Life Insurance Essentials

Life insurance exists for one purpose: to protect the people who depend on you financially if you're no longer there. It pays a death benefit that can cover income replacement, debts, a mortgage, or future expenses like a child's education. The two broad categories are term and permanent.

Term life insurance provides coverage for a set period — commonly 10, 20, or 30 years. It's simple and affordable because it's pure protection with no savings component. If you pass away during the term, your beneficiaries receive the death benefit; if you outlive it, the policy simply ends. Term is often the right fit for covering the years you have dependents, a mortgage, or loans.

Permanent life insurance — such as whole or universal life — provides coverage for your entire life as long as premiums are paid, and it builds cash value you can borrow against or withdraw. It's more expensive than term because part of your premium funds the cash value account. It can make sense for lifelong obligations, estate planning, or as part of a broader financial strategy.

How much coverage you need depends on your situation. A common rule of thumb is 10 to 12 times your annual income, but the better approach is to total your debts, the income your family would need to replace, and future big-ticket costs, then subtract what you already have in savings and existing coverage. That gives you a target that fits your actual life rather than a generic number.

Your premium is based on your age, health, lifestyle, coverage amount, and the type of policy. Because rates are locked in at issue based on your health then, buying while you're younger and healthy locks in lower premiums for the life of the term.

Deciding between term and permanent, and choosing the right amount, is very personal. A good agent will start with what you're trying to protect — not the product — and design coverage around that.