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In its simplest form, a life insurance policy is a contract between the person who owns the policy and an insurance company that says upon death (or even disability depending on the contract) the insurance company will pay out the death benefit to a named beneficiary – tax-free in most cases.

Term life insurance provides financial protection to that listed beneficiary (family, friend, charity, etc.) if you were to pass on unexpectedly during a set period, or term. The death benefit is typically paid out as a one-time lump sum payment that can then be used for whatever the beneficiary wants or needs – to help cover funeral costs, mortgage payments, outstanding bills or debts, college expenses, etc. Term Life policies can be a great option due to its affordability and straightforward nature.

At a Glance:

• Typically, term life insurance coverage can last up to 40 years but there’s a wide variety of term lengths you can choose from – with 10, 20, and 30-year term lengths being the most common
• Term life insurance premiums can be very affordable, especially when compared to permanent coverage
• Before the term period expires you will typically have the option to renew your policy, convert the policy to permanent coverage, or allow that coverage to end altogether
• Depending on the life insurance carrier that you purchase your policy from, there can be a variety of policy riders (added benefits) to choose from as well
• To sign up for a term life policy, you start by getting a quote where you select you term length, the death benefit, and answer a series of questions about yourself such as your health history

Term Life Insurance: Should you pass away unexpectedly; term life insurance protects your loved ones for a specified period of time (the term duration) by paying out a guaranteed death benefit to your beneficiary. Typically, term life insurance is easier to understand, and the premium payments are cheaper than permanent coverage. The biggest risk with term life insurance is that it can expire before you pass away.

Permanent Life Insurance: Should you pass away unexpectedly, permanent life insurance protects your loved ones for a much longer period of time – typically throughout your lifetime or at a specified age (age 90, for example). Permanent life insurance is often more expensive than term but there’s less risk since your coverage lasts longer.

There are also many forms of permanent life insurance with different features and benefits – whole life, universal life, variable universal life, and variable life. Some policies may have a non-guaranteed death benefit or a cash value component that allows you to accumulate cash tax-free.

If someone depends on you financially, you are most likely someone who needs life insurance.

Life insurance provides cash to your family or loved ones after your death. This payment, known as a death benefit, replaces your income and lost economic output (and is generally received on a tax-free basis). Your family can use this cash to pay for expenses like funeral costs, mortgage/rent, college tuition, and more. Some examples of those who need life insurance coverage include:

Married or Partnered Couples:
Many partners find it difficult to make ends meet without the other earner’s income.

Married or Partnered Couples with Kids:
In addition to losing one partner’s income, the surviving parent may have to pay for childcare or perform extra duties without the help of their spouse.

Single Parents:
As the sole income earner for your family, you’ll want to think about how to replace your children’s only source of financial support.

Stay-at-Home Parents:
From cooking meals to shuffling kids to school, stay-at-home parents perform many critical responsibilities that would be costly to outsource.

Retirees:
Many surviving partners would not be able to maintain the lifestyle they worked so hard to achieve without life insurance.

High Net Worth:
Depending on the size of your estate, your heirs could be hit with an estate tax rate of up to 45%. Fortunately, cash from a life insurance policy can give your heirs access to a tax-free death benefit to pay for immediate costs and much more.

Business Owners:
Life insurance can help your business in many ways if you, a fellow owners, or a key employee pass away.

Deciding how long you want to be insured is largely dependent on two factors: your financial obligations (dependents, mortgage, etc.), and how much you are comfortable spending on your policy. The longer the term policy, the more expensive your premium will be because it increases the risk that the insurance carrier will have to pay out your death benefit.

For example, perhaps you and your spouse just purchased a home with a 30-year mortgage. You may want to consider purchasing a 30-year term policy on each other in case something unexpected happens and one of you is left to pay off the balance of your home.

Another common example would be purchasing a 15-year term policy to cover the time in which you have children or dependents living in your home so that if anything happens to you, your family can afford to pay off expenses, replace the income you were providing, and protect their financial future.

The amount of life insurance depends on who you want to protect financially and for how long. Our Needs Calculator will help you determine that need! For a general idea, consider the following:

1. Add up the immediate, ongoing, and future expenses your family or loved ones would incur if you were to pass away (this could mean everything from funeral costs to rent/mortgage payments to college tuition).
2. Add up the financial resources your loved ones already have (this could mean a spouse’s income and life insurance coverage already in place).
3. Subtract your financial resources from the anticipated expenses (the difference between the two figures is the approximate life insurance you need to buy).