Life Insurance

Life insurance can safeguard your family's future. Get tips to find out which type of life insurance policy is right for you.

Life Insurance Basics

What is life insurance?

Life insurance is a contract between a policyholder and an insurance provider. In essence, it says: “If you make all of your insurance payments as agreed upon in our contract, we, the insurance company, promise to pay out a benefit to your loved ones—the beneficiaries—when you die.”

That benefit comes in the form of a cash payment, which can be paid out in one lump sum or in increments, depending on what the policyholder wants. The total amount paid out is reflective of the premiums—the regular installments of insurance payments—made by the policyholder over the course of the life of the policy.

The reason people get life insurance is so that in the event of an untimely or even long-anticipated death, the deceased person’s loved ones are looked after financially and are not suddenly forced to scramble to make ends meet, pay bills or look after themselves.

Types of life insurance are generally broken up into four categories: term life, whole life, universal life and variable universal life policies. The differences between these are centered on how long the policyholder must pay their premium, when the policy expires and under what circumstances the policy is no longer valid.

Because life events such as marriage, childbirth and major purchases impact the long-term needs of beneficiaries, it’s important to frequently reassess your life insurance policy to ensure that those you love are adequately provided for.

Do I need life insurance?

The point of life insurance is to make sure that your dependents are looked after when you pass away. Therefore, assuming you have no dependents, life insurance may not be a worthwhile use of your money. If you do have dependents, you might consider asking yourself a few questions to determine if you need life insurance and, if so, how much you ought to purchase. Possible questions include:

  • How much money would your dependents need for living expenses and how long would it take until they became self-sufficient?
  • Will your dependents inherit assets that can help them support themselves?
  • Are there any friends or relatives on whose care and financial support your dependents can count?

In considering factors such as these, you can establish a ballpark estimate of how well taken care of your dependents will be. You can then decide how much or how little you need to contribute to a life insurance policy and which type of policy is best for you and your dependents.

How do I buy life insurance?

Before diving head-first into a life insurance policy, have some background knowledge so you can know what you’re looking for. Understanding the difference between different kinds of life insurance and their pros and cons given your circumstances will enable you to reach the goals for you have for providing for your loved ones after you’re gone.

Once you’ve established what kind of life insurance you need and how much coverage you require, your next move is to get quotes from as many different providers that fit your coverage specifications as possible. By comparing prices, you’ll be able to pick out the most-financially attractive offer on the table or, in some cases, use one offer as leverage for getting a better offer from a different provider.

Finally, after settling on the provider that’s right for you, all that’s left is the application process. This generally entails collecting the necessary personal documents, completing an application or interview and in some—but not all—cases, getting a medical examination. Note that there are policy providers that do not require medical examinations at all, so if that facet of the process is a non-starter for you, you may want to ask providers up-front whether that is a requirement for them or not.

After completing all of the necessary paperwork, tests and interviews, you simply need to wait for approval, sign any outstanding documents and, when the time comes, pay for your policy.

Latest Articles

  • Term Life Insurance

    Deciding which type of term life insurance policy to purchase can be complicated. Most providers offer terms with varying lengths, premiums and payment structures. Apart from the terms of the policy itself, [...]

    4 min read Nov 30, 2020
    husband and wife with new baby in kitchen
  • Trustage Insurance Review 2020: Car, Home, and Life

    TruStage Insurance Company offers a range of insurance products for consumers, and most credit union customers that consult with the financial advisor at their local branch are likely to be shown one or [...]

    4 min read Nov 30, 2020
    A family is loading up the car for a family trip.
  • How much does life insurance cost?

    Life insurance can provide financial assistance to your loved ones after you pass. This assistance can extend to paying for final expenses and also compensating the beneficiaries for a loss of income due [...]

    4 min read Nov 30, 2020
    family looking at photos in an album
  • Permanent Life Insurance

    A vital component of financial planning is ensuring that your loved ones are financially protected in the event of your death. That means that you need a life insurance policy that you can count on being [...]

    6 min read Nov 30, 2020
    Older couple sitting together on a dock over a lake.
  • Midland National Life Insurance Review 2020

    Midland National is a privately-held insurance company that has been around since 1906. It started as the Dakota Mutual Life Insurance Company and grew steadily during both World Wars and the Great Depression. [...]

    4 min read Nov 24, 2020
    A husband and wife walk through a park with their two children.
  • Life insurance for diabetics

    Life insurance is one of the most foundational components of any well-crafted financial plan. It can provide tax-free income to use in any manner that you like, and it can also provide your heirs with [...]

    5 min read Nov 24, 2020
    A dad checks his blood with a diabetic testing kit while his daughter watches, confused.
  • Voluntary life insurance

    Life insurance is generally considered to be the bedrock of any comprehensive financial plan. But those who have medical conditions that prevent them from getting coverage are often left between a rock [...]

    4 min read Nov 24, 2020
    A grandson is playing with his grandparents in the living room.
  • Acceptance Insurance Review: Car, Home, and Life

    Acceptance Insurance was founded in 1979 and is headquartered in Nashville, TN. The company operates as a subsidiary of First Acceptance Insurance. Today, Acceptance has over 700 insurance agents and sells [...]

    4 min read Nov 19, 2020
    A father and child washing their car in the driveway.
  • How to insure valuable items

    Standard policies normally cover such things as jewelry, furs, artwork and collectibles up to about $2,000.

    4 min read Nov 19, 2020
    A woman is in an antique store looking at a Ming vase.

The trusted source for financial information, used by

The New York Times
CNBC
AP
The Wall Street Journal
CNN
Forbes