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on how long the policyholder must pay their premium, when the policy expires and under what circumstances the policy is no longer valid.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

  • What is life insurance?

    As car insurance insures your car and home insurance insures your home, life insurance insures your life. In 2018, only about 60% of people in the United States had some type of life insurance. One reason [...]

    3 min read May 27, 2020
    family sitting on front porch of home
  • Choosing a Life Insurance Beneficiary

    A life insurance policy provides financial support to those who survive you after your death. A life insurance beneficiary is the person who receives the death benefit payout from your life insurance policy [...]

    5 min read May 22, 2020
    Grandparent with grandchild in cafe
  • Types of Life Insurance

    Knowing the differences can help you determine the best policy for your situation.

    8 min read May 20, 2020
    Family with child and dog
  • Term Life Insurance

    Deciding which life insurance policy fits your needs can be complicated. Most providers offer terms of varying lengths and premiums with different payment structures. Apart from factoring in what all goes [...]

    4 min read May 20, 2020
    husband and wife with new baby in kitchen
  • What is cash value life insurance?

    A cash value life insurance policy is basically the same as a regular life insurance policy but with one important difference: a portion of the money you pay each month gets put into a savings account [...]

    4 min read May 17, 2020
  • Permanent Life Insurance

    A smart part of financial planning is ensuring your loved ones are financially protected in the event of your death. Considering the average cost of a funeral is between $7,000 to $10,000, life insurance [...]

    4 min read May 15, 2020
    Couple having breakfast on their porch at their cabin
  • How to Track Unclaimed Life Insurance

    You may have money waiting if a loved one named you on a life insurance policy and then neglected to tell you about it. Unclaimed life insurance policies aren’t as unusual as you would think either. [...]

    4 min read May 15, 2020
    Consumer investigating unclaimed life insurance from his kitchen
  • How to Buy Life Insurance in 8 Steps

    As you get older, having a life insurance policy provides financial peace of mind. It can replace income after retirement, help you pay off outstanding debts and support loved ones after your death. You [...]

    5 min read May 15, 2020
    Father on phone call and working with son watching tablet

The trusted source for financial information, used by

The New York Times
The Wall Street Journal