What is life insurance?

Some people think that life insurance is basically, you live, you die, your family gets a payout. Others may see insurance as a luxury, something that others may be able to have but you’re not quite there yet.

In reality, life insurance is more like a contract between a policyholder and an insurer. At a high level, this contract stipulates that the insurer will provide a sum of money to their beneficiaries should the policyholder die during their contract period. The sum of money will be paid out in exchange for premiums paid by the policyholder over the course of their life. In short, life insurance is about having peace of mind.

It is not, however, a will, which is a different document. If you’re curious as to how these two items compare to one another, you can check out this link here.

Now, there are two main types of life insurance: term life and whole life.

Term life insurance

Term life insurance is a type of policy that lasts for a certain amount of years, otherwise known as a term. Assuming no unusual circumstances, if you, as an active policyholder, pass away during this term, the insurer would pay your beneficiaries as part of that contract. If you live past the end of the term, you can sometimes choose to renew for another term or switch to permanent coverage.

Term life policies are typically issued in periods of 10, 20, or even 30 years. Some insurers (*cough*) Wysh (*cough*), even allow for more tailored terms. As a policyholder, you can choose which term works best for you, your plans, and your family.

Whole life insurance

Whole life insurance is, as one writer put it, the OG life insurance. Unlike term life, whole life covers you for, well, life. You’re covered as soon as you’re approved for a plan until you pass away (assuming your premiums are being paid, of course). This type of life insurance is also referred to as cash value life insurance, because the money you put in grows over time. If you’re curious about whole life insurance and want to know more, you can check out our go-to guide to whole life insurance.

The benefits of having a policy

A recent study by Greenwald Research showed that seven in 10 millennials want insurance and various investment options. However, only about a quarter of millennials have money set aside for savings or emergencies. Life insurance, like other forms of insurance, is an important part of having financial protection.

According to the Education Data Initiative, GenXers have the greatest overall debt, but millennials have the highest student loan debt of any generation, at 14.8 million people in the US. If your parents co-signed your student loans, they’ll have to commit to paying that off in the event of your death. Having a life insurance policy could meet that challenge head on, as well as any number of other things. From mortgages, to credit card debt, to funeral costs and child care, having a life insurance policy can go a long way to providing peace of mind for you and your family.

How to get a policy: Once you’ve decided that life insurance is right for you, you still need to have some idea of how the whole process works.

• Get a quote: The first thing you’ll want to do is get a quote, which is an estimate of the premium for your policy. In order to receive this, insurers will ask you some questions about your health to determine the scope of the plan. When being asked about your health, it’s in your best interest to be as honest as possible.

• Underwriting: You want to be honest because the insurer will then begin something called “underwriting,” to have a more accurate picture of the risk involved. Basically, the insurer wants to know the likelihood of your death during the term of your policy. Underwriting basically confirms the scope and eligibility of the policy you applied for.

• Riders: Life insurance riders are additional benefits that can be added to a policy. They allow you the ability to personalize your policy and can afford you various types of protection. Some types of riders are accidental death riders or guaranteed insurability riders. There are a variety of riders available to policyholders, each with its own focus.

• Beneficiaries: A beneficiary is often a person or persons, organizations, and/or trusts named as the recipient of a payout within your life insurance policy. You can name a parent, spouse, child, organization, charity, or trust as a beneficiary. If you choose multiple beneficiaries, you can decide how to divide the death benefit between them.

• Death benefits and claims: Once you’ve determined all of the above and been approved for a policy, you’re good to go. Again, assuming no unusual circumstances, should you die during your policy term, your named beneficiaries will receive a death benefit, or the lump sum of money awarded. In order to receive this payout, beneficiaries must file a death claim with the insurer. These often require a death certificate and other documents detailing the manner and cause of death so that the insurer can issue the correct death benefit.

Conclusion

Life insurance can seem like a lot of things. It can be scary and seen as dull ( à la The Incredibles), but at Wysh we believe that life insurance is just a part of the decision-making process as we all get older. What will happen to me in the unfortunate event of my death? What will happen to my family? Addressing these questions can be upsetting. But they can also give us the tools we need to prepare and be prepared.