{"id":352602,"date":"2017-05-31T16:57:43","date_gmt":"2017-05-31T21:57:43","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/insurance\/life-insurance.html"},"modified":"2024-03-21T10:32:01","modified_gmt":"2024-03-21T15:32:01","slug":"life-insurance","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/insurance\/life-insurance.html","title":{"rendered":"Beginner&#8217;s Guide to Life Insurance: When Is It Right for You?"},"content":{"rendered":"\n<div class=\"wp-container-core-columns-is-layout-9d6595d7 fl-sectionWithSidebar fl-container fl-flex fl-flex-wrap fl-gap30\">\n    \n    <div class=\"fl-page-articles fl-section-main fl-section-main-full-width\">\n        <h1 class=\"fl-no-margin-top\">Beginner&#039;s Guide to Life Insurance: When Is It Right for You?<\/h1>\n<section class=\"fl-gutenberg-byline\">\n    <div class=\"fl-gutenberg-byline-content\">\n                    By <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/oni-harton-j-d\/\">Oni Harton, J.D.<\/a> | Legally reviewed by <a\n                href=\"https:\/\/www.findlaw.com\/company\/our-team\/melissa-bender-esq\/\">Melissa Bender, Esq.<\/a>\n                | Last updated\n        <time>\n                            March 21, 2024\n                    <\/time>\n    <\/div>\n\n    \n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-legally-reviewed\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Legally Reviewed\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>This article has been written and reviewed for legal accuracy, clarity, and style by <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\">FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with <a href=\"https:\/\/www.findlaw.com\/company\/company-history\/editorial-policy.html\">our editorial standards<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n\n    <details class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-fast-checked\">\n        <summary>\n            <i class=\"fl-gutenberg-byline-icon\" aria-hidden=\"true\"><\/i>\n            Fact-Checked\n        <\/summary>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>The last updated date refers to the last time this article was reviewed by FindLaw or one of our <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/contributing-authors.html\">contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please <a href=\"https:\/\/lawyers.findlaw.com\/?fli=bylinelink\" target=\"_blank\" rel=\"noopener\">contact an attorney in your area<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/details>\n<\/section>\n<p>You spend your life working toward building financial strength for yourself and your loved ones. You may&nbsp;have spent time meeting with a financial professional. They can help evaluate financial products and offer broad financial advice. A financial professional can explain how the following would fit into your plan:<\/p>\r\n<ul>\r\n<li>Annuities<\/li>\r\n<li>Life insurance<\/li>\r\n<li>Long-term care insurance<\/li>\r\n<li>Retirement savings<\/li>\r\n<li>College savings<\/li>\r\n<li>Investments<\/li>\r\n<li>Estate planning<\/li>\r\n<li>Tax planning<\/li>\r\n<\/ul>\r\n<p>Each person&#8217;s circumstances are different. Life events impact your situation in different ways&nbsp;than others. One area everyone should consider in financial planning is life insurance.<\/p>\r\n<h2>Life Insurance Basics<\/h2>\r\n<p><a href=\"https:\/\/www.findlaw.com\/hirealawyer\/choosing-the-right-lawyer\/insurance-law.html\">Getting insurance<\/a>&nbsp;is a sound way to provide for your family and loved ones if you pass away. Knowing you have financial protections if you&#8217;re not there to provide for your dependents or other loved ones can bring peace of mind.&nbsp;<a href=\"https:\/\/www.findlaw.com\/consumer\/insurance\/life-insurance.html\">Life insurance<\/a>&nbsp;can ease the burden of covering final expenses or providing for those who depend on you.<\/p>\r\n<p>The prospect of the underwriting process to get a life insurance quote can seem daunting. It may include a review of your medical history and a medical exam, but it&#8217;s&nbsp;not as bad as you think.<\/p>\r\n<p>Several life insurance options can help ensure financial security for loved ones after your death. The article below provides an overview of common life insurance policies and how they can help protect your family&#8217;s financial future.<\/p>\r\n<h2>Who Needs Life Insurance?<\/h2>\r\n<p>Anyone can benefit from life insurance coverage. Certain life circumstances make it more critical for some than others. Such individuals include the following:<\/p>\r\n<ul>\r\n<li><a href=\"https:\/\/www.findlaw.com\/smallbusiness.html\">Small business owners<\/a><\/li>\r\n<li>Retirees<\/li>\r\n<li>Single-income providers<\/li>\r\n<\/ul>\r\n<p>How much life insurance to purchase depends on the reasons for obtaining the insurance. The coverage amount to buy or the type of&nbsp;life insurance to get&nbsp;depends on your circumstances.<\/p>\r\n<p>A financial professional or licensed insurance agent can explain the insurance products that are best for you. They can also help you use a life insurance calculator to predict insurance costs.<\/p>\r\n<h2>Types of Life Insurance<\/h2>\r\n<p>Knowing the different&nbsp;<a href=\"https:\/\/content.naic.org\/cipr-topics\/life-insurance\" target=\"_blank\" rel=\"noopener\">life insurance<\/a>&nbsp;policy options is a&nbsp;good idea&nbsp;when&nbsp;you start&nbsp;<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate.html\">planning for the future<\/a>.<\/p>\r\n<p>One decision entails whether you want an individual policy or a &quot;second-to-die&quot; policy. A second-to-die policy is also known as survivorship life insurance. An individual policy insures you alone. A survivorship policy insures two people, like spouses. A survivorship life insurance policy pays a death benefit payout when the second insured dies.<\/p>\r\n<p>Let&#8217;s discuss some&nbsp;of the most common&nbsp;<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/life-insurance-options.html\">types of policies<\/a>&nbsp;below.<\/p>\r\n<h3>Term Life Insurance<\/h3>\r\n<p>A term life insurance policy is often&nbsp;the cheapest option. With this type of policy, you are only insured for a certain time. 10&nbsp;or 20 years are typical terms for which you pay the premiums. However, the term can be longer or shorter.<\/p>\r\n<p>With term life insurance, it&#8217;s not an asset during your lifetime. It doesn&#8217;t mature until death. A term life insurance policy does not build a separate cash value reserve.&nbsp;A cash value is the value that builds up in a policy.&nbsp;The face amount is the coverage you provide your beneficiaries at your death.<\/p>\r\n<h3>Whole Life Insurance<\/h3>\r\n<p>A whole life insurance policy insures you for your entire life. It&#8217;s a permanent life insurance plan. The permanent policy remains if you continue making the fixed premium payments. Those payments also build up a cash reserve that grows tax-free as long as you leave the money in the account.<\/p>\r\n<p>A portion of the whole life insurance premiums are often&nbsp;put into an investment account to grow throughout the life of the plan. When the plan ends, the value will be paid out to the beneficiary. It serves as a type of investment.<\/p>\r\n<h3>Universal Life Insurance<\/h3>\r\n<p>This is similar to whole life except it offers more flexibility in terms. Universal life insurance provides permanent coverage with flexible premiums. Universal life insurance is permanent life insurance. It combines term insurance with a cash account earning tax-deferred interest.<\/p>\r\n<p>With this policy, the insured can change the amount of life insurance and the premium payments. It also builds a cash reserve that the insured can use during their lifetime. However, universal life insurance has higher premiums than other types of life insurance.<\/p>\r\n<h3>Variable Life Insurance<\/h3>\r\n<p>This allows the policyholder to invest the tax-deferred&nbsp;cash reserves&nbsp;into stocks, bonds, and securities. The insurer guarantees a certain return on the investment. A variable life insurance policy pays your beneficiaries a specified amount upon death.<\/p>\r\n<p>A variable life insurance policy also has a cash value component. This cash value varies according to the following:<\/p>\r\n<ul>\r\n<li>The amount of premiums you pay<\/li>\r\n<li>Policy fees and expenses<\/li>\r\n<li>The performance of investment products offered under the policy<\/li>\r\n<\/ul>\r\n<p>Variable life insurance is a very&nbsp;specific type of&nbsp;policy. It is critical to understand how any type of life insurance you purchase works.<\/p>\r\n<h2>Common State Life Insurance Laws<\/h2>\r\n<p>States vary in how they regulate the insurance industry. Common types of life insurance laws include the following:<\/p>\r\n<ul>\r\n<li><b>Free look periods<\/b>: These allow a new policyholder to review their policy for a specified amount of time with the option of canceling it for a full refund.<\/li>\r\n<li><a href=\"https:\/\/dictionary.findlaw.com\/definition\/grace-period.html\" target=\"_blank\" rel=\"noopener\"><u><b>Grace periods<\/b><\/u><\/a>: These give a policyholder a certain amount of time to have a past-due premium payment before the policy can lapse. It also specifies that beneficiaries must still be paid if the insured dies within the grace period.<\/li>\r\n<li><b>Timely payment on claims<\/b>: Many states require insurance companies to make payments on a claim within a specified time or face fines and interest costs.<\/li>\r\n<li><b>Insurance guaranties<\/b>: Many states also maintain a fund that will cover your policy up to a certain amount if your life insurance company goes out of business.<\/li>\r\n<li><b>Personal information<\/b>: Some state laws also regulate what insurance companies can do with your personal information.<\/li>\r\n<\/ul>\r\n<h2>Duties of a Life Insurance Company<\/h2>\r\n<p>Each state has its insurance code that details the specific obligations of insurance companies. Insurers in every state are generally required to&nbsp;<a href=\"https:\/\/dictionary.findlaw.com\/definition\/good-faith.html\" target=\"_blank\" rel=\"noopener\">act in good faith<\/a>&nbsp;and avoid unfair dealing. This includes doing the following:<\/p>\r\n<ul>\r\n<li>Investigating and paying proceeds within a reasonable timeframe<\/li>\r\n<li>Providing a written explanation for denied claims<\/li>\r\n<li>Refraining from unfair settlement practices<\/li>\r\n<\/ul>\r\n<p>If you&#8217;re dealing with an insurance company acting in an unfair or&nbsp;deceptive manner, you may be able to file a&nbsp;<a href=\"https:\/\/www.findlaw.com\/hirealawyer\/choosing-the-right-lawyer\/what-is-bad-faith-insurance-law.html\">bad faith lawsuit<\/a>. You can also&nbsp;pursue a complaint with your&nbsp;<a href=\"https:\/\/content.naic.org\/state-insurance-departments\" target=\"_blank\" rel=\"noopener\">state&#8217;s insurance department<\/a>.<\/p>\r\n<h2>Tax Law and Life Insurance Benefits<\/h2>\r\n<p>Tax laws regarding life insurance premiums and proceeds can be complex. In general, premium payments are not deductible.<\/p>\r\n<p><a href=\"https:\/\/www.irs.gov\/faqs\/interest-dividends-other-types-of-income\/life-insurance-disability-insurance-proceeds\" target=\"_blank\" rel=\"noopener\">Policy proceeds you receive as a beneficiary<\/a>&nbsp;are not included in&nbsp;<a href=\"https:\/\/codes.findlaw.com\/us\/title-26-internal-revenue-code\/26-usc-sect-101.html\" target=\"_blank\" rel=\"noopener\">gross income<\/a>. However, some proceeds may be subject to an&nbsp;<a href=\"https:\/\/www.findlaw.com\/estate\/planning-an-estate\/estate-tax-laws.html\">estate tax<\/a>. For this reason, some estate planners recommend the&nbsp;<a href=\"https:\/\/www.findlaw.com\/estate\/trusts\/the-irrevocable-life-insurance-trust.html\">irrevocable life insurance trust<\/a>, which can provide the following benefits:<\/p>\r\n<ul>\r\n<li>Reduces the size of the estate for estate tax purposes<\/li>\r\n<li>Protects the cash value of your policy from creditors<\/li>\r\n<li>Controls when, how, and why your beneficiaries receive policy benefits<\/li>\r\n<li>Helps protect the benefits of a beneficiary receiving government aid<\/li>\r\n<\/ul>\r\n<p>There are several ways to set up a life insurance policy with its tax implications in mind. It&#8217;s wise to structure a tax-free payout when possible. Your circumstances and the current&nbsp;<a href=\"https:\/\/www.findlaw.com\/tax.html\">federal and state tax laws<\/a>&nbsp;will dictate what makes the most sense for you.<\/p>\r\n<h2>Is Life Insurance Protected From Creditors?<\/h2>\r\n<p>It depends. For the most part, when your life insurance company pays your death benefits directly to a named beneficiary, they are not subject to your creditors. The proceeds of your life insurance do not pass to your estate when you have named beneficiaries who receive the payout.<\/p>\r\n<p>If the proceeds of your life insurance policy become a part of your estate,&nbsp;<a href=\"https:\/\/assetprotectionsociety.org\/creditor-protection-laws-for-li-and-annuities\/\" target=\"_blank\" rel=\"noopener\">state law dictates<\/a>&nbsp;whether creditors can seize the cash value of a life insurance policy or the insurance proceeds. For example, in&nbsp;<a href=\"https:\/\/www.dfs.ny.gov\/consumers\/life_insurance\/types_of_policies\" target=\"_blank\" rel=\"noopener\">New York<\/a>, death benefits and cash value from life insurance are&nbsp;<a href=\"https:\/\/codes.findlaw.com\/ny\/insurance-law\/isc-sect-3212\/\" target=\"_blank\" rel=\"noopener\">exempt from debts<\/a>&nbsp;of the insured if payable to a third-person beneficiary.<\/p>\r\n<p>This is another scenario in which you might&nbsp;<a href=\"https:\/\/www.findlaw.com\/estate\/trusts.html\">set up a trust<\/a>. A trust can be structured to protect your assets and the interests of your beneficiaries.<\/p>\r\n<h2>Get Legal Advice Regarding Your Life Insurance Policy<\/h2>\r\n<p>Depending on your situation, different life insurance laws could be vital to you. Whether you&#8217;re thinking of setting up a life insurance policy, dealing with a difficult life insurance company, or trying to manage a claim and the proceeds of a life insurance policy, you shouldn&#8217;t have to tackle all of the complexities on your own.<\/p>\r\n<p>Speak with an&nbsp;<a href=\"https:\/\/lawyers.findlaw.com\/insurance-law\/-law?fli=dcta\" target=\"_blank\" rel=\"noopener\">experienced insurance attorney<\/a>&nbsp;in your area who can help with your situation. They can advise you on how best to protect your assets and loved ones.<\/p>\r\n<div class=\"was-this-helpful\">\n    <div\n            class=\"was-this-helpful__question-container\"\n            aria-labelledby=\"was-this-helpful__question\"\n            role=\"group\"\n    >\n        <span\n                id=\"was-this-helpful__question\"\n                class=\"was-this-helpful__question fl-text-lg-bold\"\n        >Was this helpful?<\/span>\n        <button\n                class=\"was-this-helpful__button fl-text-sm\"\n                aria-label=\"Yes\"\n                value=\"yes\"\n        >\n            <span class=\"was-this-helpful__button-text fl-text-bold\">Yes<\/span>\n            <i class=\"was-this-helpful__button-icon\">\n                <svg width=\"22\" height=\"22\" viewBox=\"0 0 22 22\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\">\n                    <g id=\"thumbs-up\" clip-path=\"url(#clip0_604_3418)\">\n                        <path id=\"Vector\"\n   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was-this-helpful__radio-label\"\n                                for=\"was-this-helpful__radio-button--understandable\"\n                        >Easy to understand<\/label>\n                    <\/div>\n                    <div class=\"fl-radio-button-field fl-flex was-this-helpful__feedback-form-title\">\n                        <input\n                                id=\"was-this-helpful__radio-button--solved-problem\"\n                                class=\"fl-radio-button-field-input\"\n                                type=\"radio\"\n                                name=\"positive-feedback\"\n                                value=\"Solved my problem\"\n                        >\n                        <label\n                                class=\"fl-radio-button-field-label fl-text-sm was-this-helpful__radio-label\"\n                                for=\"was-this-helpful__radio-button--solved-problem\"\n                        >Solved my problem<\/label>\n                    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     class=\"fl-radio-button-field-input\"\n                                type=\"radio\"\n                                name=\"negative-feedback\"\n                                value=\"Other\"\n                        >\n                        <label\n                                class=\"fl-radio-button-field-label fl-text-sm was-this-helpful__radio-label\"\n                                for=\"was-this-helpful__radio-button--negative-other\"\n                        >Other<\/label>\n                    <\/div>\n                <\/fieldset>\n            <\/div>\n            <div class=\"was-this-helpful__form-buttons-container\">\n                <button\n                    class=\"was-this-helpful__feedback-button was-this-helpful__feedback-button--positive at-feedback-submit fl-button secondary\"\n                    type=\"submit\"\n                >\n                    <span class=\"fl-button-content\">Submit<\/span>\n                    <i\n                        class=\"fa fa-angle-right medium\"\n                        aria-hidden=\"true\"\n                    ><\/i>\n                <\/button>\n                <button\n                    class=\"was-this-helpful__feedback-button was-this-helpful__feedback-button--cancel fl-button primary disabled\"\n                    type=\"reset\"\n                >\n                    <span class=\"fl-button-content\">Cancel<\/span>\n                    <i\n                        class=\"fa fa-times-circle medium\"\n                        aria-hidden=\"true\"\n                    ><\/i>\n                <\/button>\n            <\/div>\n        <\/form>\n    <\/div>\n    <div class=\"was-this-helpful__thank-you-message\" role=\"status\">\n        <i class=\"was-this-helpful__thank-you-message-icon fa fa-check\"><\/i>\n        <p class=\"was-this-helpful__thank-you-message-text\" aria-live=\"polite\"><\/p>\n    <\/div>\n<\/div>\n\n\n    <\/div>\n    \n    <div class=\"fl-section-sidebar\">\n        <div class=\"fl-editors-summary\" data-testid=\"fl-editors-summary\">\n    \n    <div class=\"fl-editors-summary-content\" data-testid=\"fl-editors-summary-content\">\n                    <h2>Can I Solve This on My Own or Do I Need an Attorney?<\/h2>\n                <div class=\"fl-editors-summary-content-main\" data-testid=\"fl-editors-summary-content-main\">\n            \n        <\/div>\n        <ul class=\"fl-list-style-none\">\n                            <li data-testid=\"fl-editors-summary-content-item\">\n                    <i class=\"fa fa-check medium fl-editors-summary-content-item-icon\" aria-hidden=\"true\"><\/i>\n                    Consumer legal issues typically need an attorney&#8217;s support\n\n                <\/li>\n                            <li data-testid=\"fl-editors-summary-content-item\">\n                    <i class=\"fa fa-check medium fl-editors-summary-content-item-icon\" aria-hidden=\"true\"><\/i>\n                    You can hire an attorney to enforce your rights for safe products, fair transactions, and legal credit, banking and related financial matters\n\n                <\/li>\n                    <\/ul>\n                    <div class=\"fl-editors-summary-content-description\" data-testid=\"fl-editors-summary-content-description\">\n                <p>Legal cases for identity theft, scams, or the Equal Credit Opportunity Act can be complicated and slow. 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<\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>Understanding life insurance can be difficult, but it&#8217;s something worth knowing about. Learn about whole life insurance, trusts, beneficiaries, tax-free proceeds, and much more at FindLaw&#8217;s guide to life insurance.<\/p>\n","protected":false},"author":41135,"featured_media":0,"parent":352567,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"app\/Http\/Controllers\/Templates\/ArticleWithBreadcrumbsController.php","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_autodraft_ids":[],"_cloudinary_featured_overwrite":false,"_sb_is_suggestion_mode":false,"_sb_show_suggestion_boards":false,"_sb_show_comment_boards":false,"_sb_suggestion_history":"","_sb_update_block_changes":"","_is_real_time_mode":false,"_realtime_collaborators":"","footnotes":"","cf_checklist_status":[]},"categories":[2732],"tags":[],"state_laws_tags":[],"flmsa":[],"class_list":["post-352602","page","type-page","status-publish","hentry","category-consumer"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/pages\/352602","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/users\/41135"}],"replies":[{"embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/comments?post=352602"}],"version-history":[{"count":0,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/pages\/352602\/revisions"}],"up":[{"embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/pages\/352567"}],"wp:attachment":[{"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/media?parent=352602"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/categories?post=352602"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/tags?post=352602"},{"taxonomy":"state_laws_tags","embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/state_laws_tags?post=352602"},{"taxonomy":"flmsa","embeddable":true,"href":"https:\/\/www.findlaw.com\/law-api\/wp-json\/wp\/v2\/flmsa?post=352602"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}