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Every circumstance is different, but the most important reason for purchasing life insurance is to take care of your family and financial obligations should you pass away. Ensuring that your loved ones are taken care of can bring tremendous peace of mind. Life insurance can also help ensure business continuity if you are self-employed, pay for all or part of your final expenses, cover college costs for children or grandchildren, or leave a legacy to an organization whose mission is important to you. It can also be used as part of a comprehensive estate plan.

Most of the questions addressed in our FAQs are related to term life insurance but there are other forms of life insurance that we offer depending on your overall need. Let’s begin by covering the two main types of life insurance: permanent and term.

Permanent insurance provides lifelong protection, and the ability to accumulate cash value on a tax-deferred basis. Unlike term insurance, a permanent insurance policy will remain in force for as long as you continue to pay your premiums. Because these policies are designed and priced for you to keep over a long period of time, this may not be the right type of insurance for you if you don’t have a long-term need for life insurance coverage.

Why would someone need coverage for an extended period of time? Because contrary to what a lot of people think, the need for life insurance often persists long after the kids have graduated college, or the mortgage has been paid off. If you died the day after your youngest child graduated from college, your spouse would still be faced with daily living expenses. And what if your spouse outlives you by 10, 20 or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?

Whole life insurance

Whole life coverage is the most common form of life insurance and what many people think of when they hear “permanent life insurance.” Whole life provides a policyholder with lifelong coverage that includes a guaranteed ‘cash value’ (think trade-in value) component allowing you to build up savings over time.

With a cash value, the policyholder may take out loans against the cash value of their permanent policy or give up (‘surrender’) the policy in exchange for some portion of the cash value. The cash value on a whole life policy grows tax-free, and withdrawals or loans can be tax-free too. To be sure, you’ll want to consult a tax professional when taking out or exchanging a value higher than what you’ve invested. It is always a good idea to speak to your tax advisor and financial planner to see if a whole life policy works for you as an option.

If you like predictability, then you may like that whole life guarantees fixed premium payments and no changes in the death benefit.

Universal life insurance

Universal life insurance is a type of permanent life insurance that allows you to build cash value, withdraw funds, and may have basic investment options. What is unique about this type of insurance is that it offers flexible premiums, giving the policy owner some ability to vary premium payments as income changes. This is certainly something to consider when planning for retirement and anticipated shifts in future income.

Universal life insurance contains a savings component, with different product types offering different ways to invest the money. With traditional universal life, cash value earnings grow based on a fixed rate. Variable universal life insurance refers to a policy where your cash value can be invested in equities at the discretion of the policy owner and fluctuates per market conditions. An indexed universal life policy allows a policy owner to have exposure to the stock market, but with some protection against market downturns.

Term life insurance is a contract designed to cover your life for a defined length of time, or term.

Term coverage is ideal for temporary protection, made to cover your financial obligations such as a mortgage, education costs, or income replacement during the working years. You can typically get term coverage anywhere from 10 years to 30 years, although 20 years is the most common. At Legal & General America (LGA), we’re one of the few insurance carriers who offer up to 40 years of term coverage. Our term life options include 10, 15, 20, 25, 30, 35, and 40-year policies.

The most popular type is level term life insurance, meaning your payment (premium) and payout (death benefit) stays level, or the same, until the end of the term period. This is the most straightforward of life insurance options and requires very little maintenance for policy owners.

Single people

Life insurance is often associated with couples and children, but it offers the same benefits and peace of mind for single people. Life insurance is a responsible way to protect your loved ones from being burdened with bills that can extend for years after you’ve passed away.

Maybe you provide for your parents, your grandparents, or children in your family like little cousins, nephews or nieces. If you also named them as your beneficiaries, the death benefit can help cover living expenses after you’re gone.

Alternatively, if you’re thinking of starting a business with someone else and you need funds, you’ll probably be required to bring proof of insurance in order to secure a loan.

If you already own a successful company, this arrangement would allow your loved ones to be compensated for lost income, while also guaranteeing the survival of the enterprise.

It’s also just as important to prepare for end-of-life expenses at an early age. Few young and healthy people think of this scenario, but an accident or terminal illness can strike at any time. Life insurance will give your family the chance to spend time with one another and celebrate your memory instead of worrying about funeral costs.

Married couples

When it comes to marriage, buying life insurance might be the ultimate act of love towards someone who now financially relies on you and with whom you share debt.

By building life insurance into your budget ahead of time, you’ll be able to better plan for future expenses, and allocate enough resources to raise children, pay mortgages, car loans, etc.

Get clear on how much coverage you’ll need in order to replace a lost income and choose a policy that matches your needs. The goal is for your partner to be free of any major debt in the case of your death.

Parents

With most children nowadays still living with their parents well after turning 18, parents should expect to have a dependent for at least a couple of decades.

Caring for a child, however, can leave little room for researching life insurance. If possible, buy your policy before you have children or in the early phase of pregnancy. This will ensure that rates don’t go up as a result of unexpected complications and the soon-to-be mother is covered during the birth. The application process can take up to a month or more and, ideally, your policy should be active by the time the baby is born.

Even if you’re just planning to have a child or maybe you’re considering adopting, there’s tremendous value in purchasing life insurance early, while you can benefit from lower premiums.

If you’re married, your spouse should also consider getting insured, so a tragedy won’t completely turn your life upside down. What if one of you is a stay-at-home parent? Losing that person could mean losing childcare, as well as valuable assistance with cooking and cleaning. The consequences could place a huge mental, physical, and financial strain on the surviving parent.

Single parents have an even bigger responsibility to protect their children’s financial stability. Even if you have supportive family members ready to pitch in, you’ll want to take every precaution so that your kids live a comfortable lifestyle.

Whatever your scenario, you’ll want to get a policy that covers you until you’re financially secure enough to mitigate debt and provide for your children.

New homeowners

When you commit to a 15-year or 30-year mortgage, you need to factor in that you might not live long enough to pay it all off.

Who will take that financial hit?

A cosigner is most likely someone close to you like a spouse or a parent. Life insurance can remove this burden from their shoulders if anything happens to you, so they can afford to raise children or retire in without any looming debt.

Many new homeowners think that the life insurance policy they may have through their jobs will suffice. The truth is that those policies come with certain limitations. For example, if you leave your job, you can lose that life insurance, and, consequently, coverage for large investments like your house or future college savings.

Empty nesters/retirees

With kids out of the house, it’s time to enjoy life on your own terms. This is an important time to protect everything you’ve built so far and even help your adult children.

Shifting job markets and the rising cost of living might delay your children from reaching financial independence as quickly as expected. Your life insurance policy proceeds could go towards a down payment for a house, a degree or large debt payments to help them start out on the right foot.

Even if your children have done well for themselves, you still want to guard your spouse against any costly repercussions of you passing away like funeral expenses, mortgages and credit cards.

Many married couples tend to plan out retirement together. If that’s your situation, life insurance could enable your spouse to live comfortably after you’ll stop contributing to that shared retirement fund.

Life insurance is a simple, affordable way to shield your family even when you’ve passed away.

When you buy a term life policy, you agree to pay the insurance company a regular payment for the desired period of time. In return, the insurer guarantees that your beneficiary will receive a tax-free* payout if you were to pass away during the policy’s term.

Your loved ones will receive the death benefit amount typically in the form of a lump sum cash payment. They can spend the death benefit to cover a mortgage, funeral expenses, or perhaps pay for college or any other financial obligations. And, the money doesn’t have to go to one person. For example, you could give 50% to your spouse and split the rest among your adult children, a parent, a friend, or even a charity.

_{*In some instances the death benefit may not be tax-free. Consult a tax advisor for details.}

Let’s see how a term life insurance policy would work in a real-life scenario:

Let’s say you’re 35 years old and working full-time along with your partner to provide for your two young children. You want to protect your family’s income if something were to happen to you. So, based on your needs, you decide to purchase $1 million worth of level term coverage for a period of 20 years.

You estimate that this amount of protection would be enough to replace your income and help your family live a comfortable life while paying the mortgage, monthly expenses, and college tuition. Owning a level term policy guarantees you pay the same premiums during the policy’s term. You like knowing that you have predictable financial protection with a death benefit.

If you pass away at any point while you are covered with the 20-year term, the insurance company will issue your beneficiary a lump sum payment of $1 million.

On the other hand, if you outlive the term, you may choose to end or extend your coverage or convert it to a permanent policy. It’s usually around this time that your financial responsibilities decrease, for instance, your mortgage may be paid off and your children may be out of college. If that is the case you may not need the same coverage as you did when you originally applied.

Whatever the case, the term insurance will have served its purpose of shielding your family from financial hardship during those critical years.

That depends on the purpose of the insurance. For simplicity’s sake, we’re going to talk about term life insurance because permanent life insurance can be used for tax and estate planning purposes, so that can be a more complicated process that should be done with the guidance of a financial advisor.

Term life allows for high levels of life coverage when it’s needed most. When thinking about how much coverage you should purchase, start by asking yourself how much you can afford. To determine how much you need, think about all your financial responsibilities and how long they'll last.

Many experts recommend life insurance coverage that’s six to eight times your annual salary. Coverage amounts typically start at $100,000 and go up to $10 million.

So, if you’re making $75,000 a year and you have life insurance coverage through work with a benefit that’s 2x your salary, it makes sense to consider buying your own policy to make up the difference.

To calculate how much insurance you might need, please refer to our Life Insurance Worksheet.

Here’s a quick list of what term life coverage may provide:

• Coverage for a set period of time, ideal for short- and medium-term needs (we offer 10, 15, 20, 25, 30, 35, 40- year options)
• Can be used for income replacement or mortgage protection for your loved ones
• Can pay for final expenses
• Coverage amounts starting at $100,000 with affordable payments to fit your budget
• Coverage available for those aged 20-75 years old, with affordable term life insurance for seniors
• Options to renew or convert to a permanent policy
• Payouts are tax-free
• Ability to customize or “stack” your coverage with term riders

When it comes to life insurance policies, the cost is an important factor for many people. The good news is that term life is the most budget-friendly option available.

If you choose a shorter term, you will generally pay less in monthly premiums, but you risk not being covered as long as you need.

You’ll want to be sure you choose an option that balances your need for coverage with your budget. And, life insurance is not as expensive as you might think. According to a recent LIMRA study, more than half of Americans overestimate its cost by as much as three times!

Purchasing life insurance when you are young and healthy can help you get a lower premium which you can keep in place no matter how your health changes later in life.

Most life insurance companies pay attention to your medical history to determine how likely you are to die from health issues. The higher a risk you present to the company, the more you are likely to cost the insurance provider paying claims. This is why life insurance rates can be higher for individuals suffering from chronic conditions like high blood pressure and cholesterol, which affects nearly half of adults over age 20. Smokers may encounter higher premiums than non-smokers.

Life insurance riders are add-ons that offer additional coverage on top of the base policy. Sometimes called laddering, adding riders on your term policy is a way to give you more coverage upfront for a shorter period of time while still maintaining an affordable base term policy. Rider availability may vary.

Term Riders

You may be able to stack a Term Rider on top of a base term policy for 10, 15, or 20 years. Stacking term coverage is considered to be one of the most cost-effective ways to buy term life insurance. Here’s an example:

Say you purchase $1 million of 40-year term coverage. After 20 years you pay off the mortgage and now you may end up paying for more coverage than need. Alternatively, you could purchase a 40-year term policy worth $250,000 as a base policy and add a 20-year term rider at $750,000 value to get to the $1 million total coverage. Once your rider expires and your financial responsibilities decrease, your original $250,000 term policy will stay in place, without the extra protection or additional cost.

Child Rider

One of the popular riders is known as a Children’s Life Insurance Rider, which covers the lives of your children until they’re 25 years old. This rider provides a death benefit if something were to happen to your child while your coverage is active.

Accelerated Death Benefit Rider

As an added bonus for all our term life policies, an Accelerated Death Benefit Rider (ADB) is automatically included. This provision allows the policyholder the ability to request a portion of their death benefit in advance if they are diagnosed with a qualified terminal illness. Policyholders can use this benefit to cover medical expenses, funeral planning, or even a last wish or “bucket list” activity to help the family find closure in their time of need.