Life insurance

Life Insurance: A Complete Guide

What Is Life Insurance?

Life insurance is a financial contract between an individual (the policyholder) and an insurance company. In exchange for regular payments known as premiums, the insurer promises to pay a death benefit to the beneficiary (usually a family member or loved one) upon the insured person’s death.

At its core, life insurance is a protection tool — ensuring that your family or dependents are financially secure even in your absence.

Why Is Life Insurance Important?

Life insurance provides peace of mind. Having a policy in place ensures that if something happens to you, your family won’t suffer financially.

Common reasons to own life insurance:

• Income Replacement – Protect your family's lifestyle
• Mortgage Protection – Prevent foreclosure on your home
• Education Funding – Support children's education
• Debt Elimination – Avoid passing debt to loved ones
• Final Expenses – Cover funeral and burial costs

Types of Life Insurance

Life insurance generally falls into two categories: term life and permanent life. Each serves a unique financial purpose.

Term Life Insurance

Term life insurance offers coverage for a fixed period (e.g., 10, 20, or 30 years). If the insured dies during the term, the beneficiary receives the death benefit. If the term expires while the person is still alive, the policy ends unless renewed.

Pros:

• Lower premiums
• Simple and affordable
• Great for temporary needs

Cons:

• No cash value
• Coverage ends after the term

Permanent Life Insurance

Permanent policies provide lifetime coverage and accumulate cash value over time.

Whole Life Insurance

• Fixed premiums
• Guaranteed cash value
• Used for estate planning or lifelong protection

Universal Life Insurance

• Flexible premiums and death benefit
• Interest-based cash value

Index Universal Life (IUL)

• Links cash value growth to a stock market index (e.g., S&P 500)
• Has growth caps and protection floors
• Popular for combining protection and potential tax-free retirement income

Pros:

• Lifetime protection
• Builds cash value
• Can be used for loans or emergencies

Cons:

• Higher premiums
• More complex than term policies

How Much Life Insurance Do You Need?

You can estimate your coverage needs using different methods:

• 10x Rule: Multiply your income by 10
• DIME Method:
  • D – Debt
  • I – Income replacement
  • M – Mortgage
  • E – Education for children

• Needs-Based Approach: Factor in living expenses, inflation, and future goals

How Much Life Insurance Do You Need?

Use this calculator to estimate how much life insurance coverage you might need, based on your current financial situation and long-term goals.

Step 1: Enter Your Information

<form>

Field	Your Answer
Annual Income	type=text | placeholder=Enter your income (e.g., 60000) }}
Number of Years to Replace Income	type=number | placeholder=E.g. 10 }}
Total Debt (Credit cards, loans, etc.)	type=text | placeholder=Enter total debt }}
Remaining Mortgage Balance	type=text | placeholder=Enter mortgage balance }}
Future Education Costs (per child)	type=text | placeholder=Enter estimated total education costs }}
Number of Children	type=number | placeholder=E.g. 2 }}
Additional Legacy Amount (Optional)	type=text | placeholder=Enter extra for legacy, e.g., 100000 }}

</form>

Step 2: Calculate Suggested Coverage

{{#button: Calculate | action=calculateCoverage }}

Estimated Coverage Needed

<output name="coverageOutput"> (Enter your information and click "Calculate" to view your recommended coverage.) </output>

Calculation Formula

The calculator uses the **DIME + Legacy Method**:

Coverage = (Income x Years) + Debt + Mortgage + (Education x Number of Children) + Legacy

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1. 1. 1. **Script (for Scribunto/Lua module or JavaScript-enabled environments)**

If you're using JavaScript-enabled MediaWiki (like via [Extension:InputBox] + JS), here's the logic for calculation:

```javascript function calculateCoverage() {

   const income = parseFloat(document.querySelector('[name="income"]').value) || 0;
   const years = parseFloat(document.querySelector('[name="years"]').value) || 10;
   const debt = parseFloat(document.querySelector('[name="debt"]').value) || 0;
   const mortgage = parseFloat(document.querySelector('[name="mortgage"]').value) || 0;
   const education = parseFloat(document.querySelector('[name="education"]').value) || 0;
   const children = parseFloat(document.querySelector('[name="children"]').value) || 0;
   const legacy = parseFloat(document.querySelector('[name="legacy"]').value) || 0;

   const coverage = (income * years) + debt + mortgage + (education * children) + legacy;

   document.querySelector('[name="coverageOutput"]').innerText = 
       `Recommended Life Insurance Coverage: $${coverage.toLocaleString()}`;

}

Who Should Consider Life Insurance?

Life insurance is valuable for a wide range of people:

• Young adults — lock in lower premiums
• Parents — protect your children’s future
• Business owners — fund buy-sell agreements or insure key employees
• Homeowners — protect your mortgage
• Seniors — cover funeral or estate costs
• Single individuals — cover co-signers or support aging parents

The Life Insurance Process

Step-by-step application process:

1. Get a quote – Speak with an agent
2. Choose a policy – Term or permanent
3. Medical exam – May be required
4. Underwriting – Risk assessment by insurer
5. Approval – Pay premium and start coverage

What Happens When the Policyholder Dies?

If the insured passes away:

• The beneficiary files a death claim
• The insurance company processes the request
• A tax-free lump sum is paid out
• Funds can be used for any purpose

Final Thoughts

Life insurance isn’t just about preparing for death — it’s about planning for life. With the right policy, you can:

• Replace your income
• Protect your assets
• Leave a legacy

Speak to a licensed agent to explore your options and create a plan that aligns with your goals.

Related Pages

• Index Universal Life (IUL)
• Final Expense Insurance
• Disability Income Protection
• How to Present Life Insurance to Clients