Life Insurance Basics & Types | Term Insurance Brokers

New to life insurance? This guide covers the core concepts — what life insurance is, how the different types work, and how to figure out what’s right for your situation.

What Is Life Insurance?

Life insurance is a contract between you and an insurance company. You pay premiums — monthly or annually — and in exchange, the company pays a tax-free lump sum (the “death benefit”) to your beneficiaries when you die. That money can replace lost income, pay off debts, cover final expenses, or fund a child’s education.

The Two Main Types

Term Life Insurance

Covers you for a fixed period — 10, 15, 20, 25, or 30 years. If you die during the term, your beneficiaries receive the death benefit. If you outlive the term, the coverage ends with no payout.

Best for: Most families. Pure protection at the lowest cost. Ideal for covering income replacement, mortgages, and dependent care years.

Permanent Life Insurance

Covers you for life as long as premiums are paid. Includes a cash value component that grows over time and can be borrowed against. Types include Whole Life, Universal Life, and Indexed Universal Life.

Best for: Estate planning, business needs, or permanent coverage requirements. Premiums are significantly higher than term.

Key Terms to Know

Death Benefit — The amount paid to your beneficiaries. Tax-free in almost all cases.

Premium — Your regular payment to keep the policy in force. Can be level (locked in) or flexible depending on the policy type.

Beneficiary — The person (or entity) who receives the death benefit. You can name primary and contingent beneficiaries.

Underwriting — The process the insurance company uses to evaluate your health and risk before issuing a policy. This determines your risk class and premium.

Risk Classification — Categories like Preferred Plus, Preferred, Standard Plus, and Standard that determine your premium. Better health = better class = lower cost.

Contestability Period — The first two years of a policy during which the insurer can investigate and potentially deny a claim if material misrepresentation is found on the application.

Rider — An optional add-on to a policy that expands coverage. Common riders include waiver of premium, accelerated death benefit, and child term riders.

How Much Do You Need?

A common rule of thumb is 10–12 times your annual income, plus outstanding debts. But your real number depends on your specific obligations, your spouse’s income, how many dependents you have, and how long they’d need support. Use our Life Insurance Needs Calculator to get a personalized estimate.

Why Use an Independent Broker?

An independent broker represents dozens of carriers rather than one. That means we shop the market on your behalf, match your health profile to the carrier most likely to offer the best rate, and handle the application process end to end. There’s no extra cost to you — brokers are compensated by the carrier after your policy is issued.

Special Underwriting Topics

Certain personal factors can significantly affect how carriers price and classify your application. The right carrier selection can make a major difference — and in many cases, what seems like a barrier to affordable coverage has a straightforward solution.

Tobacco Users & Smokers — Using tobacco doesn’t automatically mean smoker rates. Cigar and smokeless tobacco users may qualify for non-tobacco rates at the right carrier. See our carrier-by-carrier guidelines.

Marijuana Users — Many carriers now offer non-tobacco rates for occasional marijuana users. Carrier selection is critical — guidelines vary widely. See our full breakdown by carrier.

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Life Insurance Basics 101