Family protection
Life insurance: term, whole life and how much you need
The short answer
Life insurance pays money to the people you name when you die. Term life covers a set number of years and is intended to cost less. Cash value policies, such as whole life, last as long as you keep paying and can build savings. In most cases the beneficiaries do not pay income tax on the payout.
Life insurance pays a death benefit. It does not cover medical bills and is not health insurance.
A licensed agent calls you at no cost.
Updated and reviewed by the licensed agents at Health Insurance Solutions in Orlando, Florida. How we research and review
Life Insurance at a glance
- Two main kinds
- Term or cash value
- Term covers a set period. Whole, universal and variable life are cash value policies.
- Who gets the money
- Your beneficiaries
- One person, several people or an organization you name. You can change them.
- Tax on the payout
- Usually none
- Life insurance paid because of a death is generally not income to the beneficiary. Interest it earns can be.
- Cost of our help
- $0
- A licensed agent compares plans for you and is paid by the insurance company, not by you.
Who needs life insurance?
Life insurance pays a set amount to the people you name when you die. Term life covers a set number of years and usually costs less. Permanent life, such as whole life, lasts your whole life and can build cash value. We help you decide how much coverage makes sense and compare the plans you qualify for.
- Parents raising children at home
- Homeowners who want the mortgage covered for their family
- Anyone whose income pays the household bills
- Older adults planning ahead for final expenses
What does life insurance cover?
Usually included
- A payout to your named beneficiaries if you die while the policy is in force
- Bills your family would struggle with without your income, such as the mortgage, rent, debts, childcare and college
- Final expenses such as funeral and burial costs
- Optional add ons called riders, such as waiver of premium or an accelerated benefit if you are terminally ill. Each rider raises the premium
Usually not included
- Death after a term policy ends, unless you renew or convert it. Renewal premiums can be higher
- Anything you did not name correctly. A beneficiary form that is out of date can send money to the wrong person
- Medical bills while you are alive. Health insurance does that
- Every kind of loss. Read exclusions and what the policy says about the first two years
How much does life insurance cost?
The price depends on your age, your health, the amount of coverage, the length of the term and the type of policy. We do not quote a price until we know those answers, because a general figure would mislead you.
Term costs less
Term life is intended to provide lower-cost coverage for a specific period. It fits needs that end, such as a mortgage or children at home.
Cash value costs more
Whole, universal and variable life last as long as you need them and can build cash value you can borrow against or take while alive. The premium is higher for the same amount of coverage.
How much coverage
A common rule of thumb is about 10 times your yearly income. Your debts, your savings and how long your family would need support matter more than any rule.
Health and exams
Some policies ask for a medical exam. Others skip it and cost more or pay less in the first years. We explain which kind you are being offered.
How do term and cash value life insurance compare?
Term and cash value policies solve different problems. Many families use term for the big, temporary risks and think about cash value only if they want lifelong coverage.
| Term life | Cash value life (whole, universal, variable) | |
|---|---|---|
| How long it lasts | A set period of time | For as long as you need it and keep it in force |
| Price | Intended to be lower cost | Higher for the same amount of coverage |
| Savings | None | Builds cash value you can access while alive |
| At the end | Coverage stops unless the policy renews or converts | Coverage continues |
| Best for | Needs that end, such as a mortgage or raising children | Lifelong needs, such as final expenses or leaving money behind |
When might life insurance not be the right choice?
- No one depends on your income and you have enough savings to cover your final costs. You may not need a policy.
- You are shopping for health coverage. Life insurance does not pay medical bills, so start with a health plan.
- A salesperson is pushing cash value as an investment. Compare it with term and with putting the savings elsewhere before you decide.
How do we help you choose life insurance?
Work out the amount
We add up income, debts and future costs like college to find a sensible amount.
Compare your choices
We show you the plans you qualify for, what each costs and how long it lasts.
Keep it current
We help you name beneficiaries and update them after big life changes.
Get a free quote
What's your ZIP code?
Plans and prices depend on where you live.
Common questions
What is the difference between term and whole life insurance?
Term life insurance covers you for a set period and pays your beneficiaries only if you die during that period. Whole life is a cash value policy: it lasts as long as you keep it and also builds savings you can access while you are alive. Term is intended to cost less.
Do my beneficiaries pay tax on a life insurance payout?
In most cases they do not. The IRS says life insurance proceeds paid because of the insured person's death are generally not included in income. Interest the insurer pays on the proceeds can be taxable. Ask a tax professional about your own situation.
How much life insurance do I need?
There is no single right amount. A common rule of thumb is about 10 times your yearly income. Add up what your family would need for the mortgage, debts, childcare, college and final costs, then subtract savings and any coverage you already have.
What happens when a term policy ends?
Coverage stops unless the policy can renew or convert. Some term policies let you renew without a new health check, but renewal premiums can be higher than the original ones. Ask what you would pay and whether you lose the right to renew at a certain age.
What is a life insurance rider?
A rider adds a benefit to your policy for an extra premium. Examples include waiver of premium, which stops your payments if you become disabled, and an accelerated death benefit, which lets you take part of the payout if you are terminally ill. Check how each rider defines what it covers.
Does it cost extra to use an agent for life insurance?
No. A licensed agent does not add a fee to your premium. Insurance companies pay agents. We show you the plans you qualify for and explain what each costs and how long it lasts.
Guides that go deeper
Talk to a licensed agent
We compare plans, explain the tradeoffs and help you enroll. It costs you nothing.
Sources
Rules change. Confirm dates, limits and eligibility with the source, your state insurance department or a licensed agent before you decide. We last checked these on .