A life insurance policy is an agreement between you and an insurance company. You make regular payments, and in return, the company agrees to pay a cash benefit — called a death benefit — to the person or people you choose when you pass away. It’s a reliable way to help protect your loved ones financially.
Why Life Insurance Is Important
Life insurance is one of the few financial tools that turns pennies into dollars precisely when it’s needed most — offering both protection and timing that no other product can match. It safeguards families, preserves legacies, supports business continuity, and plays a vital role in financial planning. By turning small, manageable premiums into substantial payouts during life’s most critical moments, life insurance proves to be truly irreplaceable. But its value goes far beyond the death benefit. Life insurance can also offer:
Peace of mind – When you die, your family will be devastated. Their lives will never “get back to normal.” But you can feel confident that financial trouble won’t make matters worse.
Living benefits – There are add-on options (called riders) that may make it possible for your policy to give you money before you die. Some examples include situations where you become disabled, need long-term medical care, or receive a terminal illness diagnosis.
Cash value – Permanent life insurance policies accumulate cash value that you can access for any reason you choose.
Term Life:
Term life insurance is simple and inexpensive. You pick a benefit amount and how long you’d like to be covered – this is called your term, and it usually lasts 10, 20, 25 or 30 years – and you’re squared away. At the end of the term, the level, affordable premiums you’re used to become exorbitantly expensive. The insurer doesn’t always cancel the coverage, but the increased cost makes many people consider dropping the policy voluntarily.
And unfortunately, new policy could be a lot more expensive because of your age.
Term insurance is sometimes referred to as “pure insurance” because it is just basic insurance. Features can be added (the riders mentioned above) to provide extra coverage, including a return of premium rider that gives you back every penny of your paid in premium over the course of your term.
Permanent Life:
Permanent life insurance generally provides lifelong financial protection. As long as you pay the premiums:
- Your policy will never expire and
- Your beneficiaries are guaranteed to receive the death benefit (federal income-tax free in almost all cases).
Permanent policies may also accumulate cash value which you can access for any reason, including to pay college tuition, retirement funds, etc.
There are Whole Life, Universal Life, and Survivorship life (Second-to-Die) insurance products. Get more details on the Permanent Life Insurance page.
How Much and What Kind?
Those are two of the most common questions insurance professionals are asked. The answer for both is the same: it depends. It would be irresponsible to recommend a course of action without an in-depth needs analysis. Complete our contact form, and we’ll guide you toward the right policy for your needs.
If you have short-term financial needs, term insurance may be your best bet. If your needs are permanent (such as estate planning or covering the cost of final expenses) you may need a permanent policy. Check out How Much Life Insurance Is Enough for a more detailed exploration of the topic.
“What Do I Need to Do?”
After you figure out how much and what kind, you have to find a carrier that offers a policy that fits and fill out an application. If you request a quote from us, we’ll do the shopping for you. Our powerful software compares dozens of products from America’s top-rated insurance companies – brand names you know and trust. We’ll help you compare policies and tell you which company will give you the best policy at the lowest price.
Once you fill out and submit your application, which can often be done electronically, you’ll usually need to schedule a medical exam. These are typically finished in 30 minutes or less, and they can be done in your home or office.
The insurance company will take the information from your application and exam and decide whether or not they’ll insure you and what rate class you qualify for. This is known as the underwriting process. On average, the process takes 3-8 weeks. If you are approved, you get to choose whether to accept the policy.
Now, just pay your premium every month and your family is protected!
If you are denied, you may be able to apply for insurance with another company, or you may think about getting No Medical Exam Insurance.
Steps to Filing a Life Insurance Claim
Whoever is tasked with filing the life insurance death claim should be informed and prepared to follow a few key steps. Understanding the basics — such as gathering the right documents, notifying the insurance company promptly, and completing any required forms — can help ensure the process goes as smoothly as possible. Being aware of what’s involved can reduce stress during an already difficult time and help avoid delays in receiving the settlement funds your loved ones may be counting on. Here are some basic steps to make sure you’re doing everything required to receive settlement funds.
First, get your paperwork in order. Be sure to obtain a copy of the death certificate of the person insured.
Call your life insurance representative. They can be helpful in determining what other paperwork you may need and provide you with a checklist of things you should consider that can ease the burden during this difficult time. In addition, they can help educate you on what you’re entitled to.
When you file the life insurance claim, keep in mind that each beneficiary must fill out the proper forms. Your life insurance agent should be able to get the forms for you and help you with the process.
It typically shouldn’t take more than a week or two to process your claim. The life insurance company will review your claim and make the payout.
Click here to find out more steps for filing a death claim. If you have any questions, call (800) 442-9899 to speak with one of our experienced agents.
Life Insurance: FAQs
What is life insurance?
Life insurance is a financial protection tool that pays a tax-free death benefit to your beneficiaries when you pass away. It helps cover expenses like funeral costs, mortgage payments, debts, and income replacement, ensuring your loved ones remain financially secure.
How does life insurance work?
You pay monthly or annual premiums to an insurance company. In return, the insurer guarantees a death benefit that is paid to your chosen beneficiaries when you die. Some policies also build cash value, which can be used while you’re alive.
What are the main types of life insurance?
The two primary types are:
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Term Life Insurance – Affordable coverage for a set number of years (10–30 years).
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Permanent Life Insurance – Lifelong coverage that includes cash value (e.g., Whole Life, Universal Life, Indexed Universal Life).
Your needs and budget determine which type is best.
How much does life insurance cost?
Rates depend on your:
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Age
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Health
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Lifestyle
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Policy type
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Coverage amount
Term life is generally very affordable, with many healthy adults paying as little as $1 a day for substantial coverage.
How much life insurance do I need?
A common rule of thumb is 10–15 times your annual income, but additional factors matter, such as:
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Mortgage and debt
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Childcare and education costs
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Future income replacement
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Final expenses
A personalized quote helps identify the right coverage level.
Do I need a medical exam to get life insurance?
Not always. Many insurers offer No Medical Exam or Simplified Issue options with fast approvals. Fully underwritten policies with exams typically provide the lowest rates.
What does life insurance typically cover?
Life insurance pays out in cases of:
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Illness
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Natural causes
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Accidents
Most policies exclude suicide during the contestability period and deaths related to illegal activities.
Can I get life insurance if I have health issues?
Often, yes. Many insurers approve applicants with conditions like high blood pressure, diabetes, or high cholesterol. For serious health issues, Guaranteed Issue coverage ensures acceptance regardless of your medical history.
What is the difference between term and whole life insurance?
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Term Life: Temporary, low-cost, no cash value
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Whole Life: Permanent coverage with guaranteed cash value and fixed premiums
Many people use a combination of both.
Who should have life insurance?
Life insurance is recommended for:
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Parents
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Homeowners
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Married couples
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Business owners
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Anyone with financial dependents
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People wanting to leave a legacy or cover final expenses
Even single individuals benefit by covering debts and end-of-life costs.
What is cash value and how does it work?
Cash value is a savings component in permanent life insurance policies. It grows tax-deferred and can be accessed through loans or withdrawals, used for emergencies, retirement income, or to help pay premiums.
What happens if I stop paying premiums?
Your coverage may lapse. Some permanent policies allow:
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Using cash value to cover premiums
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Reduced paid-up insurance
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Grace periods
Term policies generally end once premiums stop.
How do beneficiaries receive the payout?
After filing a claim and submitting required documents, insurers typically pay benefits within days to weeks. The payout is usually tax-free and can be used however the beneficiary chooses.
Is life insurance worth it?
Yes. Life insurance provides financial security and peace of mind. It ensures your loved ones can maintain their lifestyle, pay debts, and cover expenses even in your absence. It’s one of the most important components of a strong financial plan.
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