Life Insurance

Life insurance is a financial product that pays a benefit to beneficiaries upon the insured's death. It provides financial stability for families, ensuring support during tough times. Policyholders pay premiums, and the insurance company a payout, helping cover expenses and debts.

Key Things to Understand

Premium

The amount you pay monthly (or annually) just to have the plan, regardless of whether you use it.

Death Benefit

The amount paid to your beneficiaries when you die. This is the core purpose of the policy.

Cash value

A savings-like component in permanent policies that grows tax-deferred and that you can borrow against or withdraw from while alive.

Beneficiary

The person(s) or entity you name to receive the payout.

Rider

An optional add-on that modifies coverage, e.g., accelerated death benefit (early payout if terminally ill) or waiver of premium (skip payments if disabled).

Contestability period

Usually the first 2 years of a policy, during which the insurer can investigate and deny a claim if you misrepresented info on your application.

Lapse

When a policy ends because premiums weren't paid; permanent policies with cash value sometimes have a grace period or can use cash value to cover missed payments.

Face amount

Another term for the death benefit / coverage amount.

Referral

Written approval from your PCP to see a specialist, required by some plans (usually HMOs).

Types of plans

Term Life Insurance

Covers you for a set period (10, 20, 30 years). Pays out only if you die during the term. Much cheaper than permanent policies; no cash value.

Whole Life Insurance

Permanent coverage that lasts your whole life, with a fixed premium and a cash value component that grows over time at a guaranteed rate.

Universal life insurance

Also permanent, but more flexible — you can adjust your premium and death benefit within limits, and cash value growth is often tied to interest rates.

Final Expense

Final expense insurance is a whole life policy that covers end-of-life costs, such as funeral and medical expenses. It offers a smaller death benefit, ensuring loved ones aren't burdened financially during difficult times.