes and other expenses upon your death.
16) What happens if you outlive your term insurance policy?
Answer: If you outlive the policy term, the coverage expires, and there is no payout. You may have the option to renew, but premiums will likely be higher.
17) Can you use term insurance to cover specific financial obligations like a mortgage?
Answer: Yes, term insurance can be used to align with specific financial goals, such as mortgage protection.
18) What is a contestability period in term insurance?
Answer: The contestability period is a specific timeframe (typically two years) during which the insurance company can investigate and deny a claim for material misrepresentation on the application.
19) Can you purchase term insurance for a child?
Answer: Yes, you can purchase term insurance for a child to provide financial protection and lock in a low premium rate for their future.
20) What is a term conversion option in term insurance?
Answer: A term conversion option allows you to convert your term insurance policy into a permanent life insurance policy without a medical exam.
21) Can you add riders to term insurance for additional coverage?
Answer: Yes, riders such as critical illness, accidental death, and disability riders can be added to term insurance policies for extra coverage.
22) Is there a grace period for premium payments in term insurance?
Answer: Yes, a grace period, typically 30 days, allows you to make a premium payment after the due date without the policy lapsing.
23) Can you increase the coverage amount on your term insurance policy?
Answer: Some term insurance policies allow you to increase coverage (subject to underwriting) during the policy term.
24) What is the waiting period in term insurance?
Answer: The waiting period is the time the insured must wait before certain coverage benefits become effective.
25) Can term insurance policies be transferred to another person?
Answer: Term insurance policies are typically non-transferable; the insured and the beneficiary are specified in the policy.
26) Can you cancel a term insurance policy?
Answer: Yes, you can cancel a term insurance policy, but the process and potential fees for cancellation may vary by the insurance company.
27) What is a beneficiary designation in term insurance?
Answer: A beneficiary designation is the process of specifying who will receive the death benefit when the insured passes away.
28) Can term insurance be used as collateral for loans?
Answer: Some lenders may accept term insurance policies as collateral for loans, but it depends on the lender’s policies.
29) What is subrogation in term insurance?
Answer: Subrogation is the process by which the insurance company may seek reimbursement from a third party responsible for an insured loss.
30) Is suicide covered by term insurance?
Answer: Most term insurance policies have a suicide exclusion, meaning that if the insured dies by suicide within a specified period (usually two years), the death benefit is not paid.
31) What is the Affordable Care Act (ACA) and its impact on term insurance?
Answer: The ACA, also known as Obamacare, primarily focuses on health insurance and has had limited direct impact on term life insurance.
32) Can you renew a term insurance policy after the initial term ends?
Answer: Some term insurance policies offer the option to renew for another term, but the premiums for the renewed term are often significantly higher.
33) Is term insurance the same as mortgage insurance?
Answer: No, term insurance is a broader type of life insurance that provides a death benefit to beneficiaries, whereas mortgage insurance specifically covers the outstanding balance of a mortgage in the event of the policyholder’s death.
34) Can you change the beneficiaries on your term insurance policy?
35) Answer: Yes, you can typically change the beneficiaries on your term insurance policy by completing a beneficiary designation form provided by the insurance company.
36) What is the difference between term insurance and permanent life insurance?
Answer: Term insurance provides coverage for a specific term and lacks a cash value component, while permanent life insurance offers lifelong coverage with a savings element.
37) Is term insurance appropriate for people without dependents?
Answer: While term insurance is often purchased to protect dependents, it can also be used to cover debts, funeral expenses, or leave a legacy to beneficiaries, making it suitable for individuals without dependents.
38) Can you use term insurance for estate planning purposes?
Answer: Yes, term insurance can be part of an estate planning strategy to provide liquidity for estate taxes and other expenses upon your death.
39) Is a medical examination required to obtain term insurance?
Answer: The need for a medical examination depends on the insurance company’s underwriting requirements, the insured’s age, and the coverage amount.
40) What is a grace period for term insurance premiums?
Answer: A grace period is a specific timeframe (typically 30 days) during which you can make a premium payment after the due date without the policy lapsing.
41) Can term insurance be used for business purposes, such as key person insurance?
Answer: Yes, term insurance can be used for business purposes, such as key person insurance, to protect a company from the financial impact of losing a key employee.
42) Is term insurance available for senior citizens?
Answer: While term insurance is generally more affordable for younger individuals, there are term insurance options available for seniors.
43) What is a contestability period in term insurance?
Answer: The contestability period is a specific timeframe (typically two years) during which the insurance company can investigate and deny a claim for material misrepresentation on the application.
44) Can you have multiple term insurance policies simultaneously?
Answer: Yes, individuals can have multiple term insurance policies to provide additional coverage or address specific needs.
45) Is term insurance recommended for seniors or older individuals?
Answer: While term insurance is generally more affordable for younger individuals, there are term insurance options available for seniors.
46) What is a no-claims discount in term insurance?
Answer: A no-claims discount is a reduction in insurance premiums for policyholders who have not filed any claims during a specific period.
47) Can you convert a term insurance policy into a permanent life insurance policy?
Answer: Some term insurance policies offer a conversion option that allows you to convert to a permanent life insurance policy without a medical exam.
48) What is the difference between level term and decreasing term insurance?
Answer: In level term insurance, the death benefit remains constant throughout the policy term, while in decreasing term insurance, the death benefit decreases over time.
49) What is the waiting period in term insurance?
Answer: The waiting period is the time an insured must wait before certain coverage benefits become effective.
50) Is term insurance suitable for people without dependents?
Answer: While term insurance is often purchased to protect dependents, it can also be used to cover debts, funeral expenses, or leave a legacy to beneficiaries, making it suitable for individuals without dependents.
