What Is Life Insurance?

New to buying life insurance? Learn how it works, compare best life insurance policies, and choose the right coverage for your needs.

What Is Life Insurance? A Beginner’s Guide to Income Tax-Free Protection

A life insurance policy is a contract with an insurance company. In exchange for affordable life insurance premiums, the insurer provides a lump-sum, income tax-free death benefit to beneficiaries upon the insured’s death. Policies are tailored to your goals, whether short-term needs or lifelong wealth preservation strategies.

Types of Life Insurance Explained: Term vs. Universal vs. Whole

 Term Life Insurance: Affordable Coverage for Specific Periods

 Key Features of Term Life Insurance

Term life insurance offers financial protection for 10, 20, or 30 years. Premiums stay fixed during the term, making it a low-cost life insurance option. Post-term, renewals often cost significantly more.  

Who Should Buy Term Life Insurance? Ideal for replacing lost income during working years, covering mortgages, or funding college costs. Benefits are paid as a lump sum, not recurring payments.

Universal Life Insurance: Flexible Lifetime Coverage

Benefits of Universal Life Insurance Policies

Combines lifelong death benefit protection with adjustable premiums and coverage. Some policies focus on tax-deferred cash value growth, while others prioritize guaranteed payouts. H4: Universal Life for Estate Planning & Long-Term Needs Used for wealth transfer strategies, business continuity, or retirement income replacement. Higher premiums than term but offer lifelong flexibility.

Whole Life Insurance: Lifetime Protection with Cash Value

Whole Life Benefits: Stability and Tax-Deferred Growth

Fixed premiums and guaranteed cash value accumulation make it a tool for estate planning. Death benefits help preserve wealth for heirs. H4: Comparing Whole Life to Other Permanent Policies Unlike universal life, whole life lacks premium flexibility but offers predictable growth. Not currently available via Fidelity.

H2: Comparing Life Insurance Policies: Term vs. Universal vs. Whole Life

 Life Insurance Comparison Chart: Costs, Coverage, and Features

	Term Life	Universal Life	Whole Life
Coverage Period	10-30 years	Lifetime	Lifetime
Premiums	Fixed, low-cost	Flexible	Fixed
Cash Value	No	Yes (tax-deferred)	Yes (guaranteed)
Best For	Income replacement	Estate planning	Wealth transfer

 How Life Insurance Costs Are Determined: Factors Affecting Premiums

Rate Classes and Risk Assessment

Insurers use health, lifestyle, and family history to assign rate classes. Non-smokers and younger applicants often qualify for cheapest life insurance rates.

Lowering Your Life Insurance Premiums

Improve eligibility by quitting tobacco, maintaining a healthy weight, and choosing term life over permanent policies for short-term needs.

Why Tobacco Users Pay Higher Rates

Tobacco increases mortality risk, raising premiums by 50-100%. Consider quitting to requalify for better rates later.