What is life insurance?

In today’s world, most people understand the general idea of life insurance — it’s a policy that you purchase to provide loved ones with money to help cover expenses in the event of your passing. However, chances are even individuals who own life insurance coverage can get tripped up on some of the basics. 

So, for those looking for a better understanding of what life insurance is, why it’s important, and how to find coverage, this blog will help answer those questions. Specifically, we will cover:

• What is life insurance?
• What is a beneficiary?
• Why is it important for me to consider life insurance?
• How do you get life insurance?

What is life insurance, really?



Not to go too far into the weeds, but it is important to note that there are many kinds of life insurance you can choose. But before you go down a rabbit hole looking into all the differing life insurance out there, let’s define life insurance in its simplest form.

Life insurance is a contract between you and a life insurance company, in which you pay a premium each designated period (quarterly, semi-annually, or annually), or from your paycheck if you’re getting it through your employer, to ensure your elected beneficiary or chosen individual receives a payout in the event you pass away.

This payout is formally known as a death benefit. And when you purchase your policy, you select a death benefit amount that you want your beneficiary(s) to receive. The higher the death benefit, the more expensive your policy. In the event of your passing, the death benefit is distributed to your beneficiary(s). 

In essence, you’re paying into a program that provides those important to you the financial protection to assist them when you are no longer around to help financially.

To learn more about the two primary categories of life insurance, term and permanent, check out our blog: It’s not term OR perm, it’s term AND perm.

What is a beneficiary?

A beneficiary can be a person, group of individuals, or entity that will receive your life insurance benefit when you pass away. Most often, beneficiaries are one’s spouse, children, and other family members. Your insurance provider, agent, or employer’s HR department (if related to benefits through the workplace) can help you update your beneficiary should you need to do so.

It is important to have an elected beneficiary and to make updates/changes to your designated individuals or groups for many reasons. If you do not have a beneficiary, or if you have a beneficiary that is no longer in your life (passed away, divorced, or dissociated from you), it will be more difficult and likely be a lengthier process to ensure the right people receive your death benefit.

Why is it important for you to consider life insurance?



Typically, when someone passes away there are a handful of financial challenges for surviving loved ones — funeral and mortgage costs, paying off debts, day-to-day expenses like gas and groceries — just to name a few.

For your loved ones, chances are the event of your death will be both emotionally and financially taxing (and rightfully so). Having the reassurance of life insurance can help protect your loved ones from experiencing financial losses or added, unnecessary hardships.

As mentioned previously, there are many kinds of life insurance out there, each with its own specific benefits, costs, term lengths, and more that may work best for you. Explore your options and consult with experts, either independently or through the workplace, who can help you find the right fit to secure your financial future.

Of course, if you have enough money saved up to cover end-of-life expenses and enough that your family will not be put into a financially risky situation, then life insurance may not be necessary for you. But if you’re like the other 60% of American living paycheck to paycheck[1] or you simply don’t have the savings to secure your family’s future, having life insurance of any kind is almost certainly going to benefit you.

How can you get life insurance?

You’ve probably seen life insurance provided through your employer as part of your benefits package during open enrollment periods, similar to health insurance, dental, vision, etc. And while company-paid life insurance benefits will help, your company offering is likely only going to partially cover your loved ones when you pass. Also, in these cases, the amount of coverage you have is set by your employer.

If life insurance isn’t offered as an employer-paid benefit or you want more coverage, you may have access to life insurance through voluntary benefits. These benefits are typically employee-paid and let you select a benefit amount to fit your needs. Payments may be deducted automatically from your paycheck for easy payment and coverage may be available to you with limited or no medical questions. To understand what additional voluntary benefits may be available to you, meet with your company’s HR department to discuss your needs. Ask if voluntary benefits are available for you, when you can enroll in voluntary benefits, and how to access them in order to give yourself the maximum reassurance you and your family need.

If additional voluntary life insurance benefits are not available from your employer, you can look for your own life insurance through other third-party entities (Insurance agents, financial advisors, etc.). However, we suggest asking your HR team to meet with your employer’s designated broker to begin a conversation about offering voluntary benefits in the workplace. If you’re interested in obtaining more voluntary benefits to fit your needs, chances are your colleagues are too.

If you’ve already decided to purchase life insurance, be sure to check out our blog, So, you’ve decided to buy life insurance…now what? for some helpful tips on how to navigate policies available to you.