Insurance
Life Insurance: Basics and What to Consider
Life insurance pays a death benefit to your beneficiaries. The right coverage depends on who depends on your income and what obligations you'd want covered.
What life insurance is
A contract with an insurer: you pay premiums, and if you pass away while the policy is in force, the insurer pays a tax-advantaged death benefit to your named beneficiaries.
Who may need it
- People with dependents who rely on their income.
- Parents of young children.
- Homeowners with a mortgage that would burden a surviving partner.
- Business owners with partners, key employees, or buy-sell agreements.
- Anyone wanting to cover funeral costs or leave a legacy.
Term vs permanent
- Term covers a set period (e.g., 10–30 years). Lower premiums, no cash value.
- Permanent (whole, universal, variable) lasts your lifetime if maintained, often builds cash value, and costs more.
Coverage amount considerations
Common starting points include income replacement (a multiple of annual income), outstanding debts and mortgage, future obligations like college funding, and final expenses. The Needs Estimator below can help you sketch a range.
Beneficiaries
- Name primary and contingent beneficiaries.
- Update after major life events: marriage, divorce, births, deaths.
- Consider trusts for minor beneficiaries.
Health and underwriting
Most policies require health questions; many require a medical exam. Some "no-exam" or simplified-issue policies skip the exam but cost more or limit coverage. Honest answers matter — material misrepresentations can void coverage.
Explore types of life insurance
How much life insurance do I need?
A common starting point is 10–12x annual income, plus debts and future goals like college funding. The needs estimator can give you a personalized range.
Is term or permanent better?
Term is usually best for covering a defined period of need (kids at home, mortgage, working years). Permanent is suited to lifelong needs or estate planning, and costs significantly more.
Do stay-at-home parents need coverage?
Often yes — replacing the value of childcare, household management, and other unpaid work can be substantial.
Are death benefits taxable?
Death benefits paid to beneficiaries are generally income-tax-free, though estate tax can apply in larger estates. Talk to a tax professional for your situation.
Explore insurance options tailored to your criteria
Based on your location, household details, coverage needs, property information, vehicle information, or family goals, Finance Choices can help you compare relevant insurance options from partner providers.
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