Here’s what to know about this type of supplemental insurance and how it can help provide your loved ones with a financial safety net if something were to happen to you.

1. How does life insurance work?
2. Who can be a life insurance beneficiary?
3. What are the different kinds of life insurance?
4. When can I buy life insurance?
5. How much does life insurance cost?
6. Do I need life insurance?

The first rule of life insurance: If someone depends on you financially or for their care, you may need it.

Life insurance gives your beneficiary, usually a spouse or your kids, a cash benefit if you die. Though they’re mourning your loss, they won’t be stressing about how to pay the mortgage. The life insurance you leave could help your loved ones maintain the lifestyle you wanted them to have.

“Life insurance is designed to assist your loved ones financially after you have died,” says Virginia Solis Zuiker, Ph.D. She’s an associate professor at the University of Minnesota and an accredited financial counselor. “Life insurance benefits your loved ones, not the person purchasing the life insurance policy.”

Below, find out what you may need to know about buying life insurance — including what it can cover you for, what it may cost, and why you might need it.

Interested in exploring a life insurance policy for you and your family? Learn more about available policies today, or call a licensed insurance agent at 1-844-211-7730 to discuss your options.

How does life insurance work?

Life insurance is a type of supplemental insurance. That’s a type of insurance that you have to pay extra for in addition to your existing health insurance policy.

When you buy a life insurance policy, the insurance company agrees to pay your beneficiary (a person or people of your choosing) a settled-upon amount if you die. This is called a death benefit. In exchange, you make monthly payments (or premiums) to keep the policy active.

Your beneficiary can use the money for anything they want. It can vary by policy, but life insurance often pays the death benefit to the beneficiary in a lump sum. The beneficiary will need to file a claim with the insurance company and submit any necessary materials, such as a copy of the death certificate.

Who can be a life insurance beneficiary?

A beneficiary is the person or entity that receives the payout from your life insurance when you die. You’ll choose the beneficiary or beneficiaries when you set up your plan. Usually, the beneficiary is a spouse or children who depend on your income. Beneficiaries can also be:

• A list of charities
• Multiple people (spouse, children and a trusted friend)
• The trustee of a trust you set up
• Your estate

If you don’t designate a beneficiary, the death benefit will go to your estate.

You might also be asked to name primary and contingent beneficiaries. Primary beneficiaries are the first people to receive the death benefit. But if your beneficiaries die before you or they cannot be found, your assets go to contingent beneficiaries.

For example, you could make your sister your primary beneficiary and her children the contingent beneficiaries. That way, if your sister dies before you, the portion she would have gotten will go to her children instead.

What are the different kinds of life insurance?

There are 2 main types: permanent and term life insurance. Permanent life insurance can cover you for your entire life and can gain cash value over time. Term life insurance covers you for a set period. It has no value if you outlive the term, but it’s generally less expensive than permanent life insurance.

Permanent life insurance

A permanent life insurance policy covers you for life, assuming you keep making the premium payments and don’t cancel the plan. The plan pays a death benefit whether you die the day after you buy the plan or when you turn a specific age (subject to any policy limitations or exclusions).

A permanent life insurance plan is sometimes referred to as cash-value life insurance. That’s because the longer you have the plan, the more the cash value builds up on a tax-deferred basis.

You might also be able to take a loan out against the plan. The good thing is you don’t have to apply for a loan, and you don’t have to pay it back on anyone’s timeline but your own. But if you die before that loan is repaid, the insurance company collects what’s due to the company before determining what gets paid to your beneficiary.

What are the different kinds of permanent life insurance?

Permanent life insurance comes in several options:

• Whole life insurance: This is the most common permanent plan, and it’s the most straightforward. The premium and death benefit are the same as long as you’re on the policy.
• Universal life insurance: Also called adjustable life insurance, these policies are more flexible than whole life insurance. They might allow you to increase your death benefit or change the price you pay for the premium. Of course, changing either the benefit or the premium can impact the other.
• Variable life insurance: This plan is riskier than the other types of life insurance plans. It includes the option to invest your funds in stocks, bonds and mutual funds. That means if the market does well, so does the value of your life insurance. But if the market takes a tumble, the value of your life insurance does too.
• Variable universal life insurance: This policy combines the universal life option to adjust payment and benefits with the investment option of variable life.

Term life insurance

Term life insurance is purchased for a fixed amount of time, such as 5, 10 or 20 years. Often you would choose a term that coincides with a milestone, such as when your youngest child graduates from college or when you pay off your home’s mortgage. With term life insurance, the beneficiary gets paid only if you die during the plan’s term.

Term life insurance can be more affordable than whole life insurance because the policy is active only for a predetermined number of years. There are several varieties of term life insurance:

• Level term: The death benefit remains the same, or level, over the entire plan term.
• Decreasing term: The death benefit decreases over time.
• Renewable term: This allows the insured to extend the policy without having to qualify for the plan again.
• Convertible term: These plans allow the insured to convert their term plan into a permanent plan.

“It’s important to also remember that even after purchasing a life insurance policy, you need to review it as you get older and as your life changes,” says Faisa Stafford. She’s president and CEO of Life Happens, a nonprofit that educates people about life insurance. “Check in with your financial professional once a year or whenever a life change happens.”

Stafford also notes that policies may need to be adjusted after a significant life event, such as:

• Getting married
• Having a baby
• Getting a promotion at work
• Starting a business
• Preparing for retirement

“In these kinds of instances, you’ll want to schedule a life insurance review with your life insurance agent as soon as possible to ensure your coverage is at the right level to protect your loved ones,” advises Stafford.

Another great way to get a life insurance policy? Enter your ZIP code to search available plans, or call a licensed insurance agent at 1-844-211-7730.

When can I buy life insurance?

There’s no set enrollment period for life insurance. You can buy a plan whenever it makes sense for you. Typically, the younger you are when you buy the plan, the lower your premium. Your premium might be paid monthly, quarterly, twice a year or annually.

How do I buy life insurance?

Sometimes you can get life insurance policies as part of the benefits package for a new or existing job. In this case, you might just need to check a box or tell your company’s human resources (HR) department that you want a policy.

You can also buy life insurance on your own. You’ll then have to fill out a life insurance application that will ask you questions about your health history, smoking status and hobbies. The insurer might also pull your driving record.

Some policies may require a medical exam. The insurance company might even ask for a blood draw and/or urine sample.

Then an employee at the insurance company, known as an underwriter, will review all the information in your application. The underwriter will determine the risks involved in insuring you and give you a price for the policy you requested (see below).

How much does life insurance cost?

Cost varies by plan and person. Normally, the price of life insurance depends on several factors:

• How much coverage you select
• If you smoke
• The type of policy
• Your age
• Your gender
• Your health
• Your hobbies

If you’re younger and healthier, you’ll likely pay less for life insurance. And usually, you’ll pay less for term life insurance than permanent life insurance.

According to Stafford, many people think life insurance costs more than it does. “[That’s] a significant barrier for many who should be buying life insurance,” she says. “People are surprised to find out that life insurance can cost around the same price as a streaming subscription.”

Do I need life insurance?

Typically, if someone depends on your income, you may need life insurance. So, if you have a spouse or children who would be hurt financially if you unexpectedly died, you might consider a life insurance policy.

Stay-at-home parents could also think about life insurance because their contribution to the household would be expensive to replace.

“If you’re married or have a partner, life insurance can help ensure your surviving spouse can maintain the standard of living you worked hard to achieve,” says Stafford.

“Parents need to think about this as well but in the context of their kids,” Stafford continues. “Whether you’re a stay-at-home or working parent, your paid and unpaid contributions to your family are expensive to replace. Similarly, retirees need to think about their surviving partner and heirs.”

Interested in a supplemental term life policy? Learn more about available policies today, or call a licensed insurance agent at 1-844-211-7730 to discuss your options.

This article contains information that is compiled by UnitedHealthcare or its subsidiaries. UnitedHealthcare does not represent all the information provided are statements of fact.

Sources:

Minnesota Commerce Department. “Buying life insurance.” Retrieved from https://mn.gov/commerce/insurance/other/life-insurance/understanding-annuities/buying.jsp Accessed March 18, 2024

Minnesota Commerce Department. “Term vs. permanent life insurance.” Retrieved from https://mn.gov/commerce/insurance/other/life-insurance/term-vs-permanent/ Accessed March 18, 2024

New York State Department of Financial Services. “Types of life insurance policies.” Retrieved from https://www.dfs.ny.gov/consumers/life_insurance/types_of_policies Accessed March 18, 2024

Purdue University. “Insurance underwriter.” Retrieved from https://www.purdue.edu/science/careers/what_can_i_do_with_a_major/Career%20Pages/insurance_underwriter.html Accessed March 18, 2024

Texas Department of Insurance. “Do you need life insurance?” September 27, 2023. Retrieved from https://www.tdi.texas.gov/tips/life-insurance.html

Texas Department of Insurance. “Life insurance guide.” September 28, 2023. Retrieved from https://www.tdi.texas.gov/pubs/consumer/cb018.html

Compliance code:
50957-X-0524