By the Kryder Cares Data Desk · Reviewed by Kris Kryder, licensed agent · Updated
Key points
- Term life: lower-cost coverage for a set period; most term policies build no cash value.
- Whole and universal life: lifelong coverage with cash value; universal allows flexible premiums.
- Start with what would still need paying: income, mortgage, education and final expenses.
- Life insurance proceeds paid because of a death generally aren’t taxable income to beneficiaries.
What life insurance does
A life insurance policy is a contract: you pay premiums, and if you die while the policy is in effect, the insurance company pays a death benefit to your beneficiaries. The National Association of Insurance Commissioners (NAIC), the organization of state insurance regulators, lists the usual reasons: replacing lost income, paying funeral costs, medical or nursing bills and debts, and covering child care.
Many people have some coverage through work. The NAIC notes that employer coverage is often less than people need and may not go with you if you leave the job, so it’s worth checking what you actually have.
The main types
Term is built for a specific need over a specific time, such as the years a mortgage is outstanding or children are at home. Many term policies can be renewed at the end of the term even if your health has changed, but the new premiums are higher; ask what they’d be and whether renewal stops at a certain age.
Whole and universal life are both cash value policies. Part of what you pay builds a value you may be able to borrow against or withdraw, which lowers the death benefit. Kris compares these on her term life and whole and universal life pages, and her article on term vs. whole life walks through examples.
| Type | How long it lasts | Cash value | Premiums |
|---|---|---|---|
| Term life | A set period, such as 10, 20 or 30 years | Most term policies have none | Lower to start; higher if you renew at the end of the term |
| Whole life | Your lifetime, if premiums are paid | Builds over time | Paid on a set schedule |
| Universal life | Can last for life | Builds; depends on premiums paid and interest credited | Flexible, as long as you pay enough to keep it in force |
How much coverage to consider
There’s no single formula. The NAIC suggests starting with the financial needs that would continue after your death and asking yourself a few questions:
- Does anyone depend on you financially, and how much of the household income do you provide?
- What debts would remain — a mortgage, car loans, credit cards?
- Would you want to pay for children’s or grandchildren’s education?
- How would your family pay final expenses? (See our final expense guide.)
- Is your coverage through work enough, and would you keep it if you changed jobs?
Make sure the premium fits
Buy a policy you can keep paying. The NAIC points out that premiums for many policies are sensitive to the insurer’s investment earnings, claims and expenses, and can rise if those are worse than expected. Ask what the highest premium could be, and which parts of the premium and policy values are guaranteed.
Applying: health questions and honesty
Depending on the policy, the insurer may ask health questions, request records or arrange a paramedical exam. Policies that skip detailed health information usually cost more and offer less coverage. Answer every question truthfully: if an insurer finds false statements after issuing a policy, it could reduce or cancel your coverage.
After the policy arrives, read it. The NAIC notes you can usually return a new life policy for a full refund within a set review period, often 10 days, stated on the first page.
Beneficiaries and taxes
Name primary and backup beneficiaries and keep them current after marriages, divorces, births and deaths. Insurance companies won’t pay a death benefit directly to a minor child, so ask about naming a trust or your estate instead.
According to the IRS, life insurance proceeds you receive as a beneficiary because of the insured person’s death generally aren’t included in gross income, though any interest paid on the proceeds is taxable. Kris is a licensed agent, not a tax or legal adviser; talk with your CPA or attorney about estate questions.
How Kris helps
Kris compares term, whole and universal policies from the life insurers she represents, helps you size coverage around your real obligations and reviews existing policies every few years. Don’t cancel a current policy until a new one is in force. Start with life insurance with Kris or request a quote.
Your next step
Have questions about your own situation? Contact Kris or schedule a no-cost meeting. You can also read more about Term Life Insurance and Whole & Universal Life Insurance.
Sources
Life insurance and annuity products are issued by the insurance company, and guarantees are backed by the financial strength and claims-paying ability of the issuer. Kris Kryder is a licensed insurance agent, not a tax, legal or investment adviser.
This guide is general education, not a recommendation for any specific plan or policy. Figures were current as of October 19, 2026; plan details and government amounts change every year.