20 Aug Common Life Insurance Questions

Life insurance is a term that almost everyone has heard, but understanding exactly what it does and how it works can feel a little overwhelming. Whether you’re just starting to think about protecting your family’s future or wondering if your current coverage really fits your needs, getting clear answers is key. We’ll walk you through the most common life insurance questions, helping you feel confident about the options available and how they can provide peace of mind for you and your loved ones.

1. What is Life Insurance? 

Life insurance is a contract between you (the policyholder) and an insurance company, designed to provide financial security for your loved ones if you pass away. Its main purpose is to create stability by helping cover expenses like funeral costs, debts, or lost income. 

2. How Does Life Insurance Work? 

With life insurance, you make regular premium payments to the insurer. If you pass away while the policy is active, your beneficiaries receive the death benefit as a lump-sum payout. As long as you keep your policy active by paying your premiums, the insurer guarantees that payment. Some types of policies may also offer living benefits, allowing you to access funds under specific circumstances, such as a serious illness. 

3. What are the Main Types of Life Insurance?

There isn’t a one-size-fits-all solution. The main types of life insurance include: 

• Term Life Insurance: Protection for a set period, like 10 or 20 years. It’s straightforward and typically the least expensive option. If you pass away during the term, your beneficiaries receive the death benefit.
• Whole Life Insurance: Provides lifelong coverage, steady premiums, and a guaranteed payout. It also builds cash value over time that you can borrow against or withdraw.
• Universal Life Insurance: A flexible lifelong policy, allowing you to adjust your premium payments and death benefit. It also builds cash value, but the interest rates can fluctuate.

4. How Much Life Insurance Do You Need?

Each person’s situation is unique, but a simple rule of thumb is to purchase coverage equal to about 10 times your annual income. Think about your mortgage, debts, childcare, education, and ongoing household expenses. Subtract your assets (like savings) from your obligations to estimate your coverage needs. Many online life insurance calculators can help you dial in the right amount for your family, or contact a professional to discuss your needs and options.

5. How Much Does Life Insurance Cost? 

The cost of life insurance depends on a variety of factors, like age, health, gender, lifestyle, and even your family’s medical history. According to the Policygenius Life Insurance Price Index (February 2025), the average monthly premium for a healthy, non-smoking adult on a 20-year, $500,000 term policy is:

• $27.89/month for men age 25, $21.38/month for women age 25
• $29.28/month for men age 30, $22.96/month for women age 30
• $43.01/month for men age 40, $35.30/month for women age 40
• $102.93/month for men age 50, $78.45/month for women age 50
• $269.73/month for men age 60, $195.29/month for women age 60

Choosing a policy that covers your needs is a significant step towards protecting your family’s financial future. With so many options and a vast amount of information out there, it’s not uncommon to be unsure of which one is the best fit for you. Contact one of our Risk Advisors to walk you through each step of the process and answer any questions you may have along the way! 

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