Family under an umbrella considering life insurance options

Life Insurance Explained [And 4 Key Ways To Get The Best Rate]

Shopping for a life insurance policy might seem overwhelming, but it’s a little more than a contract between an insurance company and a policyholder. With many types of life insurance policies available, it’s important to understand how each contract can benefit the policyholder. Everyone’s life insurance needs are unique, and today’s policies are designed with various situations in mind.

Whether it’s a term life policy or a whole life insurance policy, getting to know the terminology and how each type of policy works is essential before signing on the dotted line.

Different Types of Life Insurance Policies

The two most common life insurance policies are term life insurance and whole life insurance. While both have a death benefit, only whole life insurance policies can allow earned interest to be used before the policyholder passes. Let’s take a look at their key differences.

Term Life Insurance Explained

Term life insurance policies are paid for a set amount of time, usually 10, 20, or 30 years. Term life policies only expire after the contract has been fulfilled or with death. Typically, the simplicity of term life policies makes them less expensive than whole life insurance; however, the death benefit is its sole purpose.

Whole Life Insurance Explained

While term life insurance only covers a portion of life, whole life insurance has an open-ended completion date. Whole Life insurance plans provide a death benefit and also allow the cash value of the insured amount to grow. As a premium is paid, a portion of the payment is used to create a cash account that grows with interest. Once enough has been saved in that account, funds can be used tax-free and for any purpose.

What’s Included in a Life Insurance Policy?

Each policy’s benefit varies depending on the type of insurance purchased. Before deciding on the most appropriate policy, it’s important to get an idea of their differences. A death benefit is included with both term life policies and whole life policies, but other separate components are worth noting.

Benefits of Term Life Insurance

  • Fixed, affordable premiums
  • Coverage up to 30 years
  • Death payout to multiple beneficiaries
  • Easy to understand policies
  • Easy conversion to a whole life policy
  • Renewable
  • Larger death payout sums

Benefits of Whole Life Insurance

  • Policy never expires
  • Tax-deferred cash building
  • Death payout to multiple beneficiaries
  • Fixed death benefit amounts
  • Retirement savings
  • Interest earned
  • Ability to use funds while living


Here are the most common questions when it comes to life insurance. 

Infographic of a couple under an umbrella looking for life insurance

Does every life insurance policy require a medical exam?

Although not all life insurance policies require a medical exam, there are still criteria that need to be met. Generally speaking, getting a life insurance policy without a medical exam still requires answers about health and medical history. These types of policies also tend to have strict age requirements.

Who needs a life insurance policy?

Anyone who wants to ensure a family’s financial security should consider a life insurance policy. Since life insurance rates are less expensive when started at a younger age, it’s advisable to start as early as possible.

Who receives a death benefit?

When a policyholder purchases life insurance, a recipient, called the beneficiary, is chosen. Upon the policyholder’s passing, the benefit will be paid to the person named as the beneficiary.

What’s the difference between whole life insurance and term life insurance?

There are two primary differences between whole life insurance and term life insurance policies. Term life insurance isn’t as expensive, but it only offers a specified number of years, and policy funds are only payable after death. Whole life insurance policies are designed for a lifetime, and they allow policyholders to utilize a portion of the benefit while they are living.

Can I get life insurance for someone else?

It is possible to take out a life insurance policy on another person; however, there are rules that must be followed. In addition to proving a financial dependency on the insured person, both the insured party and the person purchasing the policy must have mutual financial interests.

Getting the Best Life Insurance Rates

Since life insurance policies are designed to fit individual needs, there’s no one-size-fits-all inexpensive life insurance. But there are a number of ways to make sure a policy is as budget-friendly as possible.

Purchase a term life insurance policy.

Because term life insurance policies don’t offer more than death benefits, their rates are typically lower. They are straightforward, easy-to-understand contracts that take the guesswork out of life insurance.

Purchase life insurance at a younger age.

Purchasing a life insurance policy at a younger age is not only a great way for a young family to have financial security, but it’s also a good way to lower a policy’s price tag. Plus, younger policyholders can lock in a rate that will not rise over time.

Stay in good health.

Much like an appraiser places a value on a home, life insurance companies need to know about the health of their policyholders. Those who are in good health and have a healthier medical history can enjoy lower rates.

Shop different life insurance companies.

There’s nothing wrong with comparing the rates of several life insurance companies. There are always offers and promotions that may help to lower a policy’s rate.

Concluding Thoughts on Life Insurance 

From whole life insurance that protects an entire life to term life policies that offer coverage for a specific period, life insurance is a wise investment for anyone who is looking ahead to the future. Ensuring a financial cushion for a family or a loved one is a great way to garner peace of mind. With policies that fit any budget, it’s never too early to consider a life insurance policy.

Related: How to Calculate Your Life Insurance Needs

Newsletter Opt-in

By joining our newsletter you are acknowledging that you will receive email and/or SMS communication regarding relevant content and offers.

You have successfully opted in!