Life Insurance

Last reviewed September 15, 2026

Pays a lump sum to the people you name when you die, generally free of income tax, so that the income, the mortgage and the plans that depended on you continue. Term covers a period; permanent covers a lifetime and builds cash value. Which one, and how much, is arithmetic rather than instinct.

A life policy is a contract: you pay premiums, and when you die the carrier pays the death benefit to your beneficiaries. The benefit is a fixed amount named on the policy, paid directly to the people you name without passing through probate, and generally not counted as income to them. What the policy is for decides how large it should be and how long it should last: replacing a salary until the children are independent, paying off a mortgage, funding a business buyout, covering estate taxes, or simply paying for a funeral.

There are two families of policy. Term life covers a set number of years at a level premium, pays only if you die in that period, and builds no value; it is the least expensive way to buy a large benefit for the years a household depends on an income. Permanent life, which includes whole life and indexed universal life, is designed to stay in force for your whole life, costs several times as much for the same benefit, and accumulates cash value that can be borrowed or withdrawn.

The premium is set by underwriting: your age, sex, health history, tobacco use, family history, driving record, occupation and hobbies, the amount and term chosen, and the carrier's own pricing. Two carriers can put the same applicant in different rate classes, so a life application is worth shopping across several carriers before it is submitted, because an application that draws a poor class becomes part of the record.

The analysis starts with what the benefit has to do, arrives at an amount and a duration, and prices the policy type that fits across the carriers we represent. If the group coverage at work and the savings you already have cover the need, that is what you are told.

Covered and not covered

Covered

A lump sum to named beneficiaries on death from any cause after the contestability period
Death from illness, accident or natural causes, during the term or for life
An early payment on a terminal diagnosis, under the accelerated benefit rider
Premiums during a disability, with the waiver rider
Cash value that can be borrowed against, on permanent policies
Conversion from term to permanent without new underwriting, within the window
Coverage for children under a child rider, convertible when they reach adulthood

Not covered

Suicide within the policy's exclusion period, usually the first two years
A death within the contestability period where the application was materially misstated
Death during an act of war or while committing a felony, on some contracts
Aviation as a pilot or hazardous hobbies unless disclosed and rated
A policy that lapsed for non-payment before the death
Group coverage at work after you leave, unless ported or converted

What life insurance does

Term life

Term pays the death benefit if you die within the term, most often ten, twenty or thirty years, at a premium that stays level for the whole term. At the end of the term the policy either ends or renews annually at a much higher premium. Most term policies can be converted to a permanent policy from the same carrier without new underwriting during a conversion window, which is the feature to check if health may change. It is the right product for the mortgage, the children's years and the working life.

Whole life

Whole life stays in force as long as premiums are paid, at a premium fixed at issue, with a guaranteed death benefit and a guaranteed cash value that grows on a schedule printed in the contract. A mutual carrier may add dividends, which are not a guarantee but have a long record. It costs the most per dollar of benefit and suits needs that never expire: estate liquidity, a special-needs dependant, a business succession plan, or a person who wants a forced-savings vehicle with a death benefit attached.

Indexed universal life

Indexed universal life is a flexible-premium permanent policy whose cash value earns interest tied to a market index, subject to a cap and a floor set by the carrier, without the money being invested in the market directly. Premiums can be raised, lowered or skipped within limits, and the policy's internal charges for the cost of insurance rise with age, so a policy funded at the minimum can lapse late in life. Illustrated values are projections, not promises, and the guaranteed minimum column of the illustration is the one to read first.

Riders

Riders bolt extra features onto the base policy. An accelerated death benefit pays part of the benefit early on a terminal diagnosis and is often included at no cost; a waiver of premium keeps the policy in force if you become disabled; a child rider covers each child for a small amount; a guaranteed insurability rider lets you buy more coverage later without underwriting; a return-of-premium rider on term refunds premiums if you outlive it, at a much higher price. Each is priced, and most households need one or two.

Underwriting and rate classes

Carriers sort applicants into rate classes, from preferred plus through standard to rated classes with a surcharge, based on the medical exam, prescription history, lab results, motor vehicle record and the application. Some carriers offer accelerated underwriting with no exam for healthy applicants under an age and amount threshold. Tobacco use in any form, including vaping, puts an applicant in a separate class at a premium that can be double the non-tobacco rate for the same benefit.

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Related lines

Term Life InsuranceThe plain version of life insurance: a fixed death benefit for a set number of years at a premium that does not change, and nothing paid if you outlive it. It buys the largest benefit per dollar during the years a family depends on an income, which is why it is what we usually recommend.
Whole Life InsurancePermanent coverage with three fixed things: a premium that never rises, a death benefit that never falls, and a cash value that grows on a schedule printed in the contract. Costs several times what term does for the same benefit, and fits needs that do not expire.
Indexed Universal Life (IUL) InsurancePermanent coverage with a flexible premium and a cash value that earns interest tied to a stock index, with a cap on the upside and a floor on the downside, without holding the stocks. The illustration is a projection, the charges rise with age, and how it is funded decides whether it works.
AnnuitiesA contract with an insurer that turns a sum of money into a stream of payments, now or later. The contract decides how the balance grows, when payments start, what leaving early costs and what passes to heirs; the analysis reads those terms before anything is signed.
Umbrella InsuranceAdds a layer of liability above your auto, home, boat and rental policies, paying once their limits are spent. It is priced by the limit you choose and the policies beneath it, and it pays some claims those policies never would.