What Is Life Insurance, and How Do I Choose the Best Policy?


You know you need life insurance, but do you know what it is? If not, you are not alone. About 40 percent of Americans do not have a life insurance policy, while about half of all households in the country have less life insurance than they need. 

Life insurance is not as complicated as you might fear, however, and the right amount of the right policy can give you and your family peace of mind and security should something happen to you. 

Here is a look at life insurance, and some advice on how to obtain the best policy for you. 

What is life insurance? 

Life insurance is an insurance policy that pays a lump sum of money to your family in the event of your death. In return, you pay a monthly premium for the length of the insurance policy. 

Life insurance is a valuable aspect of financial security because it provides for your loved ones when you die. 

You can use the insurance policy to cover lost income, pay off medical bills, pay for funeral expenses, or secure the financial future of your family. 

Without life insurance, your family will need to cover these expenses themselves, and may suffer financial hardship at your passing. 

The amount you pay for your monthly premiums can vary widely, depending upon a number of factors, including the following: 

  • Your age
  • Your overall health
  • Certain habits (such as smoking)
  • Risk factors you possess
  • Pre-existing conditions
  • The coverage amount of the policy
  • The term of the policy
  • Whether you select term or whole life insurance
  • And more

What types of life insurance are there?

When you decide to purchase life insurance, you need to select the type of policy that will serve your needs best. There are two primary types of insurance you can select: Whole and term. 

Whole life insurance pays the coverage amount when you die, no matter when that is. The monthly premium you pay increases as you age, but you are guaranteed a set death benefit for your loved ones upon your passing. 

Term life insurance pays the death benefit only if you die during the term of the policy, which can vary from one year to 30 years. Usually, the monthly premium you pay increases the longer the term of your policy is. At the end of the policy term, your life insurance expires, and your loved ones receive no payment when you die. 

How much life insurance can I buy?

The amount of the death benefit you receive with life insurance depends upon the coverage amount you choose. You can select coverage amounts from $10,000 to millions of dollars. 

A good rule of thumb is to buy a life insurance policy that pays 10-12 times your annual income. This amount will be sufficient to cover your funeral expenses, pay any related medical costs, and replace income lost by your passing. 

How do I choose the best life insurance policy? 

Because life insurance offers so many different options, there is a life insurance policy for almost everyone. You just need to do some research to find the best policy for you. 

In order to select the best policy for your circumstances, you will need to think about a few different factors when making your decision: 

  • Your rate class 
  • Your health status
  • Term vs. whole life insurance
  • The length of your policy
  • The coverage amount of your policy

You can investigate the options available to you and comparison shop policies on your own, or through the assistance of various online life insurance quoting tools.

However, the simplest way to find the best policy for your needs is to use an independent insurance agency, such as Generations Insurance Partners. We can explore your options for you in order to make the process of finding the right policy faster and simpler, while saving you money. 

Because we work with dozens of insurance carriers, we are motivated to work for you, and we have the resources you need to identify the policy that best meets your needs, and your budget. Let us work for you and help you obtain the financial security you desire for your loved ones.