Texas Life Insurance Frequently Asked Questions (FAQs)

Life insurance is a type of insurance that offers your family or loved ones (your beneficiaries) financial security in the event of an untimely or unexpected death. You pay premiums, and in exchange, the insurer pays a sum of money to your designated beneficiaries when you die.

The amount of life insurance you need depends on various factors, including your income, debts, and lifestyle. A general rule of thumb is to have coverage that is at least 10 times your annual income. It’s also important to remember that as you age, this amount can evolve.  

Read more about calculating life insurance coverage here.

There are two main types of life insurance: term life insurance and permanent life (whole life) insurance. Term life insurance provides coverage for a specific period, while permanent life insurance provides coverage for your entire life.

Term life insurance provides coverage for a specific period, while permanent life insurance provides coverage for your entire life. Term life insurance is often beneficial for individuals seeking a large amount while raising a family or supporting dependents, while whole life coverage is often time appropriate for insuring children or for those preparing for final expenses. Both types of coverages offer a feeling of comfort knowing that their family members and loved ones will be taken care of upon an untimely passing.

Read more about the difference between term and whole life insurance here.

The cost of life insurance depends on various factors, including your age, health, and the type and amount of coverage you need. Generally, term life insurance is less expensive than permanent life insurance.

Whether or not you need a medical exam depends on the insurance company and the type of policy you choose. Some policies require a medical exam, while others do not. Typically, the requirement for an exam depends on the amount of coverage one is seeking along with their current age.

Read more about life insurance medical evaluations here.

Generally, you can only buy life insurance for someone else if you have an insurable interest in that person. For example, you can buy life insurance for your spouse or child. Insurable interest or the possibility of such should be discussed with a licensed agent to determine the appropriateness.

Yes, you can generally change your life insurance policy at any time. Depending on the type of coverage, you may be able to decrease your coverage amount or possibly increase it, subject to underwriting guidelines. Also, term insurance policies more often than not have a convertibility option, whereas you can convert term coverage to permanent coverage without the need for underwriting. Changes such as beneficiary, address or ownership can be made at any time by contacting the carrier for the appropriate documentation.

The payment of a life insurance policy to a named beneficiary, estate or assignment is not taxable. However, other policy benefit payments such as loans, withdraws or surrenders may be taxable depending on the amount of taxable gain achieved by the payment.

Yes, you can have multiple life insurance policies with multiple carriers. Having multiple policies can provide additional coverage and flexibility.

If you stop paying your premiums, your coverage will typically lapse or will be extended at a lowered amount of coverage. Your policy’s provisions will outline the exact privileges that are available within the policy for non-payment situations. Also, some policies may have a grace period before the coverage lapses.

Life insurance is essential for financial security at any age. However, in general, the best time to buy life insurance is when you are young and healthy. This can help you lock in lower premiums and ensure that you have coverage in case something happens to you.

Read more about how life insurance can be valuable at different stages of life.

If you have a permanent life insurance policy, you may be able to borrow money from the policy's savings component, referred to as cash value. Removing funds from a policy’s cash value comes in the form of a policy loan. A policy with outstanding loans, will often times be charged interest and will reduce the amount of death benefit available to beneficiaries.

Cancelling a life insurance policy can be requested at any time. Term insurance does not gain cash value, therefore, when a term policy is cancelled, there is no value refunded to the insured. When cancelling whole life coverage, the policyholder could receive a surrender value, which is the value of cash available in the policy. The policy’s provision documents will outline the surrender privileges for your specific policy.

The need for life insurance does depend on your lifestyle and current financial security. While you may not have dependents today, the possibility of having dependents in the future is a good reason to lock in life insurance today, while you are younger and potentially healthier. Also, one should consider any outstanding debts that would exist if you were no longer here to satisfy the debts. Leaving loved ones free of that burden is the comfort that life insurance provides.