Life Insurance 101

There's a lot of information out there about life insurance, but you don't need to understand it all to get started. The basic premise is simple: Life insurance gives you peace of mind while you're alive, and financial support for your loved ones when you're gone. It's something you should have if there are people in your life depending on you for everyday living expenses, college tuition, or retirement income.

Life insurance can make a huge difference for you and your family, not just financially but emotionally, too. And purchasing a policy sooner, rather than later, will give you more options and flexibility as well as the financial security you'll need in the future.


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Everything you need to know about life insurance.

Do I need life insurance?
Most likely, yes. Especially if you have someone depending on you for financial support.

How does it work?
Life insurance is an agreement between you and your insurance company. You make regular payments, called premiums, and the insurance company pays your beneficiaries a tax-free lump sum of money when you die. With some policies, you get additional benefits to use during your lifetime, like accessing the policy's cash value, which can be used for a down payment on a home. However, accessing the cash value will reduce the policy's available cash surrender value and death benefit. You can also accelerate death benefits and use them for health care needs.

Which type is best?
There are a number of different types of policies, but basically just two broad categories of life insurance: term life and permanent life. The one that's best for you depends on your needs and may even be a combination of products.

Term life insurance provides a death benefit for a set period of time, typically between five and 20 years. This is straightforward insurance and what most people start out with. Certain term life policies can be converted to a permanent policy at a future point, which is a useful benefit if your life changes and you need additional protection.

Whole, universal, and variable universal life all provide protection for the long-term.  In fact, whole life even provides permanent coverage.  Some policies have more guarantees than others, and some give you the opportunity to grow your policy's cash value.

How much coverage do I need?

It depends on where you are in your life and who depends on you financially. When you're starting a family, you probably want to have enough to replace your income so your spouse or partner and children have the support they need. Later in life, when your kids are grown and your house is paid for, you may want to reassess the amount of life insurance you have and focus on final expenses and other needs, like outstanding debt.

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How much does it cost?

The cost of life insurance is based on a number of factors: your age, gender, health, lifestyle, and occupation. Regardless of your budget, a financial professional should be able to find a solution that covers your needs at a price that suits your wallet.

Learn more about life insurance from New York Life

Terms to know

Cash value

The amount of money in a permanent policy that accumulates as you pay premiums. You can access it via loans or partial withdrawals for a variety of financial needs, like unexpected expenses or to pay for your child's college tuition. This money grows tax deferred.


A benefit provided by some carriers that allows you to upgrade from a temporary term life policy to a permanent policy if your life changes—without going through additional medical exams.


A share of the company's divisible surplus that is paid to an eligible policyholder. A divisible surplus is the extra money a mutual company has after paying claims, expenses, and setting aside reserves for future claims and benefits. Dividends can help your cash value and coverage grow, but they are not guaranteed.


The person or entity that receives the benefit amount upon the death of the insured.


An add-on, generally available for purchase, that you can choose to incorporate into your policy to further customize coverage.

Guarantees of the policy are based on the claims-paying ability of the issuer.