Read these FAQs to get your life insurance questions answered
Many people across the country choose to not have life insurance coverage, or they don’t understand what they’re paying for and thus don’t have the right coverage.
A recent survey showed that more people don’t have sufficient coverage as the overall population ages – only 10 percent of millennials have the life insurance coverage they need. The same survey showed that over half of millennials are not prepared to deal with a major life occurrence, like the loss of a job or the death of the main breadwinner in their household.
There are many different types of life insurance policies that fit the needs of different people. Understanding the benefits and the type of life insurance will help more individuals take control of their policies and get what they – and their family – really need.
Here are some of the top questions that New Yorkers are asking about life insurance:
1. Why do I need life insurance?
Life insurance is primarily a benefit for the loved ones you leave behind. As such, the needs for life insurance coverage change as you age or have more dependents.
If you have children or other dependents who count on your income each month, you want to be able to leave behind a source of income for them that will make up for any loss due to your death. Considerations include the standard of living and resources your dependents have now versus what you want them to have when you’re gone.
Life insurance payouts can also help your loved ones pay for any debts, funeral expenses, or estate taxes.
2. Is life insurance a requirement in New York?
No, you are not required to have life insurance and actually, some people may not need it at all. Nolo points out that if no one depends on your capacity to earn money – i.e., you have no dependents – you may not need it.
3. I’ve heard that life insurance won’t apply in the event of a suicide. Is that true?
According to New York’s Department of Financial Services, if the insured person commits suicide within the first two years of holding the policy, the face value amount will not be payable. However, the insurer will refund the premiums paid minus the dividends paid and any accrued debt, which could include interest.
4. Are there interest rates as if I have to take out a policy loan?
Insurers can charge an interest rate if you decide to take out an insurance policy loan. The New York Department of Financial Services sets forth guidelines for what insurers provide you as follows:
- A fixed loan interest rate cannot exceed 7.4 percent, payable in advance, or 8 percent, payable in arrears.
- An adjustable rate either has an 8 percent cap, or no cap not to exceed the higher of:
• the Monthly Average Corporates yield for the month ending two months before the date the rate is determined.
• the rate used to calculate the cash surrender values under the policy during the period plus one percent.
5. How do I know what kind of life insurance to buy?
You’ll first need to figure out what kind of needs you have. Are you married? Do you have children? How many people are in your family? What is your current salary? Gather this information to better determine the kind of payout you would need to leave behind.
Then, you’ll need to figure out what you can afford to pay each month, as all plans are not created equal. Be sure to find a life insurance provider who will walk you through each step and explain each coverage option. New York state requires that you receive a “free look” period of at least ten days, with a maximum of 30 days, so you can look through policy provisions and cancel without penalty during a set time period.
6. Can I update or buy life insurance at any time?
You won’t always be able to buy life insurance – you need to be in fairly good health to purchase it most of the time – so make sure you’re thinking ahead for the future.
7. What types of life insurance are there?
While there are many layers to each of the types of life insurance, the basic two to know are:
- Term insurance: set up for a specific time period, and it only pays if you die during the term.
- Permanent /whole life insurance: for your entire lifetime, it pays out upon your death.
There are then several different types within these two categories, including renewable term, universal life, and others.
8. How much does life insurance cost?
The cost of your monthly premiums will depend on three different variables assessed by insurance providers. The first is mortality based on the risk of death by mortality tables, which provide life expectancy estimates for large groups of people. Insurers care about things like whether or not you smoke, for instance.
The next factor is interest earnings; your insurance company will invest the premiums you pay, so they estimate the rate of interest they’ll receive. The third is an expense; companies take into account their expenses to operate their business.
Typically, life insurance costs range from $300 to $4,000 per year, depending on your age and other variables.
9. Can beneficiaries accrue interest if there is a delay in payouts of a death benefit?
Yes, it is a legal requirement that interest accrues on the proceeds from the date of the insured’s death until the date of the claim.
10. What if I miss a payment on my premium? Do I lose coverage?
For life insurance policies on a strict schedule, the insured has a 31-day or one-month grace period during which they can make the payment and coverage will continue. On some variable payment plans, the grace period is 61 days.
If you have additional questions about obtaining life insurance in New York, contact our experienced team at NICRIS Insurance to learn more. We ensure that you fully understand what you’re agreeing to and that you get the coverage you and your family needs.