What is life insurance?
Life insurance pays a death benefit to named beneficiaries when the insured dies while coverage is in force and the claim meets policy terms. It can help replace income, pay debts or final expenses, fund education or care needs, support a business plan, or leave a charitable gift.
The appropriate type and amount depend on the purpose, time horizon, budget, health, and existing resources. Life insurance is not a substitute for a broader financial or estate plan, and tax or legal questions should be reviewed with qualified advisers.
Common policy types
The two broad categories work differently:
Term life
Provides coverage for a stated term. It is often used for needs that decline or end, such as income replacement during working years or a mortgage.
Permanent life
Can remain in force for life if required premiums and policy conditions are met. Forms such as whole life or universal life may accumulate cash value and have different guarantees and flexibility.
Employer-provided life
Workplace coverage can be useful but may be limited, tied to employment, or become more expensive or unavailable when employment changes.
Riders
Depending on the policy, optional benefits may address waiver of premium, accelerated death benefits, children, or future purchase rights.
Common limitations and gaps
- Applications require complete and accurate health, lifestyle, and financial information
- Suicide, contestability, and other provisions can affect early claims
- Term coverage may expire or become costly to renew
- Permanent-policy values and premiums may be guaranteed, nonguaranteed, or a combination
- Loans and withdrawals can reduce values and the death benefit and may have tax consequences
What affects your coverage needs
- Income and services others depend on
- Debts, education, care, and final expenses
- Existing savings, investments, and coverage
- How long the need is expected to last
- Ownership and beneficiary designations
What to compare between policies
- Guaranteed and nonguaranteed values
- Premium schedule and renewal terms
- Conversion options on term policies
- Exclusions, riders, and underwriting class
- Insurer financial strength and policy illustrations
A practical next step
Gather your current declarations, a list of the people and property that need to be insured, and any questions about limits or exclusions. Those details make it easier to compare policies on coverage as well as price.
Coverage availability, terms, limits, and eligibility vary by insurer and state. Coverage can be confirmed only by the issued policy and applicable endorsements.