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Life Insurance 101: What is Life Insurance?

by Jen Pickett - Posted on Monday, April 20, 2015

What is Life Insurance?You work hard. You have a good job, you’re making good money and you’d like for your family to enjoy the fruits of your labor throughout their future. Preparing for your family’s future, however, means more than simply appropriate investing. For many people, preparing is and should involve purchasing the right amount of life insurance.

Put simply, life insurance protects your family’s future. Life insurance helps to mitigate the financial impact on your loved ones in the event of your death. With a life insurance policy, your family can use the proceeds to help replace lost income, eliminate debt, pay for college, keep a business afloat, or address other financial needs and goals while they adjust to a new life.

What is life insurance?

A life insurance policy provides a payment in the event of your death that helps to protect your family’s lifestyle in your absence and in the absence of your income and/or earning power. For example, many people with financial obligations —such as paying off a mortgage, putting a child through college, or supporting an elderly parent— would be dependent upon a life insurance policy to meet such obligations in the event a spouse’s unexpected death. Life insurance can help support family goals.

How does life insurance work?

When you purchase a life insurance policy, you’re essentially buying a contract with the issuing insurance company. The issuing insurance company guarantees that upon your death, it will pay a preset amount to your beneficiaries, i.e.: your pre-designated loved ones. Typically, death benefits are free from income taxes. The insurance company pays your beneficiaries directly, so your beneficiaries receive the funds without the delays and expenses associated with a will. Depending on the size of your estate, benefits from a life insurance policy may be subject to estate tax.1

What’s available?

Life insurance policies fall into two general categories: Term and Permanent.

A term life insurance policy provides coverage for a specific period of time, typically ranging between 10 and 30 years. At the end of that period, or term (hence the name), you stop paying premiums and your coverage ceases.

A permanent life insurance policy covers you until your death, regardless of age—so long as your premium payments are up to date. Permanent life insurance generally includes an investment component along with the insurance policy, which generally results in higher premiums.

Permanent life insurance is commonly used for wealth transfer and estate planning purposes, while term life insurance is used for replacing lost income in the event of premature death.

Term life insurance is generally more affordable, and in many cases more appropriate, for most purchasers. Affordable term life insurance enables you to access a quality life insurance policy for far less money than a permanent insurance plan. A good and helpful comparison is leasing a car versus buying one: You can often get a more expensive car for the same payment by leasing, rather than buying the vehicle.

When should purchase life insurance?

If someone else, or multiple people (like a family) are dependent upon your income, that means you need a life insurance policy. Thus, the time is now.

You may already have some life insurance coverage through your employer. Even so, it’s usually a good idea to consider purchasing additional coverage independently, because policies you buy outside an employer’s plan are portable, meaning your coverage continues even if you lose or leave your job. Plus, your employer’s coverage may not meet your financial obligations.

It’s a good idea to review your life insurance needs whenever a major life event occurs. Here are some examples of major life events:

  • The purchase of a new home, or undertaking major improvements to your current home.
  • Marriage. A wedding should prompt you to review your entire financial situation, including your income needs, debt, and other liabilities, and to add a layer of protection for both spouses.
  • Children. A life insurance policy can provide protection for your family’s increased income needs and any debt you may have taken on, including college expenses.
  • New job. A term insurance policy can replace any group coverage you may have had from a former employer, and enable you to increase your coverage amount in accordance with your new salary.

For families with children, if one spouse is a homemaker, it may be important to have life insurance for that spouse in addition to insuring the primary wage earner. Consider the value of the stay-at-home parent and the services he or she provides. If a premature death were to occur, in addition to being a devastating loss, it would put a tremendous financial strain on your loved ones and might impact the working spouse’s ability to continue to earn the same living.

Cheap term life insurance can cover future college expenses, funeral and estate expenses, and even business ownership needs. (Small businesses may wish to consider purchasing key employee life insurance policies, such as an owner or top employee, to help prevent financial distress if that person were to die.)

As you consider purchasing a life insurance policy, keep in mind that you will undergo a medical examination to ensure your insurability. Don’t sweat. These examinations are not the end-all-be-all, but they are important. Generally speaking, the better your overall health, the lower your premium will be. Low blood pressure and low cholesterol, along with a healthy body weight, will typically lead to a lower premium.  Thus, as you can deduct, it’s easier and more cost-effective to buy life insurance in your twenties and thirties than in your forties, fifties, sixties, and so on.

How much life insurance do I need?

There are several ways to go about determining how much coverage you need. One simple method is to buy coverage equal to 5 to 10 times your annual salary, bonuses, etc. Following this rule of thumb, if you make $50,000 annually, you’d buy a policy between $250,000 and $500,000.

However, we believe the best method for determining how much coverage you need is by speaking to an experienced broker. The broker will know which questions to ask and exactly how to ensure your insurance plan is tailored specifically for your and your family’s needs. Call a Term Life Match agent today, we are ready to assist you!

Having the Life Insurance Conversation

by Jen Pickett - Posted on Wednesday, March 25, 2015

Having the Life Insurance Conversation

Do you have an unpleasant task you’d like to avoid? That pesky item that keeps reappearing on your “to do” list? Yes, you do. Everyone does. Maybe it’s something simple, but arduous, like cleaning out your garage. Maybe it’s something simple and enjoyable, but still chore-like, such as organizing photos into albums, digital or physical. Or maybe it’s something less simple and more serious, but necessary, like…

having the life insurance conversation with your spouse.

From simple to complex, all of these tasks can seem overwhelming, making starting them the hardest part. However, leaving your garage dirty or your photos unorganized won’t have a severe long-term effect on your spouse’s or family’s well-being, but avoiding buying life insurance coverage will. Some tasks, like buying a good life insurance policy, need to become priority to protect your spouse’s or family’s future.

Many people think only about updating wills and fine-tuning legal matters as they age. But, life insurance policies are equally important and should become a priority. And while no one wants to have “the life insurance conversation” with a spouse or family member, it is critical for you to be prepared. Plus, planning for the end does not magically make the end come sooner. It may in fact have the opposite effect by granting you peace of mind – you’ve prepared for the safety and protection of your loved ones, that’s one less thing to worry about.

So, how do you initiate the “life insurance conversation?” Term Life Match has put together a comprehensive guide.


First, start by sitting down with your spouse and talking about your shared futures. What are your goals, independent and together? Which goals are storm-term? Which are long-term? How do you both anticipate achieving your goals? What will you need to do or change to safeguard your forward progress? This conversation ensures that you both are on the same page: You know each other’s life goals and you both will be able to move toward your goals in solidarity.

Then, zoom out. Think beyond yourselves and your immediate situation. Think about those people you consider an integral part of your lives. Begin to determine with your spouse feelings about caring for, protecting, or leaving something behind for other loved ones, such as nieces, nephews, godchildren, or even a favorite charity.


If your conversation starts to become emotionally charged, try a more pragmatic approach. Start to think more factually, than emotionally, if you can. Pragmatism makes this difficult conversation a little easier. So, what’s more pragmatic than finances? Talking about finances. Here are some good questions to refocus the conversation, centralizing the matter at hand: Life insurance. Start by determining your total debts, including cars, mortgage, credit cards, and other loans. Then move into your total assets and other liquidities. What are your financial obligations, independently and as a couple? Then determine what financial obligations will continue, or even increase if one of you dies, such as monthly expenses, childcare, healthcare, taxes, legal fees, funeral costs, counseling, etc. Determine which of your long-term expenses may require special planning, such as college tuition, wedding expenses, charitable gifts, retirement funds, etc.


How much coverage is enough? Actually, at Term Life Match, we think determining which kind of insurance you should get needs to be answered before assessing how much life insurance coverage you need. So, if you want to protect your family against business loss or estate taxes after your death, whole life or universal life insurance should be considered. However, if your and your spouse’s main concern is to protect each other or your family against a loss of your income, term insurance is the way to go. Cheap term life policies range from 5 years to 30 years, depending on your preference. Many of these terms are renewable. However, a cheap term policy is only in force for a specific time and once it expires, you lose the death benefit. Affordable term life insurance policies pay a death benefit to a predetermined beneficiary if the policyholder dies during the term, as stated in the insurance agreement.

Brass Tax:

Now, you can switch to discuss how much life insurance coverage you and your spouse think you need. Think about your couple situation or family’s circumstances. Do you have young children? A mortgage? Car loans, student loans, and/or credit card debts? Does your spouse have a job that will enable him/her to support your family if you die unexpectedly? The answers to these questions will determine your family’s life insurance needs. To figure out how much insurance coverage your family needs, you can get a quick quote using our life insurance quote calculator to the right of your screen.

The actual coverage amounts should vary according to your specific need and your family budget. There may be a disparity in the earning potential expected from you and your spouse. One partner may decide to invest more in rearing children and less in earning income. The other partner may be responsible for a larger percentage of the responsibility of earning income the family needs to survive. The higher income earner should be insured for a correspondingly higher amount of insurance. BUT, and this is a big but, do not underestimate the importance of a homemaker and that person’s contribution, financial or otherwise, to your family’s wellbeing. Boiled down, life insurance is all about protecting the well-being of your loved ones. A partner who may earn less is no less important to the well-being of a family.

It’s also important to think about letting your family and doctors know the kind of medical treatment you want or don’t want, and whom you would want to make health care decisions if you are unable to make those decisions yourself.


No one wants to contemplate what would happen in the event of unexpected death. It’s a subject that people want and will try to avoid because it’s a difficult conversation to have. However, don’t let discomfort cloud your vision for securing and protecting your loved one’s future. It’s important to take steps to plan for and protect your family’s future. Knowing you’ve done addressed this task, buying life insurance, and thus that you’ve done everything possible to protect your family is the best peace of mind.