Determining your insurance needs is a part of a comprehensive financial plan. As you are considering your finances, you may have life insurance questions. Consider consulting with a knowledgeable fiduciary financial planning firm to ensure you’re making the best choices for your financial future.
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Common Life Insurance Questions
1. Do you make money from selling life insurance?
The first thing you should know about life insurance is that I don’t sell it. As a financial planner, I consider it a conflict of interest to make a commission off of the advice that I might give. However, life insurance agents make a commission off of selling life insurance. I know this might seem obvious, but sometimes companies can hide their conflicts of interest pretty well. For example, a life insurance agent may choose another title that gives the impression they are giving advice instead of selling a product.
2. Does everyone need life insurance?
The purpose of life insurance is to provide a financial safety net for the people who depend on you. For example, suppose you are the sole breadwinner in your family. If something should happen to you, it will take some time for your partner to find a job and earn enough income to support the family. Therefore, you may choose to purchase life insurance to provide six months of savings to cover your family’s expenses, plus your funeral and burial expenses. On the other hand, if you do not have anyone financially depending on you, you may not need any life insurance.
3. Who needs life insurance?
Life insurance serves a purpose, but there are many factors to consider when determining whether you need life insurance, including whether:
- You have enough savings to cover your debts if you should die.
- You have dependents that rely on you financially.
- You own a business.
- You have unpaid student loans that someone else may be responsible for if you die.
- You and your partner share living expenses.
- You need to insure someone else because you are financially dependent on them.
- You are an older adult without enough savings to cover your end-of-life expenses.
4. Is there more than one kind of life insurance?
There are several types of life insurance, so it is important to understand what they cover and what they cost. Life insurance is a contract between you and the company supplying the policy. The contract is only in force if the payments are made. Life insurance is only paid out if the premiums are fully paid and up to date. If you cannot afford the premiums either now or in the future, you may throw money away. It is also important to know if there are any circumstances in which the benefits are not paid or any waiting periods before coverage is effective.
Term Life Insurance
Term life insurance provides coverage for a defined period. As a result, term life insurance tends to be cheaper than whole life coverage. At the end of a term, you may be able to renew your policy, but it may require getting a medical exam to verify that you have not developed any new health conditions and to determine how high a risk you are.
Term life insurance only provides coverage if you die during the term when the policy is active. At the end of the term, the policy has no value.
Whole life insurance
Permanent life insurance covers you for life as long as your premiums are paid. It can be whole life, universal life, or variable life insurance. Most times, whole life insurance includes an investment component. Therefore, the policy has a cash value that increases over time. However, this benefit usually incurs additional fees.
5. Should you only get life insurance when you are young?
You can buy life insurance at any age. Though it is cheaper to get it when you are younger. However, it is a mistake to purchase unnecessary life insurance when you are young in anticipation of needing it when you are older.
Since a health insurance company is wagering on whether they will need to pay out your life insurance or not, they might consider such factors as your gender, past medical history, lifestyle choices, and marital status when determining your premiums and coverage. While age is an important factor when determining whether to purchase life insurance, even more important is determining whether you need life insurance and whether it is the best way to use your money.
6. Can life insurance ever be an investment?
Some life insurance policies build cash value. This is because interest accrues as the insurance company invests the premiums. Since the insurance company is making money off your money, just like a bank, they may pay you a small percentage of the profits. When you evaluate this interest rate, you will probably find that you can make more money investing your premiums in the market.
7. What are insurance riders?
Riders can be added to your life insurance coverage to personalize it for your needs. For example, with an accelerated benefits rider, some or all of your death benefits may be accessed before your death.
Life insurance has its role within a comprehensive financial plan. We can help you weigh your insurance options. To ensure you’re making the best choices for your financial future, consider consulting with a knowledgeable Financial Planner in NYC.
Gabriel Katzner
In 2002, Gabriel Katzner received his Juris Doctorate with honors from Fordham University School of Law. After spending the first seven years of his legal career practicing at Cahill Gordon & Reindel LLP, an international law firm based in New York, he founded his own firm.
Gabriel identified key limitations in traditional estate planning—particularly the transient nature of client interactions and the suboptimal financial advice clients received elsewhere. Motivated to provide more enduring and comprehensive financial guidance, Gabriel established Frame Wealth Management. His aim was to extend client relationships and enhance their financial strategies, ultimately leading him to become a CERTIFIED FINANCIAL PLANNER™ and a CPWA® professional.
Years of Experience: 17+
