Frequently Asked Questions for Term Life Insurance
- What is "term" life insurance?
There are two basic types of life insurance: term insurance and permanent (cash value) insurance. Term
insurance generally has lower premiums in the early years, but does not build up cash values you can use in
the future.
Term insurance covers you for a term of one or more years. Premiums will not increase during the guaranteed
premium term you select. Term insurance pays a death benefit only if you die during that term. Term insurance
generally provides the largest insurance protection for your premium dollar.
You can renew most term insurance policies for one or more terms even if your health has changed. Each time you
renew the policy for a new term, premiums may be higher. The policy remains in force for as long as premiums are
current, provided there are no misrepresentations on the application or other defenses to coverage. Coverage
terminates if you discontinue premium payments.
- How much coverage do I need?
That's our most frequently asked question! Determining the amount of life insurance that is right for
you is a personal financial decision and depends on your income and major events in your life such as: marriage or
divorce, the adoption or birth of a child, buying a house, starting a new career, retirement, etc.
Here are some things to ask yourself:
Income Needs:
How much of the family income do I provide?
If I were to die early, how would my survivors, especially my children, get by?
Does anyone else depend upon me financially, such as a parent, grandparent, brother, or sister?
How will inflation affect future needs?
Expenses:
How will my family pay final expenses, including current bills and burial costs?
How much will I need to pay off my mortgage, car, credit cards, and other debts?
Do I have family members or organizations to whom I would like to leave money?
Will there be estate taxes to pay after my death?
Do I have children for whom I'd like to set aside money to finish their education in the event of my death?
Assets:
As you figure out what you have to meet these needs, count the assets you have: savings, investments, real estate, and personal property.
Which assets would your family sell or cash in to pay expenses after your death?
Don't forget Social Security and pension plan survivor's benefits.
Also count the life insurance you have now, including any group insurance where you work or veteran's insurance.
Here are three ways you might determine how much coverage you need:
1. Capital Needs Calculation
Determine how much annual income your family would need in the event of your death. Determine an
interest rate you feel investments would yield. Divide the rate into the annual income. This will
tell you how much death benefit to purchase. For example:
If you believe your family would need an annual income of $50,000 and if you believe your family
could achieve a return of 8% (0.08) on invested insurance proceeds, then you should purchase $50,000
/ 0.08 (i.e. $625,000) of life insurance.
Additional coverage should be considered to offset inflation and taxes.
2. Rule of Thumb
Depending upon your overall financial condition, The Consumer Federation of America (CFA, 1997)
recommends six to eight times your income for a married couple with children. Consider debts,
mortgages, anticipated college expenses, dependents, etc.
3. Life Insurance Needs Calculator
While rules of thumb may be helpful, they do not take each individual's situation into consideration.
If you are still don't know how much insurance you need, let our interactive Life Insurance Needs Calculator
help you decide. If you know how much term life insurance you need, click here to apply for coverage.
- How much coverage may I apply for?
You may apply for your choice of a 10- or 20-year term with face amounts ranging from $100,000 to $1,000,000.
- What term should I select?
You'll want to choose the term the best suits your life situation. If you have young children, you may want to select
a term the will provide coverage until after they've completed college. Or you may want to provide coverage until your
mortgage is paid, or until you retire. To address these different need and for your convenience, you may apply for your
choice of either a 10- or 20-year term with face amounts ranging from $100,000 to $1,000,000.
Our premiums are among the lowest in the industry. If you know how much term life insurance you need and you want
to see how low our premiums are, simply
apply for coverage and you will be provided with a no obligation quote.
If you don't know how much term life insurance you need, let our interactive Life Insurance Needs Calculator help you decide.
- What happens when I request coverage online through this site?
When you click "Apply for
Coverage", you will be connected to The American Life Insurance Company of New York's secure Web site, where
you will enter basic information about yourself. This includes such things as your gender, date of birth, the amount
you are applying for, etc.
You will then be given a premium. If you wish to continue, you will be asked several
more health and lifestyle questions.
With this interview, a prompt determination regarding a person's insurability can be made and a policy with coverage
in-force for up to 90 days will be issued immediately, after which coverage will be extended for the full term once
underwriting is complete. The online offerings of most other insurance companies require a six- to ten-week turnaround
period.
You will remain completely anonymous throughout the qualifying questions. You will not enter any personal identifiable
information until you are ready to buy. Click here to apply for coverage.
- What if I change my mind after I ask you for coverage?
All policies have a "free look" period. This period may vary by
state. During the "free look" period, you may cancel your policy
without obligation. See the policy for details.
- What should I do about insurance I have now?
If you currently are covered by another life insurance policy, DO NOT modify or cancel it until your new
policy has been issued and the premium received by the insurer. You will be notified when that happens and
your new coverage is in effect.
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