Life insurance basics you should know
What You’ll Learn
Many new homeowners investigate life insurance options to help cover costs in a worst-case scenario.
Life insurance can replace your income and enable loved ones to maintain their lifestyle after your death.
Term policies provide coverage for a set period of years.
Whole life policies provide coverage for your entire life, but tend to be expensive.
Flexible policies let you adjust your premiums and coverage levels over time.
The process of applying for coverage can be quick and easy with the right partner.
Buying a new home is an exciting new chapter! It’s more than just a place to live—it’s an investment in stability, community, and generational wealth. And while any new buyer quickly learns that they’ll need homeowners’ insurance and title insurance, it’s also a great time to read up on the benefits of life insurance as well.
We get it, life insurance isn’t typically the topic of choice at the dinner table. But if anyone, such as a partner or children, depends on your income, it’s certainly an option worth considering.
The good news is that the right insurance partner can make selecting a policy and obtaining coverage less stressful. To help you get started, here’s what you should know about life insurance, the different policies available, and how to determine how much coverage you might need.
How does life insurance work?
When you purchase a life insurance policy, you’ll choose a coverage amount, which is typically based on your financial circumstances (more on this later). Then, moving forward, you’ll pay monthly or annual premiums to pay for your coverage.
An insurance company will look at several factors to determine your premium rate, including your:
- Life expectancy
- Lifestyle choices, like whether you’re a smoker, have a dangerous profession, or enjoy skydiving as a hobby
If you pass away while your policy is active, the coverage amount you originally selected will be paid to your beneficiaries, who you selected to receive the funds.
In most cases, the proceeds are tax-free. So, if you had a policy for $300,000, for example, your beneficiaries would get the full amount, without the federal and state governments collecting a share.
Types of life insurance
Here are three basic categories of life insurance to help you determine which might be right for your needs:
Term life insurance
As the name implies, term life insurance lasts for a specific term, or time frame, such as 10, 15, 20, or 30 years. If you pass away at any time during the policy term, your beneficiaries will receive the amount of your coverage. You’ll make premium payments during that time, until the policy expires.
People often choose term insurance for the years they’ll need to replace the income they receive through work. However, once they reach retirement age, when their spouse or children might have access to their retirement investments, a life insurance policy may no longer be needed.
The advantage of term life insurance is that these policies are generally the least expensive type. The disadvantage is that when the term runs out, your loved ones will no longer have access to any of the money you contributed in premiums over the years.
Whole life insurance
Whole, or permanent, life insurance provides coverage that lasts for your entire life, as long as you continue to make payments.
Whole life policies have an investment component that can increase the value of the benefit your beneficiaries receive. Even while you’re alive, you may be able to borrow against the policy’s value.
The advantage of whole life insurance is that you don’t have to worry about your policy expiring after a certain timeframe. However, these policies tend to be much costlier than the premiums for term coverage.
Do I need a separate life insurance policy if I have one through work?
It’s an excellent benefit to have life insurance through your employer, but that alone might not provide the protection you need.
First, work policies are not portable. If you leave your employer, you can’t bring the life insurance with you. Second, the coverage from workplace policies is usually limited, often equaling only about one to two times your annual salary.
For the best protection, you may find you need additional coverage to meet your family’s needs.
How much life insurance do I need?
The amount of coverage you’ll require will depend on your personal financial circumstances. A common recommendation for coverage is 10 times your annual salary. However, this is just a general guideline.
Better Cover has a team of licensed agents that can help discuss your options and needs.
Can I get life insurance without a medical exam?
Some life insurance companies require a medical exam or even bloodwork before they grant a policy. This is because providers want to determine your health and potential risk factors before guaranteeing your coverage and premium amounts.
However, with Better Cover, the process of getting coverage is entirely digital. Better Cover offers life insurance up to $3M in coverage, possibly without medical exams, by just filling out a few health questions online. If eligible, you can get approved and covered in minutes. If you need protection above that amount, we’ll simply ask you to complete a quick, free, at-home health check.
Ready to get a life insurance quote? Now is the time
Better Cover makes the process of obtaining coverage quick and easy.
Disclaimer: Insurance quotes and policies are offered through Better Cover, LLC. A Pennsylvania Resident Producer Agency. License #881593. A full listing of Better Cover, LLC's license numbers may be found here. Better Cover is Registered in the U.S. Patent and Trademark Office.