Frequently Asked Questions

Learn more about term life insurance in our FAQ section.

What is term life insurance?

Term life insurance provides an affordable means to protect your family in case of your death. It is the least expensive and most straightforward form of protection, providing coverage at a fixed rate of payment for a limited amount of time, usually for periods of 1 to 30 years. Upon the death of the insured it pays the face amount of the policy to the named beneficiary. As long as the policy is still in force at the time of your death, your beneficiaries will receive the full sum of your coverage amount.

What is whole life insurance, and how does it differ from term life insurance?

Whole life policies offer protection for as long as you live, provided that premiums are paid as required to keep the policy in force. These life insurance policies can accrue value as you contribute to them over time, and can be useful as financial assets.

In term life insurance, premiums are paid for a chosen “term.” If death occurs during the term, your beneficiaries receive the full benefit of the policy. After the term expires, no benefits will be paid.

Term life insurance policies are significantly more affordable than whole life policies, as their benefits extend for a specified period of time rather than indefinitely. Many families searching for affordable life insurance choose term life insurance as the most inexpensive way to hedge against misfortune.

Some term life insurance policies are renewable at higher premium rates. For more information on renewable term life insurance policies, call one of our Direct Insurance Source agents at (800) 851-6508.

How do I know how much term life insurance I need?

Life insurance acts as an income replacement for your family after you’re gone, and is also used to cover things like burial costs and outstanding debts. When deciding how much term life insurance you need, consider how long your family might need assistance after your death and what kind of estate you hope to leave. This figure will depend on your family’s future expenses: college tuition, medical bills, housing payments, etc.

Always be sure to account for inflation in your calculations; funding will need to increase by at least 50% for a payout 10 years from now.

Will I need a medical exam to apply for term life insurance?

Once you have decided to move forward, most insurance carriers require a basic medical examination as part of the application process. The exam is administered by a licensed medical professional, and includes a blood test, urine sample, blood pressure reading, and height and weight measurements. During this exam, you will also be asked a few questions about your health history.

The medical exam is paid for by the issuing insurance company, and usually does not exceed 30 minutes in duration. It can take place in your home, your office, or any other convenient location.

What life insurance rate class am I in?

A life insurance rate class indicates certain health and lifestyle factors. Your term life insurance premiums are determined by the life insurance rate class into which you fall.
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There are 4 main rate classes for life insurance: Preferred Plus (excellent health and non-tobacco user), Preferred (good health), Standard Plus (some minor health impairments), and Standard (more serious health impairments).

How long is the waiting period before my benefits take effect?

Life insurance coverage does not begin until your application is approved and the first premium has been paid.

The process in which the insurance company reviews and evaluates your application is called the “underwriting” period, and generally takes between 3 and 8 weeks. Once your application is approved, your coverage begins after the first premium has been paid.

Most insurance companies also have a “free look” period during the application process, which allows you to change your mind about the term life insurance policy and receive a full refund at any time during the application process and up to 10 days after your policy is delivered.

Will my premium rates change over time?

Your premium rate will remain the same throughout the length of your policy’s term. This rate is established at the time of your policy’s approval, based on your life insurance rate class and other lifestyle factors.

Can my coverage be cancelled if I become ill?

No. Insurance policies are legally binding contracts, and insurance companies are legally obligated to pay the proceeds according to the policy provisions – regardless of any sudden illnesses. Many insurance contracts clearly include statements to the effect that neither party has the right to cancel a life insurance contract in the event of an illness.
In specific cases, an insurance company can enforce terms of “exclusion” if a policyholder knowingly failed to disclose a serious existing illness before the contract was signed.

Can the insurance company refuse to pay out my coverage if I die?

A life insurance company can deny a claim in cases of fraud, such as an applicant who knowingly hid life-threatening medical conditions and lifestyles.

Insurance companies can also deny claims during what’s called the “contestable” period, which usually lasts 2 years after coverage initiation. During the contestable period, insurance companies can invalidate and cancel a policy if the application contains misrepresentations or errors of any kind. For this reason, consumers should take care to read through the wording of insurance applications and contracts, and to fill them out honestly and completely.

Many insurance policies also include suicide exclusions, which limit the insurance company’s liability if the suicide transpires during a specifically stated period of time. In the event of such an occurrence, the insurance company will simply refund premiums rather than disbursing the full payout.