When I sit down with families to discuss life insurance, one of the most common things I hear is: “I have so many questions about life insurance, but I don’t even know where to start.” Trust me, I get it. Life insurance can feel overwhelming with all the different types, companies, and coverage amounts to consider.
For a complete overview, see learn more about final expense coverage.
Over my years helping families protect their financial future, I’ve noticed that most people have similar concerns and questions about life insurance. So I’ve put together this complete guide to answer the most important questions I hear every day. Whether you’re buying your first policy or reviewing existing coverage, this should help clarify things for you.
What Is Life Insurance and Why Do I Need It?
Life insurance is a contract between you and an insurance company. You pay premiums, and in exchange, the company pays a death benefit to your beneficiaries when you pass away. It’s that simple.
But why do you need it? Here’s how I explain it to my clients: Life insurance replaces your income and covers expenses your family would face without you. Think about it—if you weren’t here tomorrow, would your family be able to:
- Pay off the mortgage?
- Cover daily living expenses?
- Fund your children’s education?
- Handle funeral and final expenses?
If the answer is no, you need life insurance. It’s not about you—it’s about protecting the people who depend on you financially.
How Much Life Insurance Do I Actually Need?
This is probably the question about life insurance I get asked most often. The old rule of thumb was “10 times your annual income,” but that’s way too simplistic for most families today.
Here’s how I help my clients calculate their actual needs:
The DIME Method
D - Debt (mortgage, credit cards, loans) I - Income replacement (5-10 years of income) M - Mortgage (remaining balance) E - Education costs (college funding for kids)
Add these up, and you’ll have a much more accurate picture than any simple multiplier.
Consider Your Family’s Specific Situation
A single person with no dependents might only need enough to cover final expenses—maybe $25,000 to $50,000. But a parent with young children and a mortgage might need $500,000 or more.
I always tell my clients: It’s better to have too much coverage than too little. Your family will never complain about receiving more money than they need.
What Are the Different Types of Life Insurance?
Understanding the basic types of life insurance will help you make a better decision. Let me break down the main categories:
Term Life Insurance
Term life is pure insurance protection for a specific period (usually 10, 20, or 30 years). It’s the most affordable option when you’re younger and provides the highest death benefit for your premium dollar.
Best for: Young families, people with temporary needs (like a mortgage), or those on tight budgets who need maximum coverage.
Whole Life Insurance
Whole life combines life insurance protection with a cash value savings component. Your premiums are higher than term, but part of what you pay goes into a cash account that grows over time.
Best for: People who want permanent coverage and forced savings, or those looking for tax-advantaged cash accumulation.
Universal Life Insurance
Universal life offers more flexibility than whole life. You can adjust your premiums and death benefit within certain limits, and the cash value earns interest based on current rates.
Best for: People who want permanent coverage with more control over their premiums and death benefit.
Final Expense Insurance
This is a smaller whole life policy (usually $5,000 to $50,000) designed specifically to cover funeral costs and final expenses. The application process is simplified, making it easier to qualify.
Best for: Older adults (50+) who want to ensure their final expenses are covered without burdening family.
How Do Insurance Companies Determine My Rates?
When you apply for life insurance, the company looks at several factors to determine your risk level and set your premium. Here are the main things they consider:
Your Health
This is the biggest factor. Most policies require a medical exam, blood work, and review of your medical records. The healthier you are, the better your rates.
Your Age
Life insurance gets more expensive as you get older. That’s why I always tell people: the best time to buy life insurance is when you’re young and healthy.
Your Lifestyle
Do you smoke? Do you have a dangerous hobby like skydiving? Do you travel to risky countries? These factors can increase your premiums or even lead to coverage being declined.
Your Driving Record
Multiple speeding tickets or a DUI can impact your rates. Insurance companies see risky driving as an indicator of overall risk-taking behavior.
The Amount of Coverage
Obviously, more coverage costs more. But there’s often a “sweet spot” where the cost per thousand dollars of coverage is most efficient.
What Health Conditions Affect Life Insurance Approval?
This is where I see a lot of confusion. Many people assume that having a health condition means they can’t get life insurance. That’s usually not true.
Conditions That Are Often Manageable
- High blood pressure - If controlled with medication, you can often still get good rates
- High cholesterol - Same as blood pressure—control is key
- Type 2 diabetes - Depends on your A1C levels and how long you’ve had it
- Depression/anxiety - If stable and treated, many companies will offer coverage
- Past cancer - Depends on the type and how long you’ve been cancer-free
Conditions That Are More Challenging
- Heart attack or stroke within the past few years
- Current cancer treatment
- Uncontrolled diabetes
- Multiple serious conditions combined
The key thing to understand is that every company evaluates risk differently. What one company declines, another might approve at standard rates. This is why working with an independent agent who can shop multiple companies is so valuable.
Should I Buy Term or Permanent Life Insurance?
This is probably the second most common question about life insurance I get. The answer depends on your specific situation and goals.
Choose Term If:
- You need maximum coverage for the lowest premium
- Your need for life insurance is temporary (like until kids are grown or mortgage is paid off)
- You’re disciplined about investing the premium difference
- You’re young and just starting out financially
Choose Permanent If:
- You want coverage that won’t expire
- You like the idea of building cash value
- You have estate planning concerns
- You want to leave a legacy to your children or charity
Here’s my honest take: Most families are better served by buying term insurance and investing the difference. But there are definitely situations where permanent insurance makes sense, especially for estate planning or if you know you’ll need life insurance for your entire life.
How Does the Application Process Work?
Understanding the application process can help reduce some of the anxiety around buying life insurance. Here’s what you can expect:
Step 1: Application and Interview
You’ll fill out a detailed application about your health, lifestyle, finances, and family history. Most companies also require a phone interview to verify the information.
Step 2: Medical Exam
For most policies, a nurse will come to your home or office for a brief medical exam. They’ll take basic measurements, blood pressure, and collect blood and urine samples.
Step 3: Underwriting Review
The insurance company reviews everything—your application, exam results, medical records, and sometimes additional requirements like an EKG or stress test.
Step 4: Decision
The company will approve, decline, or make a counter-offer (like a higher premium or lower death benefit than you applied for).
The whole process typically takes 2-6 weeks, depending on how quickly you complete requirements and how complex your health situation is.
What Mistakes Should I Avoid When Buying Life Insurance?
In my experience, here are the most common mistakes people make:
Waiting Too Long
Life insurance gets more expensive every year you wait. Plus, you never know when a health issue might pop up that makes you uninsurable.
Buying Too Little Coverage
Don’t let budget constraints push you into inadequate coverage. It’s better to buy a larger term policy than a smaller permanent policy if coverage amount is the issue.
Not Being Honest on the Application
Insurance companies share information, and they will find out about health conditions or lifestyle factors you don’t disclose. This can void your policy and leave your family with nothing.
Buying Based on Price Alone
The cheapest policy isn’t always the best value. You want a company with strong financial ratings that will be around to pay claims.
Not Reviewing Your Coverage Regularly
Your life insurance needs change as your life changes. Marriage, kids, divorce, new mortgage—all of these events should trigger a review of your coverage.
How Do I Choose the Right Insurance Company?
Not all life insurance companies are created equal. Here’s what I look for when recommending carriers to my clients:
Financial Strength Ratings
Companies like A.M. Best, Moody’s, and Standard & Poor’s rate insurance companies’ financial strength. Look for companies with ratings of A- or better.
Claims Paying History
How quickly and fairly does the company handle death benefit claims? This information is available through state insurance departments.
Product Options
Different companies specialize in different types of coverage. Some are great for term life, others excel at whole life or final expense coverage.
Underwriting Philosophy
Some companies are more lenient with certain health conditions than others. This is where an independent agent’s knowledge of different companies really pays off.
What Questions Should I Ask My Agent?
When you’re working with a life insurance agent, here are some important questions to ask:
- Are you independent, or do you only sell one company’s products?
- What companies are you appointed with?
- Can you show me quotes from multiple companies?
- What’s your experience with cases similar to mine?
- How are you compensated? (All agents earn commissions, but knowing the structure helps you understand potential conflicts)
A good agent should be happy to answer all of these questions and shouldn’t pressure you to buy immediately.
Common Life Insurance Myths Debunked
Let me clear up some misconceptions I hear regularly:
“Life insurance is too expensive”
Term life insurance is actually very affordable, especially when you’re younger. A healthy 30-year-old can often get $500,000 of 20-year term coverage for under $30 per month.
“I don’t need life insurance if I’m single”
While you might not need income replacement, you still might want coverage for final expenses, student loans, or to leave something to family or charity.
“My employer’s life insurance is enough”
Employer coverage is usually 1-2 times your salary, which probably isn’t enough. Plus, you lose it if you change jobs.
“I can’t get life insurance with health problems”
Most health conditions don’t automatically disqualify you from coverage. They might affect your rates, but many people with chronic conditions can still get approved.
When Should I Review My Life Insurance?
Life insurance isn’t a “set it and forget it” purchase. You should review your coverage:
- When you get married or divorced
- When you have children
- When you buy a home
- When your income changes significantly
- Every 5-10 years as a general practice
Your needs change over time, and your coverage should change with them.
What About Life Insurance for Children?
Parents often ask me about buying life insurance for their children. Here’s my perspective:
From a pure insurance standpoint, children don’t need life insurance because they don’t have dependents or income to replace. However, there are some reasons families choose to buy coverage for kids:
- Guarantees their insurability for life
- Builds cash value they can use later
- Provides some coverage for final expenses (though this is rare and tragic)
If you’re considering this, make sure you have adequate coverage on yourself first. Your children need you more than they need life insurance.
- Calculate your life insurance needs using the DIME method (Debt, Income replacement, Mortgage, Education costs) rather than relying on outdated rules like “10 times your income.”
- Choose term life insurance if you need maximum coverage at the lowest cost for temporary needs like mortgages or raising children.
- Consider whole life insurance when you want permanent coverage combined with a cash savings component that grows over time.
- Determine if you need coverage by asking whether your family could pay the mortgage, cover living expenses, and fund education without your income.
- Review your coverage amount based on your family’s specific situation, as a single person may only need $25,000-$50,000 while parents might need $500,000 or more.
Final Thoughts: Making Your Decision
I know this was a lot of information, but these are the questions about life insurance that matter most when you’re making this important decision. The key things to remember are:
- Start with how much coverage you need - Don’t let budget determine this; figure out the right amount first
- Compare options from multiple companies - Different insurers have different strengths and specialties
- Be honest throughout the process - Trying to hide health issues or lifestyle factors will only cause problems later
- Don’t wait - Life insurance gets more expensive and harder to qualify for as you age
Life insurance is one of those things you want to get right the first time. I help families compare options from multiple top-rated carriers so they can make confident decisions about protecting their loved ones.
Want help finding the right coverage? Reach out for a free quote and let’s talk about your options. I can show you what different companies offer and help you find the coverage that makes sense for your family’s specific situation.
