What is life insurance?
Life insurance is a legally binding contract between you and your insurance company. It gives financial support for your beneficiaries when you die to help replace your income and cover daily costs. If you pay your premiums and your policy is active when you die, your named beneficiaries can claim the payout from your life insurer.
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How does life insurance work?
Life insurance works by allowing your beneficiaries to claim a financial payout (often equal to your coverage amount) after your death. Here's how the process works:
Apply for a policy
Start by applying for a life insurance policy. You may need to share details about your health, lifestyle, and coverage needs. Some insurers may ask you to take a medical exam to decide your eligibility and premium.
Pay premiums
You need to pay premiums, the amount you pay for the life insurance coverage, to keep your policy active — typically monthly or annually.
Maintain an active policy
As long as you pay your premiums, your life insurance policy remains active.
Some policies have additional features. For example, certain life insurance policies have cash value that grows over time, potentially reducing your premium or increasing your death benefit.
Beneficiaries receive the payout
If you pass away while the policy is active, your beneficiaries can file a claim for their portion of the payout. This is called a death benefit. Beneficiaries may use the payout however they choose — to cover funeral costs, mortgage payments, education expenses, or anything else. Share details about your life insurance policy with your beneficiaries, like providing them with a copy of the policy, so they understand the coverage.
Pro tip:
You can add features to your policy by purchasing life insurance riders. For example, a guaranteed insurability rider lets you add more coverage to your policy in the future without having to go through a medical exam (which would likely raise your rate).
What are the benefits of life insurance?
Life insurance may help provide financial security by replacing your income and helping your loved ones pay for debt, final costs, and living expenses. The death benefit is typically tax free, allowing recipients to receive the full payout without deductions.
As an estate planning tool, it can help fund education, donate to charity, and ensure support for lifelong dependents like aging parents.
Learn more about the benefits of life insurance to find the right policy for your needs.
What are the types of life insurance?
There are five main types of life insurance that cater to specific coverage needs:
- Term life insurance: This is a lower-cost option that covers you for a set number of years. It has fixed premiums that may make budgeting easier. At the end of the term, you may be able to renew at an adjusted rate or convert your policy to whole life insurance.
- Whole life insurance: A type of permanent life insurance that provides coverage for your lifetime, whole life insurance pays your benefit no matter when you pass away (as long as you keep paying your bill). It has a savings component, called cash value, with a fixed interest rate that builds over time and is one reason why whole policies cost more than term policies.
- Universal life insurance: This permanent option provides coverage for your entire life as long as you pay the premiums. It offers more flexibility than a whole life policy. The savings component has a guaranteed minimum interest rate that helps you build cash value over time but can change based on market conditions.
- Variable life insurance*: This is a riskier type of permanent life insurance. It offers a greater range of options but opens you up to much higher risk, fees, and costs than whole life or universal life policies.
- Final expense life insurance: Also known as funeral or burial insurance, this is a type of whole life insurance. It offers a smaller, more affordable death benefit designed to help cover your end-of-life expenses like medical bills, funeral costs, and debt.
Learn more about the types of life insurance. Then use our life insurance calculator to determine how much life insurance you need.
How much is life insurance?
According to eFinancial, the cost of a 10-year, $250,000 term life insurance policy is typically between $24 and $31 per month for a healthy 20 to 40-year-old. † Getting life insurance in your 20s or 30s will generally get you a lower premium than if you wait until you're older.
Term life insurance is more affordable than permanent life insurance, and female customers generally get a lower rate than male customers of the same age and health status. Life insurance tends to cost more for male customers due to their shorter lifespans and greater likelihood for dangerous jobs or lifestyles.
Several factors may influence the cost of life insurance premiums, including:
- Age
- Sex
- Health
- Weight
- Tobacco use
- Lifestyle (e.g., risky job or hobbies)
Learn about how weight affects your life insurance rate and the basics of smoking and life insurance.
Can I get life insurance with a pre-existing condition?
You're not automatically disqualified from getting life insurance if you have a pre-existing condition. Your condition may affect the policy type, rate, and coverage amount.
It's important to be honest and transparent in your life insurance application and during your life insurance medical exam — failing to disclose requested information can be considered life insurance fraud.
When should you buy life insurance?
Life insurance isn't required, but people often buy it when they get married, have kids, or take out a big loan.
To determine if you need life insurance, consider this: If you passed away unexpectedly, would your loved ones struggle financially? If so, consider getting a policy to protect your loved ones.
Common reasons for getting life insurance include covering future college expenses, supporting a partner who relies on your income, or leaving an inheritance for your loved ones.
If you're older than 50, a final expense policy (also known as burial insurance) can be an affordable way to make sure your funeral and final expenses are covered. Find out how burial insurance works, and calculate your funeral costs so you can estimate your coverage needs.
Learn more about when to get life insurance.
According to LIMRA's 2024 Insurance Barometer Study, about 75% of American adults overestimate the cost of life insurance. More than half of respondents said their cost estimate was a "wild guess." Compare term life insurance rates and get a free quote to see how much peace of mind really costs.
What does life insurance cover?
Life insurance covers the insured person's life. If you pass away while your policy is active, your beneficiaries can use the payout to cover whatever they choose — medical bills, funeral costs, education, loans, day-to-day costs, and even savings.
If you have a policy, conduct regular life insurance reviews to make sure your beneficiaries are up to date and know how to claim life insurance coverage if you pass.
How to get life insurance
You can get a life insurance quote online through Progressive. Answer a few questions, then choose your coverage amount, term length, and other policy details. Or call 1-866-912-2477 to speak with a licensed Progressive Life by eFinancial representative who can help you find the right policy for you.
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