Q. I need to
prepare for final expenses. Should I buy life insurance or just
pre-pay for a funeral?
A. Prepaying for a
funeral or purchasing pre-needs insurance from your undertaker
is an option if your health is such that you cannot get life insurance.
However, if you are eligible, whole life insurance provides more
flexibility for your heirs and gives you some extra options as
well. For example, if you ever needed to, you can borrow against
whole life insurance for some emergency cash.
Q. I have enough
assets to simply pay final expenses. Why should I bother with
whole life?
A. If your assets are
such that your heirs will not have to worry about paying for final
expanses, you may still want life insurance to enable them to
pay other expenses such as estate taxes. Life insurance is paid
out tax free and does not go through probate. Your assets will
have to be probated before your heirs are free to use them. If
probate takes awhile, the undertaker may not be willing to wait.
Q. Since Term
insurance is guaranteed renewable, why should I pay more for whole
life?
A. Term is renewable
but at the premium for your attained age. Furthermore, after you
reach 75, your premium may increase every year. Since Term does
not accumulate cash value, you can find yourself with nothing
if the premium increases to an amount you cannot pay.
Q. How fast
can I expect cash value in a whole life policy to accumulate?
A. If you have a traditional
whole life, the cash value will equal the face value when you
reach age 100. That's one reason, in addition to the cost of insurance,
that your policy is more expensive if you wait until later in
life to get it.
Q. How stringent
is the medical underwriting on whole life?
A. The rules vary from
one company to another. However, if you choose a modest face value—less
than 50,000, for example—and have no chronic health problems,
most companies have at least one "easy issue" policy. Such applications
might ask you for health conditions over the past three to five
years only, and—depending on your age—might not require
a doctor's report.
Q. What if
I die unexpectedly very soon after taking out the policy? Will
it pay off?
A. Yes, providing you
did not lie on the application. All companies have a right to
a two year "contestability" period. However, if there is no reason
why they would not have issued the policy, they will pay the face
value to your beneficiary.
Q. What if
something happens and I can't pay my premium?
A. If you cancel the
policy, you will receive whatever cash value it has accumulated.
However, if you have had it long enough, you will also have the
option of taking a "reduced paid up" insurance. That means, you
will receive a paid-up policy of whatever face value your premium
has purchased at that time. Term insurance does not give you this
option.
, from a company
with a high rating.
