Life Insurance Basics

Term life covers a defined period — typically 10, 15, 20, 25, or 30 years — with the largest death benefit per dollar of premium. Best for temporary financial obligations: paying off a mortgage, replacing income while kids are dependent, covering a business loan, or protecting a spouse until retirement assets are built. Most families should start here.

Whole life provides lifetime coverage with guaranteed premiums, guaranteed death benefit, and cash-value growth that compounds tax-deferred. Mutual carriers often pay dividends on top. Best for legacy planning, estate liquidity, funding trusts, buy-sell agreements, and disciplined long-term savings — not for maximizing early death benefit per dollar.

Universal life (UL) offers flexible premiums and permanent coverage. Guaranteed UL (GUL) prioritizes the death benefit with minimal cash value — often the lowest-cost path to permanent coverage. Indexed UL (IUL) credits interest based on a stock index (like the S&P 500) with a cap and a floor, giving upside participation without direct market risk. Variable UL (VUL) invests cash value in subaccounts and carries real market risk.

Final expense (also called burial insurance) is a smaller whole life policy — usually $10,000–$50,000 — designed to cover funeral costs and end-of-life expenses. Often no medical exam and simplified issue, so it fits older applicants and those with health issues.

How to size coverage: a common starting point is 10–12x annual income plus outstanding debts (including mortgage) minus liquid assets, plus future goals like college funding. Refine from there based on your spouse's income, existing coverage through work, and time horizon.

Underwriting tiers: Preferred Plus, Preferred, Standard Plus, Standard, and Substandard/Table-rated. Height/weight, blood pressure, cholesterol, family history, tobacco use, driving record, and hobbies all affect classification. The same profile can price differently across carriers — shopping matters.

Riders that add value: waiver of premium (if disabled), accelerated death benefit (access proceeds if terminally ill), child rider, disability income rider, and long-term care rider on some permanent policies. Not every rider is worth its cost — we walk through which apply.

Common mistakes: buying whole life when term fits better; skipping coverage because 'work covers me' (group coverage disappears when you leave the job); waiting for a health event to shop; naming the estate as beneficiary instead of individuals or a trust.