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Life Insurance Basics: Do You Know the Answers to This Quiz?



Answer

1. True or false? In order for your spouse to receive life insurance money if you die, he or she must be the owner of your insurance.

False.

You can be the owner of your own insurance. The person who receives a death benefit if you die is the beneficiary. You can be both the owner and the insured and your spouse would be listed as the beneficiary.

Read more about insurance ownership in this blog: Who can own a life insurance policy?

2. True or false? If you buy insurance with a term of 20 years, your insurance expires in 20 years.

True.

A life insurance policy lasts for a certain period of time. This time period is called a term. The most common semester lengths are 1

0, 15, 20, 25 and 30 years. At the end of the term, your insurance expires.

If you feel you need more coverage, most operators will allow you to renew your insurance period, but premiums often increase drastically so we usually recommend that you choose another option. Either you convert your terms policy into a permanent insurance policy or buy a brand new terms policy.

Read more about these options in this blog: My terms policy expires – what can I do?

3. True or false? Your life insurance coverage must be equal to 10 times your income.

False.

Life insurance is not one size fits all. While the industry's rule of thumb is that you should own ten times your salary, this calculation is not right for everyone.

Read more in this blog: Life insurance: Do you need ten times your salary?

] 4. True or false? If you have life insurance through your job, you do not need personal life insurance.

False.

We recommend that you always supplement your work life insurance with a personal life insurance.

With an employer group plan, the coverage amount you usually have is once or twice your annual salary. For most working individuals, this amount is not enough to protect your family financially should you die and your income suddenly disappear. In addition, these policies will not follow you if you leave your job. If your next workplace does not offer this benefit, you will suddenly be without coverage.

Read more about group life insurance in this blog: Do I need individual life insurance if I have group life insurance?

5. True or false? You will get your money back if you do not die before your insurance period expires.

False.

With a traditional life insurance, you will not receive any premiums back if you do not die within the term. Think of it as a car insurance policy. Just because you do not file a claim does not mean you get your money back.

The only way you would get your money back would be if you bought a return insurance policy. But you pay a higher premium because you know you would get your money back if you survive your insurance.

Read more in this blog: What happens if I do not die while my insurance is valid?

6. True or false? You can buy life insurance on your neighbor.

False.

You can not buy life insurance on anyone without an insurable interest. Insurable interest is when your finances would be adversely affected as a direct result of another person's death. Your neighbor's life does not matter to your finances.

Read more in this blog: Can I buy life insurance on someone else?

7. True or false? Your insurance premiums increase every year.

False.

When you buy a life insurance policy, your premiums will never increase during the life of the insurance. That is why we always recommend that you buy insurance as soon as you need it. The younger and healthier you are, the cheaper your insurance is and you can lock in the low interest rate.

8. True or false? Life insurance is cheaper than full life insurance.

True.

A life insurance is a permanent insurance and will, in addition to accumulating a cash value, last a lifetime. Due to these two factors, full life insurance is about ten times more expensive than one insurance policy. A term insurance is usually the right choice of coverage for most people, but permanent insurance also has its benefits.

Read more in this blog: Is lifetime insurance better than full life insurance?

9. True or false? You can name your dog as a beneficiary in your life insurance.

False.

While Mr. Fluffikins really are part of the family, you can not name a pet as a beneficiary on your life insurance. What you can do, however, is make sure to provide instructions in your will on how to take care of your pet. You can even go a step further and create a Pet Trust and appoint the trustee of your life insurance beneficiary.

Read more about how to protect your pet in this blog: Pet Trusts and Estate Planning for Your Pet

] 10. True or false? You must have a medical examination to buy life insurance.

False.

It is not necessary for all life insurance applicants to get a medical examination. Many life insurance companies offer accelerated issue guarantee for qualified applicants. The accelerated issuance process does not require a medical examination.

However, not all applicants qualify for a life insurance policy without a degree. Your health plays a big role in determining your insurance costs and the results of a medical examination help a life insurance company determine these costs.

Read more about life insurance medical examinations in this blog: Do I Need a Medical Examination to Get Life Insurance? [19659005]

How did you do? If you did not get so many right then it's OK! You now know the basics of what you should know before buying a life insurance policy. Our FAQ page is a great resource if you want to learn more.

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