Major types of life insurance
Term life insurance
Term life is designed to provide a death benefit during a selected coverage period. It is commonly considered for income replacement, mortgages, education years, business obligations, and other needs with a defined timeline.
Whole life insurance
Whole life is permanent coverage that generally includes a death benefit, a specified premium schedule, and cash value. Guarantees and non-guaranteed elements are defined by the issued contract.
Universal life insurance
Universal life is permanent insurance that may offer flexibility in premium payments and death benefits within policy limits. Charges, credited interest, funding, and policy performance require ongoing review.
Indexed universal life credits interest using a method connected to one or more market indexes, subject to caps, participation rates, spreads, floors, charges, and policy terms. It does not directly invest policy value in the stock market.
Variable universal life insurance
Variable universal life combines flexible permanent insurance with investment subaccounts. Values can rise or fall, and this product involves investment risk and additional securities requirements.
Final-expense coverage is typically a smaller permanent policy intended to help beneficiaries address funeral costs and other end-of-life expenses. Benefit amounts, waiting periods, underwriting, and availability vary.
Group life insurance
Group coverage is often provided through an employer or association. It can be valuable, but employees should understand portability, conversion, benefit limits, and what happens after leaving the group.
How a life insurance policy is structured
- Owner: controls contractual rights and policy decisions.
- Insured: the person whose life is covered.
- Beneficiary: receives policy proceeds according to the contract.
- Premium: the amount required or planned to fund coverage.
- Death benefit: the benefit payable after a covered death while the policy is in force.
- Cash value: a feature of many permanent policies, subject to charges, loans, withdrawals, and policy terms.
Common underwriting paths
Depending on the carrier and product, underwriting may include an application, health questions, prescription history, motor-vehicle information, consumer reports, medical records, a telephone interview, laboratory testing, or an exam. Some applicants may qualify for accelerated or simplified processing.
Common optional riders
Available riders may address accelerated death benefits, waiver of premium, accidental death, children’s coverage, chronic or critical illness, guaranteed insurability, return of premium, or other needs. Riders can have eligibility rules, charges, exclusions, and state variations.
Choosing a coverage amount
A coverage review may consider income replacement, mortgage and other debts, education goals, final expenses, business obligations, existing insurance, savings, survivor income, and the number of years protection may be needed. The goal is a benefit and premium the household understands and can maintain.
From review to coverage
- Clarify the people and financial responsibilities to protect.
- Compare suitable policy types, benefit amounts, and timeframes.
- Complete the carrier application and underwriting process.
- Review the approved policy, premium, beneficiaries, riders, and delivery requirements.
- Keep beneficiaries and contact information current and review coverage after major life changes.
Life insurance questions
When is a good time to review life insurance?
Marriage, a new child, buying a home, changing jobs, starting a business, increasing income, caring for parents, or approaching retirement are useful review points.
Can someone own more than one policy?
Yes, an individual may have multiple policies when the total coverage is supported by financial need and carrier underwriting guidelines.
Can beneficiaries be updated?
Many policies allow beneficiary changes by the owner, subject to policy terms and any irrevocable beneficiary designation.
How often should coverage be reviewed?
A review after major life changes and a periodic check of beneficiaries, coverage amounts, funding, and contact information can help keep the policy aligned with current goals.