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Frequently Asked Questions
Term life insurance is the simplest -- and usually the least expensive form of life insurance. Term life provides protection for a specific period of time. It pays a benefit only if you die during the term. A policy that has not paid out a death benefit will ultimately expire with no value. It is sometimes called temporary life insurance. Policies generally last for 5, 10, 15, or 20 years,
or to some specified age. The longest a policy can stay in force,
in New York State, is to age 80. 2. What is a whole life policy? How does this compare to variable and universal life? Whole life insurance gives you lifetime coverage at a premium rate that does not increase with your age after you buy. In the early years of the policy, when you're a low risk, you'll pay more in annual premiums than it costs to insure you. As you become a higher risk at an older age, the level premium eventually becomes less than the amount it takes to insure you. Level premium payments build a reserve in your policy that is used to insure you as you age. Insurance companies call this reserve the "cash value." You may also surrender a whole life policy for its cash value, or borrow against it at anytime. Variable and universal policies are similar in that they generate cash values, and offer a level premium. These are not guaranteed (as they are with whole life), however they typically offer lower premiums and variable policies allow you to direct how the cash values are invested. 3. How do I know how much life insurance to apply for? A general industry rule of thumb is life insurance policy from six to ten times your gross annual income is considered to be adequate coverage. For example, if your gross income is approximately $35,000 per year, the suggested level of coverage would be approximately $250,000 (somewhere between $210,000 and $350,000). Of course this is just a general rule, you will have to decide if it is appropriate for you. A better way to calculate your need is to have your advisor compare your survivors needs with assets and coverage you already have. 4. What is disability insurance? Disability insurance provides protection against the loss of income that could result if a disability prevents you from working and earning a living. 5. Why do I need Long Term Care Insurance? Won’t Medicaid pay for everything? A common misconception is that Medicare or Medicaid will cover the cost of long term care, including nursing homes. In reality, Medicare covers very little of the cost of long term care services. In fact, Medicare covers virtually no long term care, but is intended for short-term, acute care only. Medicaid, a program jointly funded by states and the federal government for the nation's poor, does cover long term care, but qualifying for Medicaid frequently entails a prohibitive application and qualifying process after a person has depleted most of their own personal assets.
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