Posts tagged ‘life insurance company’

What Kind of Things Will the Life Insurance Company Ask Me?

Life insurance is a necessary component of financial planning. It makes sure that all the people an individual leaves behind after death are well protected from the financial void of that loss. However, the process of obtaining life insurance involves a thorough review by the insurance company of an individual’s health, history, and lifestyle choices. Knowing what the insurance company will ask can allow an individual to purchase a plan that best suits his or her needs.

Details of the Policy

The first questions that many life insurance companies will ask concern what type of life insurance policy best suits the individual’s unique situation. This can encompass what type of plan he or she wants, whether term, full, or universal life. What type may depend on a number of factors including the number and age of the policy holder as well as the anticipated beneficiaries, the anticipated length of the policy, and how much the owner of the policy wants to put aside each month or year. These details will involve detailed conversations with the insurance company and the individual’s own family to determine what sort of insurance plan protects them at the best rate.

PreExisting Conditions and Medical History

After the general terms of the policy are pinned down, the life insurance company will begin to investigate the current state of the policy holder’s medical history and present physical condition to evaluate the exact terms and cost of theĀ  insurance policy. The insurance company will begin by asking for basic information such as age, gender, weight, and other readily available information. However, the company will also ask for a great deal of more personal medical information such as blood pressure, cholesterol and information about the individual’s medical history, such as information pertaining to sports injuries or history with arthritis, heart disease, and even acne.

Family History

Beyond the individual’s own medical history, the life insurance company also requires information about the policy holder’s family’s medical history. The company will ask about family experiences with heart disease, cancer, Alzheimer’s disease and other potential diseases that may be indicated by genetic predisposition. This will help the company determine the likelihood that the individual policy holder will contract those diseases and how long he or she is likely to live.

Lifestyle Choices

Finally, the insurance company will ask about any lifestyle choices that may affect an individual’s life expectancy. These can range from very common things such as tobacco use to dangerous hobbies. Activities such as scuba diving, mountain climbing, and sky diving can raise life insurance rates as it can decrease life expectancy of a policy holder. The insurance company may also ask about the policy holder’s job, as class divisions and occupational hazards have recently been introduced to actuarial accounting and may be taken into account with life insurance rates.

Choosing and acquiring a life insurance plan is a very complex process, requiring life insurance companies to balance the expectancy of payouts against the policy holder’s interests in providing for his or her own family. A policy holder may be tempted to obscure or falsify information to acquire better rates, but this can invalidate a policy, leaving the holder with nothing. Always tell the truth on insurance applications.

Pros and Cons of Using One Life Insurance Company

No limits have been set regulating the number of life insurance policies that an individual can have at one time, nor are there any requirements as to how many different companies an insured person can buy life insurance from. There are many pros and cons to using one insurance company. Having life insurance protection with more than one insurance company may be a great idea for a complete portfolio, but make sure to understand the pros and cons to make the decision that best fits the needs of the insured person.

Insolvency

Insolvency is when an insurance company becomes obsolete and does not have the funds to pay claims for death benefits. One pro for having more than one insurance company is that if one of the insurance companies were to become insolvent, the insured person would have other forms of life insurance protection in place. The Life and Health Insurance Guaranty Association for the state will cover a certain amount of a cash surrender or death benefit if an insurance company becomes insolvent, but not all it.

Steady Growth toward Security

Many individuals with low financial resources must purchase life insurance as they can afford it. Another pro in favor of multiple life insurance companies and policies is that in such a case the insured person has the ability to grow towards their security as their financial strength grows. The insured individual can continue to purchase life insurance policies from various companies as they can afford to add the coverage to their portfolio along the way.

Discounts for Large Death Benefits

Some insurance companies offer discounts for large death benefits. Basically, in a situation where the insurance company offers a discount for a large death benefit policy the insured individual has an opportunity to save money by purchasing only one plan and by keeping their life insurance with that one company. An individual with several smaller death benefit policies at various life insurance companies can potentially miss out on such a discount.

Confusion

With there being so many different types of life insurance available, having multiple plans at many insurance companies can cause confusion. Trying to keep the plans details straight and trying to remember what plan has certain provision, such as which policy is the permanent plan and which policy is the term plan can cause confusion and can cause an insured person to mix up provisions with each company on different policies.

Contract or Administrative Fees

Additionally, another con to having more than one life insurance policy with more than one life insurance company is that an insured person may pay additional fees. Many life insurance policies have contract fees or administrative fees for each policy. If an insured individual has several policies with multiple companies they may be paying more than their share of contract or administrative fees.

Policy owners should take the time to weigh all of the pros and cons as to whether they should have more than one life insurance policy. In addition, they should consider whether to have more than one life insurance company. Having various plans with various companies can protect an insured person against insolvency and allow them to grow a steady portfolio providing a secure future for their families, but it can also cause confusion and undue overpayment of fees.