Ask these questions about life insurance before selecting your policy

If you’re thinking about ways to financially protect your family and help ensure they’ll have the money they need to cover bills and expenses after you’re gone, you may have started to explore life insurance and the benefits coverage can provide. As you begin to research your options, asking the right questions can help you better understand how life insurance works and what type of coverage may fit your family’s needs.

Evaluate your life insurance needs

Before selecting life insurance, take a step back and evaluate your overall needs based on your current financial situation and future goals. Factors such as income replacement, outstanding debts, ongoing living expenses, and long-term family responsibilities can all play a role in determining the right level of coverage. Taking time to assess these needs can help you better understand what type of life insurance policy may be appropriate for your situation.

How much life insurance do I need?

Understanding how much coverage you may need is an important part of the life insurance planning process. A common guideline is to consider coverage equal to 10 to 15 times your annual income, but the right amount can vary based on factors such as final expenses, mortgage or rent costs, outstanding debts, and future goals. Life insurance can help fill gaps in a financial plan and, depending on the type you choose, may also offer additional benefits such as helping supplement retirement income, building cash value, or providing access to living benefits¹ in the event of a serious illness.

When working with a financial professional, they will likely ask fact-finding questions to better understand your financial and personal situation. With this information, they can estimate how much coverage would be adequate to cover your life insurance needs and help you meet any other goals you would like to accomplish, like building an emergency fund or saving for children’s future education costs.

How long should my life insurance coverage last?

How long your life insurance coverage should last depends on how long you expect others to rely on your income or how long you’ll have significant financial obligations. In many cases, coverage is designed to last anywhere from 10 to 30 years, often aligning with key milestones such as paying off a mortgage or the years until children become financially independent.

Before selecting a type of life insurance, consider both short and long-term responsibilities, including ongoing household expenses and a partner’s financial protection in retirement. Some people choose coverage that lasts for a specific period, while others prefer coverage that extends throughout their lifetime. Your financial professional can help you evaluate your goals and determine a duration that fits within your overall financial plan.

What are living benefits of life insurance?

The idea of a death benefit likely comes to mind when you first think about life insurance, and while this is a very valuable feature, many policies can also provide benefits while you’re still alive. Living benefits allow the insured to access a portion of their death benefit or accumulated cash value while still living, in the event of a qualifying illness or financial need. These benefits may be available through riders, such as accelerated death benefit endorsement, or from certain permanent life insurance policies that include cash value accumulation.

These funds can help cover medical bills or other costs that may arise from a serious health event, such as household expenses, mortgage payments, or childcare needs during recovery. Certain policy types can also help fill retirement income gaps by offering cash value growth potential and additional access to funds for future financial needs.

Consider different types of life insurance policies

As you evaluate your life insurance needs, it’s helpful to explore the different types of life insurance policies available and how each may align with your goals. Some policies are designed to provide coverage for a specific period of time, while others are intended to offer lifelong coverage and may include additional features such as cash value accumulation. Understanding these differences can help you select the life insurance coverage that may be appropriate for your situation.

What kind of life insurance should I get?

A common question about life insurance is what kind of policy should you buy? Comparing different types of life insurance coverage can help you understand whether a term or permanent policy may better fit your needs. For many people, term life insurance can be a good option for providing affordable coverage during the years when financial responsibilities are typically at their highest. Coverage periods commonly range from 10 to 30 years, making it a practical choice for needs such as income replacement, paying housing costs, or supporting young children.

Permanent life insurance may be appropriate for those who need lifelong coverage, want to build cash value over time, or have more complex financial or estate planning needs. These policies can provide financial protection that lasts for the insured’s lifetime and may include additional features depending on the policy type.

How to choose a life insurance policy?

Choosing a life insurance policy means bringing together the questions you’ve already considered: how much coverage you may need, how long you want your coverage to last, what type of policy fits your goals, and what premium amount works within your budget. A financial professional can help you compare options and understand how different policy features may support your family’s needs and long-term financial plan.

What happens if I survive the policy term?

If your term life insurance policy reaches the end of its term, you may be able to keep the coverage. However, the cost usually goes up a lot each year after the term ends. If you decide not to keep paying for the coverage, the policy ends and no death benefit is paid. Unless the policy includes a return of premium feature, there is generally no money refunded at the end of the term. As the policy approaches the end of the term, some policies may offer a term conversion option, allowing you to transition to a permanent life insurance policy without a new medical exam. This can help extend coverage if your life insurance needs have changed or if you still have financial responsibilities to cover. Reviewing your coverage regularly with a financial professional can help ensure your plan continues to align with your goals over time.

Prepare for the life insurance planning and application process

The life insurance application process typically begins with selecting a policy and completing an application that includes basic personal, medical, and financial information. Understanding the application process for life insurance ahead of time can help you feel more prepared for the information you may need to provide. Depending on the coverage amount and type of policy, applicants may be asked to provide supporting documents such as income verification, identification, and medical history. Many applications also include a medical evaluation, which can involve a health questionnaire, prescription review, and in some cases a physical exam. Once submitted, the insurer reviews the information to assess eligibility and determine final policy terms.

How do I choose a financial professional to plan for life insurance?

Choosing a financial professional to plan for life insurance involves finding someone with the right expertise, credentials, and communication style that matches your needs and preferences. Look for professionals with relevant designations such as Certified Financial Planner (CFP) or Chartered Life Underwriter (CLU), which indicate advanced knowledge of insurance and financial planning. Pay attention to how they are compensated and whether their approach is transparent, so you understand any potential fees or commissions involved. Financial professionals should take time to understand your goals, answer questions thoroughly, and help compare options in a way that supports informed decision-making. Evaluating all of these factors can help you choose someone you trust and who is well-suited to guide your life insurance planning process. A financial professional can also help answer your life insurance questions in the context of your family, budget, and long-term goals.

Contact North American for help with all of your life insurance questions

Understanding your life insurance options is an important step in building a financial plan that helps financially protect your family’s future and supports your long-term goals. North American offers a range of life insurance and annuity solutions designed to help protect your family while also supporting broader savings and retirement income goals. These products can help you prepare for life’s uncertainties while working toward long-term financial protection. To learn more, contact a North American agent today!

¹ Subject to eligibility requirements.

The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.

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