__CONFIG_colors_palette__{"active_palette":0,"config":{"colors":{"62516":{"name":"Main Accent","parent":-1}},"gradients":[]},"palettes":[{"name":"Default Palette","value":{"colors":{"62516":{"val":"rgb(255, 164, 0)","hsl":{"h":38,"s":0.99,"l":0.5}}},"gradients":[]}}]}__CONFIG_colors_palette__
GET A FREE QUOTE

life insurance basics

The perfect place to start your life insurance search.

Starting with Life Insurance

getting started guide

How does life insurance work?

Life insurance pays a lump sum cash benefit to your beneficiary/ies - typically your family - when you die.  

There are typically three parties involved.  The owner and insured is typically the person who pays the premium - or cost of life insurance - and whose life is insured.   The second party is the life insurance company who receives the premium.  In return, should the insured person die, they pay a cash death benefit to last party, who is the named beneficiary or beneficiaries.  

 

How much do I need?

You should have enough coverage to pay off your debts, replace your lost income, and provide enough money to take care of your loved ones.  Some people also add in cost of funeral services.

 >> Learn more

How much does it cost?

Your cost will depend on:

  • your age and gender
  • your health
  • tobacco use
  • what type of lifestyle you lead
  • the type of life insurance you buy 

10-Year term is the lowest priced life insurance (longer terms cost more) while whole life insurance costs the most as it provides lifetime coverage.

As an example, a 45-year-old male non-smoker in excellent health could buy $500,000 of coverage with guaranteed level premiums for 20 years for as little as $43 per month.

>> Get more sample quotes.

 

Can I insure a spouse, child, or parent?

Yes, to all three!  For children, you can easily add a bit of coverage - like $5,000 to $10,000 - on most policies using a "child rider" without their knowledge or consent if they are minors.

In the case of your spouse, parent, or an adult child, you'll need consent and they will need to sign as the "insured" person, although you can typically be the owner and payer.  You cannot take out a policy on adults without their knowledge, however.

 

What types of life insurance are there?

There are two types.  Term Life Insurance is typically less expensive and provides temporary coverage for a set period of time like 10 or 20 years.  

The other type is Permanent life insurance which is designed to cover you for your entire lifetime.  

>> Learn more about the types of life insurance

 

What is term life insurance?

Term life insurance is the most affordable type of life insurance.  Term life insurance offers guaranteed level payments and a level death benefit for a specific amount of time.  

The level period - or term - expires at some point.  You can typically set your term length to 10, 15, 20, 25, or 30 years, with it costing more to lock in your premiums for longer terms and less to lock it in for shorter terms.    

If you die before the policy expires, the company will pay your beneficiaries a death benefit.  If you die after it expires, they pay nothing. 

 

Is my life insurance at work enough?

Not usually.  Most employers offer a meager $50,000 group term life insurance policy, and many of these only pay out for accidental deaths.  Some employers go as high as 3x your annual salary.  But most financial planners recommend 10 to 20 times your income in life insurance.

 

How do I qualify for life insurance?

The process involves completing an application where you answer questions about your health and lifestyle, as well as give consent to the life insurance company to pull your motor vehicle report, medical records, and other resources in an effort to "underwrite" you, or decide if they will approve you.  

Ready for the next step?  Click here for our buyer's guide.

In Which Other Areas Do You Have Questions?

Types of life insurance

What is term life insurance?

Term life insurance is life insurance for a specific amount of time.  It will expire at some point.  For example, every year, or every 5, 10, 15, 20, 25, 30, 35 ,40 years.  If you die before the policy expires, the company will pay your beneficiaries a death benefit.  If you die after it expires, they pay nothing. It is the least expensive form of life insurance.

>> Learn more about term life insurance.

 

What are the different types of life insurance I can buy?

There are two types.  Term Life Insurance is typically less expensive and provides temporary coverage for a set period of time like 10 or 20 years.  If you're looking for affordable coverage to protect your family during your working career or for any period up to 30 years, term is the way to go!  

>> Learn more about term life insurance.

The other typs is Permanent life insurance which is designed to cover you for your entire lifetime.  The main two types of permanent life insurance are whole life and universal life insurance which we cover below.

>> Learn more about whole life insurance.

 

What is whole life insurance?

Whole Life Insurance does not expire.  It offers guaranteed premiums, cash values, and death benefits.  It will last until age 100 at which point it will endow and pay your beneficiary even if you are still alive..  Whole life insurance offers the most guarantees of any life insurance policy.  It is the most expensive form of life insurance and offers the most guarantees.

What is universal life insurance?

Universal Life Insurance is another form of permanent coverage.  Unlike Whole Life Universal Life has flexible premiums, cash value and death benefit.  It can be customized in many different ways.  It is cheaper than whole life but more expensive than term insurance.

>> Learn more about universal life insurance.

What's the difference between term and whole life insurance?

Term is cheaper but only lasts for a set amount of time, typically 10 to 30 years, after which it expires.  Whole is more expensive but lasts your lifetime and never expires.  Whole life also provides other benefits which term does not like a cash value account.  We typically recommend term for families who simply want low-cost life insurance to help their family pay bills and replace the deceased's lost income in the even of his/her passing.  Whole life typically is used by savvy investors interested in the cash value component, or to fund a life insurance trust, or for business purposes.

 

What's the difference between whole and universal life insurance?

Both are permanent policies and designed to provide coverage for life.  Whole life has guaranteed premiums, cash values, and death benefits.  All of these tend to be more fixed with whole life.  Universal life has flexible premiums, cash values and death benefits and is more customizable. 

 

Which type is right for me?

If you need coverage for only a set amount of time - after which, you don’t need life insurance anymore - then term life insurance is right for you. For example, 20 years to cover a mortgage or 15 years until you retire.  Permanent life insurance is for people who have to carry coverage to the grave no matter when they die. For example, to care for a special needs child or to fund a life insurance trust.

 

How is accidental insurance different from life insurance?

Life insurance will pay out if you die of an illness or an accident regardless.  Accidental only pay when your cause of death is an accident. Accidental does not pay if you die of an illness or anything other than an accident.

What is final expense insurance?

Final expense or guaranteed issue life insurance are policies generally less than $25,000.  They are meant to provide liquidity to pay for things like a funeral.  There are no medical exams or questions.  Everyone can qualify BUT the policy only pays a death benefit if you die after the second year.  If you die in the first two years of the policy, the company only returns your premium plus interest.

 >> Learn more about guaranteed issue life insurance.

The Perfect Match Assessment

No time to learn about life insurance?  We understand.  Just answer 5 easy questions and we'll match you with the perfect company! Click here for quick assessment.

optional policy features

What is a life insurance "rider?"

A life insurance rider is something that is added to a base life insurance policy, most of the time at an extra cost.  Kinda like a “trim package” is added to a car. The most frequently added rider to a life insurance policy is a Child Rider which is a great way to insure you children.

 

What is waiver of premium?

Wavier of premium is an optional rider you can add to your life insurance policy for an extra cost.  It says the life insurance company will waive the premiums due on your policy if you become disabled and are unable to pay.  This way your policy will not lapse.

 

What are accelerated death benefits, critical illness rider, and terminal illness rider?

There are 3 types of benefits known as "living benefits," so named because you can use the benefits while still living.  They differ in the details but the bottom line is you can access the death benefit before you die if you are critically or terminally ill.  You can actually get a portion of the death benefit - typically up to 50% - accelerated to you while you are alive to help pay for these expenses, go on vacation, or do whatever you want with the money.

What is the two-year contestability period?

It only lasts the first 2 years of a life insurance policy after which it expires.  If you commit sucide in the first 2 years of the policy, the insurance company will not pay the full death benefit, only return the premium plus interest.  Also if you die in the first 2 years of the policy and the life insurance company determines you committed fraud in order to purchase the policy or get a better rate, for example lying and saying you were a non smoker when you really smoked, they will also return the premium plus interest.  The contestability period expires after 2 years at which time the company will pay the full death benefit.

What is the suicide clause?

The sucide clause is in every life insurance policy.  It says if you buy a life insurance policy and commit suicide in the first 2 years of the policy, the life insurance company will not pay a death benefit.  Instead, they will return the premium you paid plus interest.

 

What does term conversion mean?

Conversion is a privilege that some life insurance policies have, but not all offer.  It allows you to exchange your term life insurance policy for a permanent policy (whole life or universal life) before your term life expires.  The price of the new permanent policy is based on your attained age at the time you switch.   You also carry over the same underwriting class to the new permanent  policy you had on the term life.  So if you were approved “preferred health” on the term originally when you bought it, you will be “preferred health” on the new permanent policy.  This feature could be very useful if you were approved for “preferred health” on the term then had a health change (heart disease or cancer etc.) which makes renewing your existing term or buying a new term policy impossible.

 

What is the free look period?

All life insurance policies have it.  That actual time may vary from company to company.  Either 20 or 30 days.  The free look period means you can cancel your policy no questions asked in the first 20 or 30 days of the contract and get all your money back.  After the free look, no refunds of unearned premium are return if you cancel.

 

Ready for the Next Step?  

Before you get a life insurance quote, you must know the amount you want, the type of plan, and the best company for your needs.  Our shopper's guide walks you through these 3 essential questions.  Click here for the guide.

applying for life insurance

Describe the application and approval process

The application process is painless with most companies.  You can apply online with many companies in as little as 10 to 15 minutes.  If you need help from an agent, it could take a few minutes longer.  

In the application, you'll answer questions about your health and lifestyle, as well as give consent to the life insurance company to pull your motor vehicle report, medical records, and other resources in an effort to "underwrite" you, or decide if they will approve you. 

How long does it take to get coverage?

For some non-medical policies like from Ladder Life or Bestow - it can take as little as a few hours to a few days.  For "fully underwritten" policies, which require a medical exam and may pull your medical records - 4 to 6 weeks.  Note, you can sign up for "temporary coverage" while you wait for your approval so you are covered in the interim.

 

What information do life insurance companies collect on the application?

It varies a bit by company, but generally the application asks:

  • Contact info - legal name, phone, drivers license, address, and social security number
  • Financial info - income, occupation, assets/liabilites, reason for coverage, and other life insurance owned
  • Policy info - who the payer, insured, owner, and beneficiary/ies will be - You'll need their DOB's and address at a minimum
  • Health history - height/weight, tobacco/drug/alcohol use, current and/or previous medical conditions or medications, includes mental health history
  • Additional risk assessment questions - driving history, family history of disease, travels outside the U.S., hazardous occupation or hobbies questions

Why do they need my social security number?

Insurance companies need your SSN to verify your identity and check third party information like Rx Database, criminal history, credit history, etc.  It is also used as your tax id number which is helpful in case of a death to match up the insured person on the contract with the death certificate.  Every company requires it so, unfortunately, there's just no getting around this one.

How much life insurance do I need?

You should have enough coverage to pay off your debts, replace your lost income, and provide enough money to take care of your loved ones.  Some people also add in cost of funeral services.

 >> Learn more 

Will I need a medical exam?

Depends on your age, health, amount of insurance you are applying for, and the company you apply to. 

What does the medical exam check for?

The medical exam consists of your height, weight, blood pressure, pulse and lab work.  The lab work does a complete blood count plus tests for disease such as HIV or hepatitis.  In addition, they test for nicotine and drugs.

Will I save money if I take an exam?

Yes. The majority of the time this is true.  Even if you are young and healthy. But is especially true if you are middle aged, in good / not so good health.  By submitting to an exam, you are showing the company a snapshot of your health.  That lowers their risk.  The one caveat - and time when taking an exam could actually hurt you - is if something pops up in your exam that you didn't know about and causes you to be declined or to pay a higher rate.  In that case, though unlikely, it would have been better to buy no exam coverage.

Can I qualify if I have a medical condition?

You can typically qualify for life insurance even if you have health issues, so long as your health issues are under control and not life threatening.  Conditions like asthma, high blood pressure, or high cholesterol, while quite serious, aren't typically much of a challenge to insure so long as the condition is stable and well controlled.  You may pay a bit more than someone without those concerns, but not much more.

But even more serious conditions can be insured.  For example, people can usually get life insurance with a history of seizures, PTSD/depression, stroke, diabetes, obesity, and more.  For very serious issues such as a stroke, heart attack, or cancer, there is often at least a 1 year waiting period before you can get a standard type of policy.  Alhtough, guaranteed issue policies may be available even with terminal diseases.  

Can I have more than one policy?

Yes, you can have more than one policy BUT there has to be financial justification for the amount you are purchasing and already own.  Meaning you can’t buy as much as you want.  How much you can buy depends on your income and the financial loss your beneficiary would suffer.

 

What's the difference between a primary and secondary beneficiary?

Your primary beneficiary will receive the life insurance proceeds so long as they are living at the time of the insured's death.  A secondary beneficiary is simply second in line should the primary beneficiary predecease the insured person.

 

Can I name more than one beneficiary?  Can I use a trust?

You can have as many beneficiaries as you want.  But each beneficiary must incur some type of financial loss associated with your death.  You can also name a trust as a primary or secondary beneficiary?

 

Can I replace one policy for another?

Yes, you can replace your existing policy for a new one.  This should only be done if the new policy is better suited for your costs and needs than the current one you have.  Dont' just look at price.  Not all life insurance policies are equal.  Be sure to compare the options and features as well.

The insurance company must - by law - inform the company of your current insurance that you are planning on replacing your current policy.  This allows your current company time to send you letters explaining all the potential downsides of replacing your coverage.   

What are my payment options?  Can I pay by credit card?

You can pay your premium annual, semi-annual, quarterly, or monthly.  The more frequently your payments, the more your total cost per year is.  For example, it may cost you an extra 8% if you pay monthly vs annual. 

Not all life insurance companies allow you to pay with a credit card but some do.   

Can my actual price be different from my quote?

Yes.  A quote is just an estimate.  Your real price is determined after you apply and are approved for the policy.  Your actual price may be the same as the quote, but it may also be lower or higher than what you were quoted.

If your actual price turns out to be higher than the quoted rate, you can cancel your life insurance application or lower your coverage to reduce the price.

Can I cancel my application if I change my mind?

Yes.  You can cancel your life insurance application at anytime.

The Perfect Match Assessment

No time to learn about life insurance?  We understand.  Just answer 5 easy questions and we'll match you with the perfect company! Click here for quick assessment.

After I purchase life insurance

How does my beneficiary collect when I die?

First, ensure your benefiary/ies know that you have a policy and where they can find a copy of your policy.  Upon death, your beneficiary must complete the company death claim form and return it to the company with an ORIGINAL copy of your death certificate.  By law, a company must pay a claim within 60 days but most are paid faster.  Even as quick as a few days.

 

Can I reduce my payment?

If you are struggling to pay your premium, don't just stop paying.  That will lapse (or terminate) your policy completely.  You can typically reduce your payment by lowering the amount of coverage on the policy.  Most companies will allow you to lower the amount of the policy down to a minimum coverage level - typically $100,000.

 

What are dividends?

In whole life insurance, dividends may be paid to the policyholder on an annual basis, although they are not guaranteed.  Dividends can be taken as cash or re-invested into the policy to buy "paid-up additions," which adds to the cash value and death benefit, or can be used to reduce premium payments.  

Dividends consist of a combination of returns on investment, death claims not paid, and overhead expense funds not used by the life insurance company.  This money is returned to the policyholder as a return of overpaid premiums.  Dividends are only paid by Mutual Companies (owned by the policyholders).

Can I borrow from my cash value?

In permanent policies only, yes, you can.  In most cases it is treated like a loan from your policy and accrues interest.  If the loan and interest is not paid back before you die, the amount borrowed plus interest is deducted from the death benefit amount.  If you borrow too much and never pay the policy back you policy could be in danger of lapsing (terminating the policy).

What happens to my premiums if I have a health change?

Your premiums will not change if you have a negative health change for as long as the policy is guaranteed for.  After the guarantee is over, your premiums will change.

If your health improves, you can typically ask the insurance company for a one-time rate classification adjustment.  They will re-underwrite your medical status and may reduce your premium.  This is common for people who stop smoking.

 

What happens if I miss a payment?

Most companies allow a 30 to 60 day grace period, after which your policy could be in danger of lapsing (terminating) if no payment is made.  It is very important if you change addresses or banks that you keep your life insurance policy up to date so that you don't miss any payments.

 

Can I cancel my policy at any time?

You can cancel your policy at any time. Beware that you will not get your money back if you have term life insurance.  In the case of permanent coverage, you will get back your cash surrender value, which may or may not be as much as you've paid.

 

Who do I contact for policy service?

If you have an agent who helped you purchase the policy, you can contact him/her.  Or you can contact the company direct.  This is typically the way to go.  Companies are great about adding their number to all their letters but if you don't have it, you can also usually just Google the company name + customer service phone number.

 

Ready for the Next Step?  

Before you get a life insurance quote, you must know the amount you want, the type of plan, and the best company for your needs.  Our shopper's guide walks you through these 3 essential questions.  Click here for the guide.