Life Insurance 101
A simple, straightforward guide to understanding life insurance. Learn what it is, how it works, and whether it's right for you — all in plain English.
Why Life Insurance Matters
Life insurance is about protecting the people who depend on you. Here's why it's an important consideration for many families.
Financial Protection
Life insurance provides a financial safety net for your family. If something happens to you, the death benefit can replace lost income, helping your loved ones maintain their standard of living and cover daily expenses.
Debt Coverage
Outstanding debts don't disappear when you do. Life insurance can help pay off mortgages, car loans, credit cards, and other obligations, preventing your family from inheriting financial burdens during an already difficult time.
Future Planning
Life insurance helps secure your family's future goals. It can fund children's education, cover retirement needs for a surviving spouse, or provide for special needs dependents who require long-term care.
Final Expenses
Funeral and burial costs can be substantial, often ranging from $7,000 to $15,000 or more. Life insurance ensures these expenses are covered without depleting savings or burdening family members.
Peace of Mind
Beyond the financial benefits, life insurance provides emotional comfort. Knowing your family will be taken care of allows you to focus on living your life without constant worry about what might happen.
Legacy Building
Life insurance can help you leave a lasting legacy. Whether it's supporting a favorite charity, helping grandchildren with education costs, or passing on wealth to the next generation, it provides options beyond immediate needs.
How Life Insurance Works
Understanding the basics of life insurance is simpler than you might think. Here's the process from start to finish.
Choose Your Coverage
Decide how much coverage you need and what type of policy fits your situation. Consider your income, debts, family needs, and long-term goals.
Apply for a Policy
Complete an application with information about your health, lifestyle, and family history. Some policies require a medical exam, while others offer simplified underwriting.
Pay Your Premiums
Once approved, you'll pay regular premiums (monthly, quarterly, or annually) to keep your policy active. As long as premiums are paid, your coverage remains in force.
Beneficiaries Receive Benefits
If you pass away while the policy is active, your named beneficiaries file a claim with the insurance company and receive the death benefit, typically tax-free.
Important to Know
Life insurance policies have specific terms and conditions. It's important to understand what is and isn't covered, any waiting periods that may apply, and how beneficiaries can file claims. A licensed insurance professional can walk you through all the details and answer your questions.
Who Should Consider Life Insurance?
Life insurance isn't just for one type of person. Many different situations call for the financial protection it provides.
Parents with Young Children
If you have children who depend on your income, life insurance helps ensure they can maintain their lifestyle, stay in their home, and afford education even if something happens to you.
Homeowners with Mortgages
A mortgage is often a family's largest debt. Life insurance can help pay off the mortgage, allowing your family to stay in their home without the burden of monthly payments.
Married Couples
Even if one spouse doesn't work outside the home, their contributions have value. Life insurance on both spouses protects against the loss of income or the cost of replacing household services.
Business Owners
Life insurance can fund buy-sell agreements, provide key person coverage, or help ensure business continuity if an owner or essential employee passes away.
Seniors Planning Ahead
Final expense insurance helps cover funeral costs, medical bills, and other end-of-life expenses, preventing these costs from depleting savings or burdening family members.
Anyone with Debt
If you have personal loans, credit card debt, or co-signed loans, life insurance can help ensure these obligations don't fall to your family or co-signers.
If any of these situations apply to you, it may be worth exploring your life insurance options. A licensed professional can help you determine what type and amount of coverage makes sense for your specific circumstances.
Key Terms to Know
Understanding these common life insurance terms will help you make informed decisions about your coverage.
Premium
The amount you pay (monthly, quarterly, or annually) to keep your life insurance policy active.
Death Benefit
The amount of money paid to your beneficiaries when you pass away, typically tax-free.
Beneficiary
The person or people you designate to receive the death benefit from your policy.
Term
The length of time your policy provides coverage (for term life insurance), such as 10, 20, or 30 years.
Cash Value
A savings component in permanent life insurance policies that grows over time and can be borrowed against.
Underwriting
The process insurance companies use to evaluate your health and risk factors to determine eligibility and premiums.
Rider
An optional add-on to your policy that provides additional benefits or coverage for specific situations.
Face Amount
Another term for the death benefit — the amount of coverage your policy provides.
Ready to Learn More?
Now that you understand the basics of life insurance, the next step is exploring which type of coverage fits your needs and connecting with a licensed professional who can provide personalized guidance.
Have Questions? We're Here to Help
Life insurance can feel complicated, but it doesn't have to be. Our licensed professionals are available to answer your questions, explain your options, and help you find coverage that fits your budget and needs — with no pressure or obligation.