As a general rule, if there are people who depend on you for financial support, like a spouse, children, or aging parents, then you’re a good candidate for life insurance. If you contribute to your household through cooking, cleaning, or childcare, a policy can account for the costs of replacing that labor. Additionally, if you have debt that another person will have to assume, like a mortgage or student loan debts, it's a good opportunity to look into life insurance.
Life insurance can be used to cover a variety of common expenses, like:
- Co-signed debt, including student loans
- College expenses for the kids
- Living expenses for your family
- Stay-at-home labor expenses (cooking, cleaning, etc.)
- Burial expenses
- Loans from family members
- Estate taxes that your heirs must pay for other assets
The beneficiary is the person or entity named as the recipient of your policy’s death benefit. It can be a family member, a person unrelated to you, or even a business or other organization. You choose the beneficiary on your own — you don’t need permission from the insurer or the beneficiary. You can also choose more than one beneficiary and designate how you want the death benefit to be split among them, and name contingent beneficiaries in case the primary beneficiaries predecease you.
Your insurer will automatically disburse the death benefit if you die, but it’s still a good idea to tell any beneficiary about the policy so they will be prepared to take action should a problem arise. For this same reason, it’s also a good idea to provide the beneficiary with access to the contract.
Technically a beneficiary does not have to do anything to receive your policy’s death benefit, but it’s a good idea to make sure he or she is aware that the policy exists in case there are any delays or complications on the insurer’s side.
The insurer will require proof of death and a copy of the contract in order to disburse the benefit.
Many employers offer life insurance as part of a benefits package. Usually, the amount is a multiple of your salary, up to a limit (usually one or two times your salary). Whether this is enough protection for your needs depends on your financial situation.
Life insurance is more expensive for those who are older or in poor health, so employer-offered life insurance can be a great way to obtain coverage if you can’t otherwise afford it.
The premiums you pay for your life insurance policy are not tax-deductible.
The difference between an agent and a broker is that an agent usually sells insurance for a single insurer, while a broker sells insurance for any number of insurers.
In some cases, an agent may actually be employed by the insurance company, although there are also agents who are self-employed.
If you’re looking for details about a specific insurer’s products, an agent may be the best person to talk to. However, if you’re trying to comparison shop across multiple insurers, you may want to contact a broker.
Agents and brokers always provide their services for free and earn commissions off of the policies they sell.
If you outlive your term life insurance, the policy expires and you do not receive a refund of premiums paid. You may have an option to convert your term policy into a permanent policy after it expires.
Most life insurance policies include a 30- to 31-day grace period after your payment due date (the exact period can vary by insurer or state). If you don’t pay your premium within that period, your policy will lapse and you will need to work with your insurer to reinstate your coverage.