There’s more to life insurance than most people think. A lot more.
Of course, everyone generally understands that a life insurance policy helps provide protection for loved ones should you pass away. But, depending on how you plan it out, life insurance can specifically help with financial situations arising out of:
Beyond being an asset in all phases of life, life insurance also can help with specific areas like:
This is a guide to life insurance that will help you understand the possibilities in all these areas.
Life insurance 101
To fully appreciate the range of life insurance capabilities, it’s important to learn about the different types of policies that are available. It’s also important to understand how to shop for insurance and consider what policy might be right for your circumstances and goals.
Types of life Insurance
- Term insurance tends to be the most affordable and, consequently, the most basic type of life insurance policy available. It provides death benefit coverage for a specific period of time, often 10 or 20 years.
- Permanent insurance, by contrast — including whole life, universal, and variable — offers coverage for a lifetime.
Since many people start with term insurance, it’s important to understand its basics and how it can be built upon or combined with other types of insurance.
- 4 times when term insurance may be the answer
- Not all term policies are created equal
- Term vs. perm life insurance: 3 considerations
- What policyowners should ask about term-perm conversions
- The case for combining term and perm
At the same time, since needs and resources change over time, it’s important to be familiar with the features of permanent insurance.
- Understanding different types of permanent insurance
- Whole life insurance explained
- Understanding universal life insurance
- What to know about variable universal life insurance
- Trading life insurance for long-term care? 1035 exchanges
- Treating cash value with care
- Understanding life insurance policy riders
- What premium plan will work for you?
- The tricky math behind indexed universal life insurance
In the range of permanent insurance, whole life insurance offers particular features that can be attractive.
- How whole life insurance can help through life stages
- Whole life insurance: Balancing protection and accumulation
- Short vs. long premium whole life policies: The difference
- How whole life insurance helps diversify your taxes
- Understanding ‘cash value’ in whole life insurance policies
- What goes into whole life insurance dividends?
- Whole life insurance: Criticisms and rebuttals
Life insurance and protecting loved ones
Life insurance protection is generally recognized as an important part of financial wellness. Yet, only about 52 percent of Americans own any, according to a recent study by the insurance research group LIMRA.1 And, even then, the amount of life insurance they have may not be enough. (Life insurance calculator)
- Why you should get life insurance
- 6 signs you are underinsured
- Single? 3 reasons you still may need life insurance
- The newlywed financial checklist
- Stay-at-home parents and the need for life insurance
- Four financial ‘Acts of Mutuality’
- The new parent financial checklist
- The gender gap in life insurance
- Divorce and life insurance
- Crowdfunding is a poor substitute for life insurance
- Buying life insurance for your parent
- Can I insure anyone?
- The danger of life insurance lapses
- Beneficiary mistakes
Life insurance at different ages
There are also questions about the right time to get life insurance. Does is pay off to purchase a policy when you are younger, when it will likely cost less, or wait until you obviously need it? Answers can vary, but the question should be considered.
- Do you need life insurance in your 20s?
- Life insurance in your 40s: Pros, cons, and timing
- Options for insurance in your later years
- The logic of life insurance for children
- How to ‘ladder’ life insurance with family changes
- The power of a term-perm combination
Life insurance and occupation
Many people own group coverage life insurance through their employer or other organization. In fact, 29 percent of American consumers overall own group coverage, according to LIMRA’s research.1 But oftentimes, such coverage may not be enough and it has other drawbacks that need to be considered.
- Is group life insurance enough?
- The freelancer's insurance and benefit checklist
- Is military life insurance versatile?
Life insurance and the end of life
Obviously the most critical role life insurance plays is when someone has passed and left proceeds to beneficiaries. Understanding what to do when it’s time to make a claim and how to implement final wishes can be challenging. Here’s some help.
- What to do when a loved one passes
- Lost life insurance policy? Here’s how to find it
- Funeral costs and considerations
- 8 ways to handle a large benefit
Life insurance and retirement
Beyond protection for your loved ones, some types of life insurance, particularly whole life insurance, can provide a way to accumulate a source of funds. Those funds may help you address some of the financial risks during retirement, such as market volatility or could be used to provide supplemental retirement income.
- How life insurance can help you in your retirement
- Protecting yourself against market fluctuations in retirement
- Taking cash off the table: Life insurance, annuity alternatives
Whole life insurance and some other types of permanent insurance offer tax advantages too, like tax-deferred growth as well as tax-deferred distributions. Also, death benefit proceeds are generally tax free.
- Taxes and life insurance – FAQs
- Life insurance: 3 income tax advantages
- Mind your ‘MEC’: When life insurance morphs
Life insurance and estate planning
Proceeds from whole life insurance and other types of policies have long been used to help heirs deal with costs and taxes that can apply to inherited property and assets. They also avoid the expenses and delays of probate and are not part of any public record. But, as the estate size grows, there can be pitfalls.
- 6 mistakes in estate planning
- Estate planning for high-net-worth households
- How survivorship insurance works
- Estate planning and keeping a farm in the family
- 6 ways life insurance can help with estate planning
Making life insurance a gift
A life insurance policy can also be a vehicle for helping young people get a head start and aiding worthy causes.
- Gifting life insurance for kids: 3 reasons
- What to give your child on an important birthday
- 3 ways to give your godchild (or niece or nephew) a financial boost
- Helping your alma mater: 3 life insurance moves
- Using life insurance for charity
Many people don’t realize the critical role life insurance can play in starting or maintaining a business, small or otherwise.
- Funding a buy-sell agreement with life insurance
- What benefits are employees looking for?
- How institutional insurance provides protection and risk management
- The executive bonus that keeps on giving: Insurance
- 3 reasons an entrepreneur needs life insurance
- Can a life insurance, LTC combination boost benefits?
Shopping for life insurance
Once you are familiar with the types of life insurance, their uses, and how they can possibly apply to your situation, you can start investigating specific options.
- Shopping for life insurance? 9 questions to ask
- Buying life insurance on a budget
- What to think about when shopping for life insurance
- Life insurance terms you should know
- Why an insurer’s financial strength ratings matter
- Top 5 mistakes when purchasing life insurance
- How the web can make you a better (life insurance) consumer
- What kind of life insurance should I get?
- What is ‘direct’ term life insurance?
You also learn about the industry in general and the two basic types of companies operating within it.
- How life insurance is regulated
- Mutual vs. stock insurance companies: Pros and cons
- The 3 advantages of a mutual insurer
Life insurance can be ... fun?
Life insurance discussions tend to be serious and focused, but not always. Life insurance, after all, pops up in movies from time to time, both comedy and drama. The industry has a long, rich history as well. Exploring can be fun.
- Insurance in the Oscars: Know the winner?
- The insurance policy in 'It’s a Wonderful Life'
- Know life insurance history? Quiz yourself
- Connecting with the 'father' of American life insurance
Conclusion and help
Yes, life insurance comes in many forms and can have many uses. Depending on your circumstances, the choices can get challenging and confusing. Many people opt to consult with a financial professional who can help them make informed decisions.
- Working with a financial professional, instead of going alone?
- Two types of investment professional: Which is right for you?
- Meeting your financial professional for the first time
- Financial professionals — ‘Groundhog Day’ no more
1 LIMRA, “2021 Insurance Barometer,” April 2021.