Basics
Answers in the basics topic.
- What is life insurance?
Life insurance is a contract between you and an insurance company: you pay premiums, and if you die while the policy is in force, the insurer pays a lump-sum death benefit to the beneficiaries you name. Its core purpose is to replace lost income and cover final expenses, debts, or obligations for the people who depend on you. Under U.S. tax rules, life insurance death benefits paid because of the insured's death are generally not included in the beneficiary's gross income.
- How much life insurance do I need?
A common rule of thumb is coverage of roughly 10–12 times your annual income (confirm for your situation), but a needs-based estimate is more accurate: add up income replacement for the years your family would depend on you, plus debts (mortgage, loans), final expenses, and future costs like childcare or college, then subtract existing savings and any coverage you already have. Popular methods include the DIME formula (Debt, Income, Mortgage, Education) and a full needs analysis.
- How much does life insurance cost by age, health, and coverage?
Life insurance premiums are driven mainly by your age, overall health, tobacco use, the coverage amount (death benefit), the policy type (term is the cheapest; permanent costs more), and the length of coverage. Younger, healthier, non-smoking applicants pay the least, and premiums rise as you age or if you have health risks. For the same death benefit, level term is typically far less expensive than permanent coverage.
- Group vs. individual life insurance: what's the difference?
Group life insurance is coverage sold to a group — most commonly an employer — where individual employees are certificate holders under a master policy; it is typically low-cost, requires little or no medical underwriting, and provides a fixed amount (often 1× salary) that is usually not portable when you leave the job. Individual life insurance is your own policy, priced based on your age and health, portable regardless of employment, and available in whatever amount your underwriting supports. For most families, employer group life is a good starting layer but rarely enough coverage on its own.
- Can you have multiple life insurance policies?
Yes. You can own multiple life insurance policies at the same time — from the same insurer or from different insurers — as long as total in-force coverage is within what insurers will underwrite based on your income, net worth, and existing coverage. Most people use multiple policies for two reasons: to 'ladder' term policies with different lengths so coverage decreases as their need decreases, and to combine a permanent policy for lifelong needs with term coverage for a temporary income-replacement need.