Life Insurance FAQ

1) What is life insurance?

When a person dies, there are many expenses that will need to be paid. These expenses may include such items as funeral costs, burial expense, current bills, and estate taxes. In addition, there may be financial needs the insured would have met if they had remained alive, including family living expenses, mortgage payments, long-term debt, and college costs for children.

A Life Insurance Policy provides, upon death of the insured, an amount sufficient to pay for any or all of the preceding costs and expenses. Which expenses or costs are to be provided for, and how much money will be needed is entirely up to the insured.

2) How much life insurance should I have?
There are many and varied needs for funds upon the death of an individual, and all must be taken into account to arrive at a proper amount of insurance. For simplicity, some authorities recommend a good rule of thumb to be five times your annual income.

Your Montalvo Insurance agent can talk with you about your needs and goals, and illustrate how each item translates into a given amount of funds needed at the time of death. He or she can also share how to account other sources of income (such as Social Security or retirement plans) that will actually lower the amount of life insurance necessary.

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3) Who will receive money if I die? How much?
Upon death of the insured, the insurance company pays the policy's benefit amount to the beneficiary (or beneficiaries) named by the insured on the policy.

Some policies may provide additional benefits. Talk to your Montalvo Insurance agent to find out more.

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4) Does the manner of death affect how much my beneficiaries will collect?
During the first two years of the policy period, there may be conditions (fraud, misstatement of age, suicide) that can affect the death benefit paid by the policy. Your Montalvo Insurance agent can discuss these with you.

After two years, the full policy death benefit is payable, regardless of the cause of death. (Some policies may also pay extra benefits in certain conditions, such as the insured dies in an accident.)

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5) Are there different types of life insurance I should consider?
Although there are many types of life insurance policies, nearly all are variations of two basic types–term and permanent. (A third type, known as “universal” life, is a combination of term, permanent and various investment options. Its complexity is beyond the scope of our overview, but if you are interested, your Montalvo Insurance agent can discuss if universal is a good fit for your life insurance needs and goals.)

• Term insurance is exclusively death coverage. The policies are written for a specific length of time (the “term” referred to in the name). Common terms are one year, five year and ten year, although longer terms may be available. If the insured dies during the term of the policy, the death benefit is paid to the beneficiaries. If at the end of the term the insured is still alive, the coverage ends.

• Unlike term insurance, a “permanent” insurance policy (often referred to as “whole life”) never terminates as long as the premiums are paid. It also builds cash values in the policy that can provide valuable “living” benefits in addition to the death benefit.

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