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Frequently Asked Questions

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Illustration of a Life Insurance FAQ

Life Insurance FAQ

What is life insurance?

Life insurance is a method some people take to ensure that their loved ones are financially secure if they pass away. Insurance companies are willing to pay those who depend on you a sum of money upon your death in exchange for periodic premium payments. In the event of your passing, the life insurance policy pays out directly to the individuals selected by the insured, who can then use the money however they wish.

What does life insurance cover?

Life insurance is basically designed to cover the loss of income, end-of-life expenses, and other financial needs your family or loved ones may have if you die unexpectedly. The coverage can vary from plan to plan, as life insurance is fairly flexible. Some examples of coverage can include providing money to pay the deceased’s outstanding debt, paying a mortgage, college tuition for the deceased’s children, paying into a trust, and many other options.

How much life insurance should I purchase?

The amount of life insurance you should purchase depends on your specific, personal needs. You may want to purchase a plan that takes into account your family’s financial status and its probable future. If you are the primary earner in your household, you may want to purchase a larger policy than if you are not. You should speak with an insurance agent to discuss your options and see what life insurance plan fits best for the the needs of your loved ones.

How much does life insurance cost?

Several different factors go into the cost of a life insurance policy. The cost of a plan is based on age, life choices, occupation, health, and several other considerations. A young, healthy non-smoker will likely pay a lower rate than a middle-aged smoker with diabetes, for example. The cost also depends on the amount of life insurance you wish to buy and whether you choose a term or permanent life insurance policy. It is important to look at all your options and compare life insurance companies  in order to know how much you should expect a policy to cost.

What is a beneficiary?

A beneficiary is the person or persons that will receive the proceeds of your life insurance policy should you die unexpectedly. It is important for the insured to designate a beneficiary or beneficiaries in order to make sure the payout goes to the person(s) the insured wished to benefit. If no beneficiary is outright named, the life insurance payment will be distributed according to the insurance contract, typically going to the the surviving spouse, children, parents, siblings, or the insured’s estate.

How many years should I choose for my life insurance policy?

It all depends on your individual needs and your current life situation. If you have younger children, a 20-30 year term on your life insurance may be necessary to ensure that your children’s college tuition or other expenses are paid for. However, if your children are fully grown or you do not have children, you may want a shorter coverage period. It is best to examine your life and any potentials needs to foresee while also talking them over with your loved ones and an insurance agent to see how many years are the best for you.

Are my life insurance benefits taxable?

Life insurance benefits and proceeds aren’t usually taxed if they are paid to a specifically named beneficiary or beneficiaries. The payout can become taxable, however, if the insured’s estate is named as the beneficiary. If that is the case, then the proceeds are subject to an estate tax.

When should I get life insurance?

Whenever it makes sense. Waiting to purchase a policy gets more costly with age and it is easier to qualify when you are younger without health complications. However, many people wait until they get married, have children, start up a business, or have some other important aspect that will be left behind should they unexpectedly die. It is up to you to decide when it is the best time to purchase a policy.

Where can I buy life insurance?

Freeway Insurance offers a simple and affordable life insurance solution. We get rid of the complicated enrollment process to give you the freedom to choose from multiple life insurance companies. We’ve set up an online one-stop-shop where can apply in minutes and completely free.