What is Life Insurance?

Life insurance provides a financial benefit to a listed beneficiary in the event that the policy holder dies. Individuals purchase to cover their final funeral and burial expenses, to provide a survivor income stream to a designated beneficiary (spouse, children), to provide financial assets to a beneficiary for college education expenses within the future, to provide a legacy and to cover estate tax expenses.

While some provides strictly a death benefit, other types offer the ability to accumulate cash value over time. To fully understand, you must first review the basics such as how much coverage you require, which types of are appropriate and how to begin the underwriting process.
How Much of this do You Require?

While there is no magic number for how much you may need to cover these various expenses upon your premature death, there are some general rules of thumb to consider. Most individuals begin by evaluating their current financial position; assets, liabilities, income and expenses. What if any final expenses do you anticipate having? What debts if any does your family currently have? Do you need to provide for a survivor income stream?

Consider the answers to each of the questions above when determining how much you may require. If you anticipate needing to provide a survivor income stream upon your premature death, be sure to consider a conservative annual interest rate for the capital, such as 4-6%, when determining how much will be required to generate a long term income stream. Once you determine how much you require for your financial goals and objectives, you will need to determine which of the four types of is most appropriate.

The Four Types of Life Insurance

There are four primary types of, term life, whole life, universal life and variable universal life. Each type of policy offers a variety of features and benefits which an individual should consider when determining which type and amount of coverage are most appropriate for their financial needs and goals.

The 4 primary types of life insurance are:

Term Life

Whole Life


Universal Life

Variable Universal Life

This term does not offer a cash value benefit, while the other three types offer some form of a cash accumulation option. Consider the features and benefits of each type of when selecting the type that best fits your financial goals and objectives as well as your household budget.

Life Insurance Next Steps

Once you have decided how much coverage you require and the type of life insurance that is most appropriate for your specific needs, you need to locate a policy and begin the underwriting process. Most insurance companies will require you to complete a general medical and financial application as well as a brief physical examination. Underwriters will review this information to determine if they can underwrite you for a life insurance policy. This entire process typically takes 3-6 weeks to complete. Once you have been approved, you will begin paying your ongoing premiums.