Ten Questions to Ask Before Choosing a Policy

A life insurance policy is a long-term contract, and the price is only one part of it. These ten questions bring the important details into view, whether you are speaking with an agent, reading an offer online or comparing two policies side by side. Bring them to any conversation and ask for the answers in writing.

1. What exactly would this policy pay, and when?

Start with the death benefit and the conditions attached to it. Ask about exclusions, which are situations the policy does not cover. Most policies include a suicide clause, commonly two years, during which the benefit is limited to a refund of premiums. Most also have a contestability period, also commonly two years, during which the insurer can review the application and deny or adjust a claim if important information was left out or misstated.

2. How long does the coverage last?

For term policies, confirm the length of the term and what happens when it ends. Can the policy be renewed, and at what cost? For permanent policies, ask whether coverage could lapse if premiums are missed or if the cash value runs low, which can happen with some universal life designs.

3. Can the premium change?

Level term premiums stay the same during the term. Whole life premiums are typically level for life. Universal life policies are more flexible, and the internal cost of insurance can rise over time, which may require higher payments to keep the policy in force. Ask to see what happens to the policy if you pay only the minimum.

4. What will it cost in total, over the whole commitment?

Look beyond the first-year premium. Multiply it out over the full term or the years you expect to pay. Also ask whether paying monthly costs more than paying annually, because many insurers add a charge for more frequent payments. Small differences add up over decades.

5. How was my rate class decided?

Insurers group applicants into rate classes based on factors such as age, health, family history and tobacco use. Ask which class you were placed in and why. If your circumstances improve, for example after you stop using tobacco, ask whether you could apply to be reconsidered later.

6. Does it include a conversion option or riders?

A conversion option lets you switch term coverage to a permanent policy without new medical questions, usually before a set age or date. Riders add features, such as waiving premiums if you become disabled or allowing early access to part of the benefit if you are diagnosed with a terminal illness. Ask what each rider costs, and whether you are likely to use it.

7. If there is cash value, how does it grow, and what does it cost to reach?

Policy illustrations show how cash value might develop over time. Ask which figures are set by the contract and which are only projections based on assumptions. Then ask about surrender charges, loan interest rates and how loans or withdrawals would reduce the death benefit.

8. Who is the insurer, and how financially strong is it?

A policy is only as dependable as the company behind it. Independent rating agencies publish financial strength ratings for insurers; ask the agent which ratings apply and check them yourself. Each state also has a safety-net system that protects policyholders up to certain limits if an insurer fails, and your state insurance department can explain how it works where you live.

9. Is the agent licensed, and how are they paid?

Insurance agents must be licensed in the state where they sell, and you can confirm a license through your state insurance department. It is also fair to ask how the agent is paid. Many agents earn commissions from the insurer, which can differ from product to product. Some represent a single company, while independent agents can offer policies from several. Fee-only financial planners charge you directly instead. Knowing the arrangement helps you weigh the advice you receive.

10. How long is the review period, and how do I cancel?

Most states require a review period after a policy is delivered, often called a free-look period, during which you can return the policy for a refund of premiums. The length varies by state and by policy type. Use this time to read the full contract, not only the summary pages, and to confirm that it matches what you were told.

Bringing it together

You do not need to become an expert to make a sound decision. You need clear answers to the right questions and enough time to consider them. A short checklist to take with you:

• The death benefit, exclusions and contestability period.
• The length of coverage and what happens at the end.
• Whether and how the premium can change.
• The total cost over the full commitment.
• Your rate class and the reasons for it.
• Conversion options and the cost of each rider.
• Cash value details, if any, in writing.
• The insurer’s financial strength.
• The agent’s license and how they are paid.
• The length of the review period.

Helpful official resources

• National Association of Insurance Commissioners (NAIC)The standard-setting organization created and governed by the chief insurance regulators of the states.
• Federal Trade Commission: Consumer AdviceThe federal agency that works to protect consumers from fraud and unfair business practices.
• Consumer Financial Protection BureauThe federal agency responsible for consumer protection in the financial sector.

These links lead to official public websites. CovForLife is not affiliated with any of these organizations.