2024-01-01 · personal, life

Life Coverage

Overview

Life insurance pays a death benefit to your beneficiaries if you pass away while the policy is active. It can replace lost income, cover debts, and fund long-term goals like education or estate planning.

Types of life insurance

• Term life: coverage for a set period (e.g., 10–30 years) with lower premiums.
• Whole life: permanent coverage with fixed premiums and cash value growth.
• Universal life: permanent coverage with flexible premiums and adjustable benefits.

What life insurance can cover

• Income replacement: supports household expenses and caregiving costs.
• Debt payoff: mortgages, student loans, or other obligations.
• Final expenses: funeral and medical bills.
• Legacy planning: charitable gifts or inheritance.

Key costs and factors

• Age and health: younger, healthier applicants pay less.
• Coverage amount: higher death benefits increase premiums.
• Policy term: longer terms typically cost more for term policies.
• Riders: add-ons like accelerated death benefit or waiver of premium.

How to choose the right amount

1. Add up obligations: debts, income replacement needs, and future goals.
2. Subtract assets: savings, retirement accounts, and existing coverage.
3. Revisit regularly: update coverage after major life events.

Tips for comparing policies

• Compare guaranteed vs. projected cash value for permanent policies.
• Ask about conversion options for term policies.
• Review exclusions (e.g., contestability period or risky activities).

Frequently asked questions

Do I need life insurance if I’m single? If no one relies on your income, coverage might be optional, but it can help cover debts or final expenses.

Can I cancel a policy later? Yes, but term policies have no cash value; permanent policies may have surrender charges.