Learn

Start with what your family would need to pay for if you died tomorrow. Add up these five things:

1. Debts: credit cards, car loans, and any other balances.
2. Income: how many years your family would need your paycheck to get back on their feet.
3. Mortgage: the remaining balance, so your family can stay in the home.
4. Education: college or trade school for your children.
5. Final expenses: the funeral, burial or cremation, and medical bills.

Then subtract the savings and coverage you already have. What's left is a good starting number. Keep in mind that life insurance through work usually ends when you leave the job.

Back to all guides

Term life is like renting. It covers you for a set number of years, such as 10, 20, or 30, at a low price. If you outlive the term, the coverage ends. Some term policies can be converted to permanent coverage later.

Whole life is like owning. It covers you for your entire life, the premium never goes up, and it builds cash value you can borrow against. It costs more for the same amount of coverage.

Many families use both: term for big needs that end, like a mortgage or raising kids, and a small whole life policy for final expenses that lasts for life.

Back to all guides

In most cases, there's no difference. Both names describe a small whole life policy that pays your beneficiary when you pass away, so your family can cover the funeral and final bills.

Pre-need insurance is different. You buy it through a funeral home, and the money goes to that funeral home for a service you choose ahead of time.

Final expense insurance pays your family directly, so they decide how to use it, whether that's the funeral, a medical bill, or travel for relatives.

Back to all guides

Some plans for people with serious health conditions have a waiting period, often two years. If you pass away from natural causes during that time, the plan pays back the premiums you paid plus interest, instead of the full benefit.

Accidental death is usually covered in full from the first day. After the waiting period, the full benefit pays for any cause.

Answer health questions honestly and let us compare companies. You might qualify for a plan with full coverage from day one.

Back to all guides

Your money is still yours. You usually have four choices:

• Leave it in your old employer's plan.
• Move it into your new employer's plan.
• Roll it over into an IRA you control.
• Cash it out.

The mistake to avoid: cashing out usually means paying income tax, plus a 10% penalty if you're under 59½.

If you roll it over, ask for a direct rollover. The money goes straight to the new account and no taxes are withheld. If the plan mails the check to you, it holds back 20% for taxes, and you have 60 days to deposit the full amount.

More on 401(k) rollovers →

• Name a primary and a backup. The backup, called a contingent beneficiary, receives the money if your primary can't.
• Use full legal names. “My kids” can create delays. Name each person.
• Plan for minors. Children under 18 can't receive life insurance directly, and a court may have to appoint someone to manage the money. A trust or custodian avoids that.
• Review it after big life events, such as a marriage, divorce, birth, or death.

Beneficiary designations generally override what your will says, so keep them up to date.

Back to all guides