Tim Wilhoit, agency owner of Your Friend 4 Life in Nashville, TN, answers a few common questions about life insurance that consumers and agents frequently ask. Hopefully, one of these questions can help you as well.
What Happens To Life Insurance When Both Parents Die?
The beneficiaries of a life insurance policy pay in a certain order.
First is the primary beneficiary which can be a person, a few people paid by percentage, or an institution, such as to repay a debt.
Second is the contingent beneficiary. The contingent beneficiary is paid if the primary benefit dies before or with the insured.
Third is the tertiary beneficiary. This beneficiary receives life insurance proceeds if all of the primary and contingent beneficiaries die before or with the insured.
If the later beneficiaries are not named on the policy, then life insurance proceeds roll into the estate and will be subject to probate and estate taxes. This is always a shame as life insurance proceeds are usually not taxed if there is a named beneficiary. Be sure and work with a knowledgeable agent or advisor to be sure your life insurance policy is set up correctly.
When Does Whole Life Insurance Expire?
Only term life insurance expires. Whole life and universal life actually endows. It depends on how the writing agent sets the policy up at point of application, but the premiums are based on minimum, target and maximum premiums. The illustrations will show the age that was targeted for the coverage to endow. The most common ages are 95, 100, 105 and 121 years old. The whole life policy will endow at the specified age which means the premiums will begin to exceed the death benefit. At this point, you can take the cash value, you can continue paying premiums to allow the cash value to grow or you can stop paying premiums and allow the money to grow and leave your beneficiary the cash as a death benefit. Whole life insurance will not just simply expire.
How Is AD&D Different From Life Insurance?
An Accidental Death and Dismemberment policy is a life insurance product. It can come in two different forms. There are term and permanent life insurance policies that offer AD&D as a rider to the life insurance to increase the face amount proceeds in case of accidental death. The dismemberment pays on a schedule depending on the limbs effected.
There are also AD&D standalone policies that only cover an accidental death or dismemberment. The plus side of these polices usually require little or no underwriting which gives ill people an opportunity to have some life insurance coverage were as they may not qualify for any other type of life insurance. They are also very affordable premiums. The downside is the odds of dying accidental versus dying from an illness are very very high. This is why they are easy and cheap, because the odds are in the life insurance company’s favor not to pay a claim.
Why Get Life Insurance At A Young Age?
When purchasing life insurance the younger and healthier a person is, the more affordable the premiums can be. First, before purchasing life insurance you must determine if is there an insurable need? Meaning, who would suffer financially at your death? Could be a loved one that would have to pay for your expensive funeral costs. Could be a loved one that depends on your income. Could be someone that would incur your debt upon your death. There are literally hundreds of reasons to purchase life insurance and the younger you make that purchase the cheaper you will find your premiums to be. However, do not just purchase life insurance just because it is cheap, be sure you have a good reason.
“Judge a man by his questions rather than his answers”.—Voltaire
Image by Stuart Miles at www.freedigitalphotos.net
Tim Wilhoit is owner/principal of Your Friend 4 Life Insurance Agency in Nashville, TN. He is a family man, father of 3, grandfather of 1, entrepreneur, insurance agent, life insurance broker, salesman, sales trainer, recruiter, public speaker, blogger, author and team leader with over 28 years of experience in sales and marketing in the insurance and beverage industries.