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how long the policyholder must pay their premium, when the policy expires and under what circumstances the policy is no longer valid.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

  • Best life insurance for new parents

    Becoming a new parent can be both an exciting and terrifying time. Not only does everything in your life change in an instant, but now you have another life to protect. One of the most responsible acts [...]

    5 min read Jun 04, 2021
    Father kissing baby boy on cheek
  • Allstate vs Liberty Mutual

    Allstate is one of the largest insurers in the U.S. — in fact, it ranked in fifth place in 2020 with 4.73% of the market. While home and auto insurance are what the company is most known for, it also [...]

    5 min read Jun 04, 2021
    Getting her home business up and running
  • Life insurance for vapers

    Life insurance quotes are largely based on your age, overall health, habits and lifestyle choices. If you are one of the 8.1 million American adults who uses electronic cigarettes, more commonly known [...]

    5 min read Jun 03, 2021
    A man using an electronic cigarette, vaping.
  • Life insurance for seniors

    As people get older, having life insurance can provide much needed financial peace of mind. A good life insurance policy could be a useful financial tool to help seniors pay off their mortgage, erase debt [...]

    8 min read Jun 02, 2021
    Happy man playing with boy on sofa at home
  • MetLife insurance review 2021

    MetLife insurance is best known for employer-sponsored coverage, but they also sell directly to individuals. Most insurance companies offer auto and home insurance, but MetLife also provides life, disability, [...]

    7 min read Jun 01, 2021
  • Erie Insurance review 2021

    In its near century-long business in insurance after being founded in 1925, Erie has gone from offering policies in Pennsylvania to operating in 12 states total. Its coverage includes more populated states [...]

    7 min read Jun 01, 2021
    neighborhood homes and auto
  • AAA vs. Allstate

    Choosing between AAA vs. Allstate for car insurance can be a challenge. Both carriers have long-standing reputations as top car insurance companies in the industry. AAA was founded in 1902 and offers car [...]

    4 min read May 27, 2021
    Caucasian businessman working on patio
  • Geico vs Farmers

    Geico was founded in 1936, and is currently the second-largest car insurance company in the country, with 13.54% of the total market share. Geico offers a wide variety of insurance products and has over [...]

    5 min read May 27, 2021
    Man sorting mail
  • Allstate vs. Nationwide

    Allstate is the fifth-largest insurer in the U.S., with 4.73% in market share. It has been writing auto insurance policies since 1931 and now sells a raft of insurance products, from auto to identity protection, [...]

    5 min read May 27, 2021
    Woman paying bills online at home
  • State Farm vs Farm Bureau

    State Farm Insurance is the biggest car insurance company in the United States. As of 2020, State Farm held 16.19% of the total market share and has written over 80 million insurance policies. State Farm [...]

    5 min read May 26, 2021
    Focused female IT professional holding document while looking at computer in creative office

The trusted source for financial information, used by

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