❓ What is life insurance?
Life insurance is a contract with an insurance company: you pay regular premiums, and in return, the company pays a death benefit (a lump sum of money) to your chosen beneficiaries when you pass away. This money can be used for anything — replacing lost income, paying off a mortgage, covering funeral costs, funding children’s education, or leaving an inheritance.
❓ What’s the difference between term life and whole life insurance?
Term Life: Covers you for a specific period (10, 15, 20, or 30 years). If you die during the term, your beneficiaries receive the death benefit. If the term expires while you’re alive, coverage ends. Term is significantly cheaper — a healthy 35-year-old might pay $25–$40/month for $500,000 in coverage.
Whole Life: Covers you for your entire life as long as premiums are paid. It also builds cash value over time that you can borrow against. Premiums are 5–15x higher than term but they never increase. A common use: final expense/burial insurance is a type of small whole life policy ($5,000–$25,000).
❓ How much life insurance do I need?
A common rule of thumb is 10–12 times your annual income, but the right amount depends on your specific situation. Consider:
• Remaining mortgage balance
• Outstanding debts (car loans, student loans, credit cards)
• Children’s future education costs
• Years of income replacement your family would need
• Funeral and final expenses ($8,000–$15,000 average)
• Existing savings and other life insurance
A licensed agent can help you calculate the right amount based on your family’s actual needs.
❓ What is final expense insurance?
Final expense insurance (also called burial insurance or funeral insurance) is a type of whole life insurance with a smaller death benefit — typically $5,000 to $25,000. It’s designed to cover end-of-life costs like funeral services, burial or cremation, medical bills, and small debts so your family isn’t left with a financial burden. Key benefits: no medical exam required (simplified underwriting), guaranteed premiums that never increase, available to people aged 50–85, and coverage that never expires.
❓ Do I need a medical exam for life insurance?
It depends on the type and amount of coverage:
No exam required:
• Final expense / burial insurance (simplified underwriting — just health questions)
• Guaranteed issue whole life (no health questions at all, but limited benefit in first 2 years)
• Some term policies under $500,000 (accelerated underwriting)
Exam typically required:
• Term life policies over $500,000
• Large whole life or universal life policies
The exam is usually free, done at your home, and includes basic measurements, blood pressure, and a blood/urine sample.
❓ How much does life insurance cost?
Costs vary based on age, health, coverage amount, and policy type. Here are rough monthly estimates for a healthy non-smoker:
Term Life ($500,000, 20-year term):
• Age 30: $20–$30/month
• Age 40: $30–$45/month
• Age 50: $75–$120/month
Final Expense ($15,000 whole life):
• Age 55: $40–$60/month
• Age 65: $60–$90/month
• Age 75: $90–$140/month
Smoking, health conditions, and certain hobbies can increase rates significantly.
❓ Can I get life insurance if I have health problems?
Yes. While serious health conditions may limit your options or increase premiums, there are policies designed for people with health issues:
• Simplified issue policies ask basic health questions but don’t require an exam
• Guaranteed issue policies accept everyone regardless of health — no questions asked
• Graded benefit policies have a 2-3 year waiting period before the full death benefit kicks in
Common conditions like diabetes, high blood pressure, and heart disease don’t automatically disqualify you — many carriers specialize in substandard risk. An independent agent can shop multiple carriers to find the best rate for your health profile.
❓ Who needs life insurance?
Life insurance is most important if anyone depends on your income or would face financial hardship if you died. You likely need it if you:
• Have a spouse or partner who depends on your income
• Have children or other dependents
• Have a mortgage or significant debts
• Co-signed loans with someone
• Own a business with partners
• Want to leave an inheritance
• Want to cover funeral costs so your family isn’t burdened
Even stay-at-home parents should consider coverage — replacing childcare, cooking, and household management costs $35,000–$50,000+/year.
❓ What happens if I outlive my term life policy?
If your term expires and you’re still alive, the coverage simply ends — there’s no payout and no cash value. However, you have options:
• Renew: Most policies let you renew year-by-year, but at much higher premiums
• Convert: Many term policies include a conversion option that lets you convert to a permanent (whole life) policy without a medical exam — very valuable if your health has declined
• Buy a new policy: If you’re still healthy, you can apply for a new term or whole life policy
The key is to plan ahead. If you think you’ll need coverage beyond your term, ask about conversion options when you first buy the policy.
❓ Is life insurance taxable?
In most cases, no. The death benefit paid to your beneficiaries is generally income tax-free under IRC Section 101(a). However, there are exceptions:
• If the policy is part of your taxable estate and exceeds the estate tax exemption ($13.99 million in 2025), estate taxes may apply
• Interest earned on delayed payouts is taxable
• If you sell the policy (life settlement), proceeds above your cost basis may be taxable
• Cash value withdrawals that exceed your premiums paid are taxable
For most families, life insurance proceeds are completely tax-free to beneficiaries.
