What life insurance covers

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 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 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 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.

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.