01 / THE BIG IDEA
What does life insurance do?
Life insurance can help people you care about pay bills after you die. It is a contract with an insurance company. The contract is called a policy.
You do not need to know every insurance word to take a good first step. Start with who you want to help, what they may need, and what you can afford.
Choose the plan
You apply for an amount of coverage. The company reviews the application and sets the terms if it approves you.
Keep it active
You make the payments the policy requires. Ask when coverage starts and what you must do to keep it.
Help the people you name
If you die while the policy is active, the company pays a covered claim to the people you named. The policy's rules and limits apply.
The money may help with rent, a home loan, food, child care, debts, or funeral costs.
Picture a family with two incomes. If one parent dies, the other may still have the same rent and grocery bills. Life insurance can give that family money to help with those costs.
Sources: NAIC: Tips for buying life insurance.
02 / NO NEED TO MEMORIZE
Six words you will hear
- Premium
- The payment you make to keep your policy active.
- Death benefit
- The money a policy pays for a covered death claim.
- Beneficiary
- The person or group you name to receive that money. You can name more than one.
- Insured person
- The person whose life the policy covers.
- Cash value
- Money that may build inside some types of life insurance. It is different from the death benefit.
- Underwriting
- The company's review to decide whether to offer a policy, and at what price.
Sources: California Department of Insurance: Life insurance guide · NAIC: Tips for buying life insurance.
03 / COMPARE THE JOB EACH PLAN DOES
Know the common choices
No one type is right for every person. Compare the job you want the plan to do and the cost you can keep paying.
Coverage for a set time
Term life
Term life lasts for a set time, such as 10, 20, or 30 years. It pays for a covered death during that time. Most term plans do not build cash value.
What happens when the term ends? Can I renew it, and what would that cost?
Designed to last your lifetime
Whole life
Whole life can last your whole life if you meet the policy's terms and make the required payments. It builds cash value. For the same death benefit, it usually costs more than term life.
Which payments and benefits are guaranteed? How much cash value is there in the early years?
Help with final bills
Final expense
Final expense is life insurance meant to help with funeral costs and other final bills. It may be a small whole life policy. Check the actual policy type. It is not the same as buying a prepaid funeral.
Is there a waiting period or a smaller payout for some deaths in the first few years?
Cash value is not free extra money. Loans charge interest. Unpaid loans and interest reduce the death benefit. Ask before taking money out.
Other plans, such as universal life, have more moving parts. Ask for a separate explanation of costs, guarantees, and what could change.
Sources: NAIC: Choosing a type of life insurance · NAIC: Life Insurance Buyer's Guide · Washington Insurance Commissioner: Funeral insurance · California Department of Insurance: Life insurance guide · South Carolina Department of Insurance: Common questions.
04 / PLAN AROUND REAL LIFE
Start with your family's needs
There is no one right amount for every family. Use this page to start a talk, not to pick a final policy on your own.
- Who counts on my income or the care I give?
- Which bills would still need to be paid?
- How long would my family need help?
- What payment could I keep up with each month?
A simple worksheet
Use the writing spaces in the free PDF. Keep your notes for yourself.
- Help with monthly billsAmount needed each month x number of months
- One-time costsDebts, final costs, child care, or other goals not counted above
- Total needsAdd the first two lines
- Money already set asideSavings and current life insurance meant for these same needs
- A starting gap to discussTotal needs minus money already set aside
A made-up example
- $2,000 a month for 12 months
- $24,000
- Other costs not counted above
- + $16,000
- Total needs
- $40,000
- Savings set aside for those costs
- - $10,000
- Starting gap
- $30,000
These numbers are for practice. They are not a quote or a suggested coverage amount. This example covers only one year of bills. Your family may need many more years of help.
Count each cost once. Keep an emergency fund in mind. Check whether work coverage would stay with you after a job change. Discuss future costs and a budget you can keep.
Sources: NAIC: Life insurance basics and needs · West Virginia Insurance Commissioner: Life insurance brochure.
05 / TAKE YOUR TIME
Five steps before you buy
Set a goal and a budget
List who you want to help and what bills matter most. Choose a payment you can keep making.
Compare the same things
Look at the coverage amount, how long it lasts, the payments, and the limits. Check the agent and company with your state insurance department.
Answer the application with care
Give full, true answers. Ask for help if a question is unclear. The insurer may ask about health or request records or an exam.
Read the offer
The final price or terms may differ from an early estimate. Ask when the plan starts and which claims it will not pay.
Check the policy when it arrives
Check names, benefits, payments, and dates. Ask about the time allowed to review and return it. Put reminders in place for payments.
Bring these questions
- Can my payment go up?
- When does coverage start and end?
- Is there a waiting period or a smaller early benefit?
- What deaths or situations are not covered?
- What happens if I miss a payment?
- Which values are guaranteed, and which are just examples?
- How do the people I name file a claim?
- What can I change later, and what would it cost?
Already have coverage? Get help comparing both plans before you replace one. Do not cancel the old plan until the new one is approved and active, and you understand what changes. New costs, limits, or review periods may apply.
Sources: NAIC: Life Insurance Buyer's Guide · Texas Department of Insurance: Life insurance guide · West Virginia Insurance Commissioner: Life insurance brochure.
06 / COMMON QUESTIONS
Short answers to good questions
Does no medical exam mean anyone can get a policy?
No. A plan may skip the exam but still ask health questions or check records. The company can still turn down an application. Ask what review is required.
Sources: NAIC: Life Insurance Buyer's Guide · Texas Department of Insurance: Life insurance guide.
Does filling out a form start my coverage?
No. A request for information or a pre-application does not start coverage. Ask the insurer when your coverage takes effect and what must happen first.
Sources: NAIC: Life Insurance Buyer's Guide.
What is a waiting period?
Some policies pay a smaller benefit for certain deaths during an early period. The length, amount, and exceptions depend on the plan. Ask to see those rules in writing.
Sources: South Carolina Department of Insurance: Common questions.
Is the coverage from my job enough?
It may help, but compare its amount with your family's needs. Ask what happens when you leave or retire, and what it costs to keep the coverage if that is allowed.
Sources: West Virginia Insurance Commissioner: Life insurance brochure.
Can someone who stays home need life insurance?
Yes. Think about the cost of replacing child care, rides, meals, and other help that person gives. Paid income is only one part of a family's needs.
Sources: NAIC: Life insurance basics and needs.
What if I miss a payment?
Call the company right away. There may be a short grace period to catch up. If you do not meet the policy's payment rules, coverage can end. That is called a lapse.
Sources: Texas Department of Insurance: Life insurance guide.
Can I name my child to receive the money?
Ask how a payment to a child would be handled. A child may not be able to receive the money directly. Your agent can explain when legal help may be needed.
Sources: NAIC: Life Insurance Buyer's Guide.
Can I change the people named on my policy?
Often, yes, but some choices have limits. Ask the company for its change form and confirm the update. Review your choices after a birth, death, marriage, or divorce.
Sources: NAIC: Life Insurance Buyer's Guide.
07 / AFTER YOU BUY
Help your family find the plan
A policy is easier to use when someone knows it exists. Keep these details in a safe place. Tell a trusted person where to find them.
- The insurance company's name and claims phone number
- The policy number and where the policy is stored
- The people named to receive the money
- The agent's name and contact details
- The payment due date and how payments are made
Review the plan when your family, job, debts, or budget changes. Update contact details and the people named on the policy when needed.
Keep your worksheet for yourself. You do not need to send Social Security numbers, medical details, or account numbers to ask Timmy a general question.
Sources: NAIC: Life Insurance Buyer's Guide · NAIC: Life insurance roadmap.
Sources & more help
These official consumer resources helped inform this guide. State resources explain general ideas; local rules and policy terms vary.
- NAIC: Tips for buying life insurance
- NAIC: Life Insurance Buyer's Guide
- NAIC: Choosing a type of life insurance
- NAIC: Life insurance basics and needs
- Texas Department of Insurance: Life insurance guide
- California Department of Insurance: Life insurance guide
- Washington Insurance Commissioner: Funeral insurance
- South Carolina Department of Insurance: Common questions
- West Virginia Insurance Commissioner: Life insurance brochure
- NAIC: Life insurance roadmap
This guide is for learning. It is not a quote, an offer, or a promise of coverage. Costs and rules vary by company, plan, and state. The insurer decides whether to offer a policy. Read the policy for the terms that apply to you.
Find resources for your state