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on how long the policyholder must pay their premium, when the policy expires and under what circumstances the policy is no longer valid.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
-
Life insurance for felons
Orange is the new insured? See whether prisoners can get life insurance policies.
6 min read Jan 06, 2023 -
What happens if you lie on your life insurance application
Lying on a life insurance application has major consequences, find out what happens.
7 min read Jan 05, 2023 -
What happens to your life insurance when you leave a job?
Have life insurance through work? Here’s what to do when you leave.
5 min read Jan 05, 2023 -
What happens when your life insurance beneficiary dies before you?
The benefits that come with your life insurance are intended to help financially support your loved ones after you pass away. When you purchase a life insurance policy, you are required to name the beneficiaries [...]
7 min read Jan 05, 2023 -
What is cash value life insurance?
What does cash value life insurance bring to the table? Find out.
6 min read Jan 05, 2023 -
Whole life insurance
A whole life policy’s lifelong coverage may be right for you. Start here.
6 min read Jan 05, 2023 -
Life insurance or 529 for college savings?
Life insurance and a 529 plan can both help pay for college. But which is best?
6 min read Jan 01, 2023 -
Can I convert my term life insurance to whole life insurance?
Learn how to convert term life insurance to whole life for longer coverage.
6 min read Dec 20, 2022 -
Is whole life insurance worth it?
Wondering if whole life insurance is worth it? Bankrate explores the ins and outs.
6 min read Dec 16, 2022 -
Are life insurance loans a bad idea?
Considering taking a loan on your life insurance? Bankrate gives you the pros and cons.
6 min read Dec 13, 2022