Personal Propery & Life Insurance FAQs
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What is homeowners insurance?
What do I need to know when purchasing homeowners insurance?
- Get the amount and type of insurance that you need.
- Determine the amount of personal property insurance and personal liability coverage that you need.
- Select any additional endorsements you want to add to your policy. For example, do you want the personal property replacement cost endorsement?
What is “actual cash value”?
What is replacement cost”?
Where and when is my personal property covered?
Should I purchase earthquake coverage?
Should I purchase flood coverage?
How much life insurance should an individual own?
Important factors include:
- Income sources (and amounts) other than salary/earnings
- Whether or not the individual is married and, if so, what is the spouse’s earning capacity
- The number of individuals who are financially dependent on the insured
- The amount of death benefits payable from Social Security and from an employer sponsored life insurance plan
- Whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc.
It is recommended that a person’s insurance advisor be contacted for a precise calculation of how much life insurance is needed.
What about purchasing life insurance on a spouse and on children?
Should term insurance or cash value life insurance be purchased?
It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:
- “How much life insurance should I buy?” and
- “What type of life insurance policy should I buy?”
The question contained in (1) involves an “insurance” decision and the question contained in (2) requires a “financial” decision.
The “insurance” question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium.
If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the “financial” decision–which type of policy to buy. Important factors affecting the “financial” decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.
How does mortgage protection term insurance differ from other types of term life insurance?
Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?
Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. Is credit life insurance a good buy?
Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.