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how long the policyholder must pay their premium, when the policy expires and under what circumstances the policy is no longer valid.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

  • Who needs a million dollar life insurance policy?

    To most people, a million dollars seems like a lot of money. But if you are thinking about purchasing life insurance, a million dollar life insurance policy may actually be a good choice – and one you [...]

    4 min read Jan 08, 2021
    Interracial couple sits on a couch across from a financial expert to review a policy.
  • AXA Equitable Life Insurance Review

    The Equitable Life Assurance Society of the United States was founded in 1859. In 1991, Equitable Life Assurance Society was acquired by French insurer AXA, and in 2004, the company was renamed AXA Equitable [...]

    4 min read Jan 08, 2021
    Black senior and his grandson are sitting together on a dock with fishing rods laughing together.
  • Brighthouse Financial Review

    Life insurance is never a comfortable topic to discuss. After all, you’re talking about what happens after you die. Although it’s something you’d probably prefer to avoid thinking about, leaving [...]

    4 min read Jan 06, 2021
    Woman and mother sit together laughing on the couch.
  • Return of Premium Life Insurance

    Term life insurance is by far the cheapest type of life insurance coverage that you can buy. But it only lasts for a specific period of time. Those who outlive the term of their coverage have essentially [...]

    5 min read Jan 06, 2021
    Asian grandpa bending low to speak with his young grand daughter. They are laughing together.
  • Farm Bureau Insurance Review 2021: Car, Home, and Life

    In 1939, Iowa Farm Mutual Insurance Company opened its doors in Des Moines, Iowa. In its infancy, the company sold liability insurance to local farmers. As the company grew and opened offices in other [...]

    6 min read Dec 17, 2020
    unpacking car in front of home
  • Securian Financial Review

    Securian Financial was founded in 1880 as Minnesota Mutual. In 2001, the company was rebranded as Minnesota Life Insurance. Fast forward to 2018, Minnesota Life Insurance took on the name of its parent [...]

    4 min read Dec 17, 2020
    A single mom and her two kids are laughing and sitting together on the couch in the living room
  • Life Insurance Retirement Plans (LIRPs)

    A life insurance retirement plan (LIRP) can be an effective complement to traditional forms of retirement savings like IRAs or company-sponsored retirement plans. This type of plan does not have many of [...]

    4 min read Dec 16, 2020
    A young man and woman are in the bunk of their Winnebago looking on the phone at possible insurance options.
  • Life Insurance Quote

    Most people realize that they need life insurance, but shopping around to find the best price can be a daunting task. This is especially true if you have one or more major health conditions, such as cancer [...]

    8 min read Dec 15, 2020
    An older couple sits at a desk across from an insurance expert.
  • Infinity Insurance Review 2021: Car, home and life

    Infinity Insurance was founded in 1955 and is headquartered in Birmingham, Alabama. The company specializes in non-standard auto insurance and is currently the second-largest writer of non-standard car [...]

    4 min read Dec 10, 2020
    A father holding his small son in his arms while stepping out of his car.

The trusted source for financial information, used by

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