What you are buying
Life insurance is an agreement with an insurer. You pay premiums, and the insurer pays a death benefit if the insured person dies while covered and the claim meets the policy's terms. A beneficiary is the person or organization named to receive that benefit.
For a household, the money might help replace lost financial support, pay housing costs, or cover care and education. The purpose should be clear before you choose an amount.
Three decisions to work through
The amount
What financial gap would your death leave? List the costs you want covered, then account for the resources already available.
The length of coverage
Some responsibilities have a timeline, such as a mortgage or the years a child depends on you. Other goals may continue throughout your life. That distinction helps you compare term and permanent insurance.
The budget
A useful policy is one you can keep paying for. Compare the coverage and its future costs, along with the initial premium.
What happens when you apply
An insurer assesses your application to decide whether it can offer coverage and at what price. It may ask about your health, lifestyle, occupation, and the amount you want. The process varies by insurer and product.
Answer accurately, ask about anything unclear, and read the terms of any offer. An estimate or quote doesn't mean insurance is already in place. Confirm when coverage takes effect.
A few words worth knowing
| Term | Plain English meaning |
|---|---|
| Premium | The amount you pay for insurance. |
| Death benefit | The amount payable on an insured death under the policy. |
| Beneficiary | The person or organization named to receive the benefit. |
| Underwriting | The insurer's assessment of an application and its risks. |
| Exclusion | A circumstance the policy does not cover. |
| Rider | An addition to a policy that changes or adds coverage. |