Life insurance

What is life insurance designed to do?

Life insurance pays a death benefit to your named beneficiary when a covered death occurs while the policy is in force. The money can help the people who depend on you manage bills, housing costs or other needs.

Start with the people and responsibilities you want to protect. The right conversation is different for a parent with young children, a couple sharing a mortgage and someone who mainly wants to provide for final expenses.

Term life and permanent life: the basic difference

Term life covers a set period, such as a number of years. It generally does not build cash value. Check the length of the term, whether the premium is fixed, and what happens when the term ends.

Permanent life is designed for longer-lasting coverage, provided its requirements are met. Policies may include cash value and can be more complex. Ask which premiums and benefits are guaranteed, which can change, and what charges or loans could reduce the amount paid.

Estimate the gap you want to cover

Build a rough picture before choosing a benefit amount. Write down housing costs, regular household spending, childcare, debts and any future education support you want to provide. Include the cost of replacing unpaid work such as caring for children or relatives.

Then list savings and existing insurance available for the same purpose. Consider how long the support would be needed. This gives you a more useful starting point than choosing a round number without looking at your household.

If your main concern is a smaller amount for funeral and related costs, read our final expense guide and compare its terms with other life insurance options.

Compare the policy, not just the initial payment

• How long is the quoted premium guaranteed?
• What would it cost to renew or continue later?
• Are health questions or a medical exam required?
• Are any benefits limited in the early years?
• What happens if you miss a payment or need to cancel?
• What optional benefits cost extra?

Use the same benefit amount and coverage period when comparing quotes. A preliminary estimate may change after the insurer reviews your application. Answer application questions accurately and check the final offer before accepting.

Choose beneficiaries with care

Name the people or organizations you want to receive the benefit, and ask about a backup beneficiary. Keep contact details current after a marriage, divorce, birth or death. If a child is involved, ask a qualified adviser how the benefit should be arranged rather than assuming it can be paid directly to a minor.

Tell someone you trust where the policy is kept and how to contact the insurer. A clear record can make it easier for your family to find the coverage.

What if you already have life insurance?

Review workplace coverage and personal policies together. Ask whether workplace protection can continue if you leave the job and what that would cost. Before replacing a personal policy, compare any lost guarantees, charges and new waiting or contestability periods. Keep existing coverage until the replacement has been issued, reviewed and confirmed in force.