Everything you need to know about insurance basics, like coverage types, limits, cost and more.
Life Insurance 101
You insure your car, home and your health to protect yourself from the unexpected. Have you considered how you can help financially protect those you love? Life insurance provides financial protection in the event you were to pass away. You pay premiums to your insurance company, and in return, they will pay your beneficiaries a death benefit — which is an agreed upon sum of money — when you pass away.
Why Do I Need Life Insurance?
Do you have people who depend on you financially? Would they have enough money to cover the substantial costs of a funeral? What about a mortgage, debt and other expenses you’d leave behind?
Having life insurance can provide peace of mind that your loved ones will have some financial protection to cover these expenses or replace lost income if you were to die.
But, there can be more to life insurance than just a financial safety net if you were to pass away. With DreamSecure Whole Life and DreamSecure Flexible Life, there’s the ability to build cash value, leave behind a legacy or even contribute to your retirement. Find out more about how life insurance protects your family.
What Are the Different Types of Life Insurance?
There are two main types of life insurance you’ll frequently hear about: temporary and permanent life insurance. Not sure of the difference? This short video explains it.
It’s the right time for life insurance but you can’t decide which policy type is right for you.
Luckily, American Family Life Insurance Company is here to help with all your life insurance needs!
To start, there are two main types of life insurance: term life insurance and permanent life insurance.
Term life insurance is a temporary policy that lasts for a set amount of time. Typically 10, 15, 20 or 30 years. Term life only delivers a payout if the insured passes away while the policy is active.
Term life insurance is perfect for when you want financial protection for a limited amount of time.
For example, when you have a mortgage or other big loan, have children in the house, or are paying or planning for post-secondary education.
Plus, term life can be more affordable than permanent life insurance policies.
To meet your unique needs, American Family Life Insurance Company offers two types
of term life insurance, DreamSecure Simplified Term Life and DreamSecure Term Life.
Permanent life insurance is another common type of life insurance.
Whereas term only covers a set number of years, permanent life insurance can last your whole life!
In fact, whole life insurance is one type of permanent life insurance.
Permanent life insurance can help provide financial protection at any and every point of your life.
It can help your loved ones cover things like funeral costs or paying off debts, can be used to leave a legacy to loved ones, and even builds cash value over time!
Plus, with a variety of coverage options available, you can build a permanent life policy to fit your unique needs and specific budget.
So it’s always a good time to consider a DreamSecure Whole Life Policy from American Family Life Insurance Company.
It’s important to remember that term and permanent life insurance isn’t an either/or question. You can own multiple policies for even more customized protection!
For example, let’s consider Alexis.
She and her husband just bought their first home, so they each get a DreamSecure Simplified Term Life policy for the duration of the mortgage to help make sure the other won’t lose the house should one of them pass away.
After the birth of their first child, Alexis decides to add a second term life policy. This time a DreamSecure Term Life for additional coverage.
When the kids grow up and move out, Alexis and her husband look toward their future. They decide now’s the perfect time to add a DreamSecure Whole Life Insurance policy.
Decades later, when Alexis passes peacefully, her survivors, her husband and her children, have her whole life insurance policy to cover expenses such as funeral costs.
They love and appreciate how well Alexis has taken care of them financially, even after she’s gone.
Ready to learn more about how your life insurance can help make sure your loved ones are financially protected after you’re gone?
Contact your American Family agent today.
Temporary Life Insurance
Temporary life insurance — better known as term life insurance — offers coverage for a specific period of time, for example in 10, 15, 20, or 30 year terms. If you pass away while the policy is in effect, your beneficiary will receive a death benefit. However, if your term life insurance policy expires before you pass away, your beneficiaries won’t receive a payout.
Depending on your policy, you may be able to extend your term after the initial policy term ends or convert it to a long-term policy. Take a look at American Family Life Insurance Company’s DreamSecure Term Life Insurance and DreamSecure Simplified Term Life Insurance policies to see if temporary life insurance coverage is for you.
Permanent Life Insurance
A permanent life insurance policy, such as whole life insurance, offers coverage for — you guessed it — your whole life (subject to policy terms). Typically, a premium for whole life insurance will cost more than term life, but that’s because not only does it provide lifelong protection, but the policy also has the ability to accumulate cash value. Cash value is a component of whole life insurance that you can borrow against* while you’re still living.
You can use it for things like helping with a down payment on a house, college tuition or investing in a business. Keep in mind, if you don’t pay back the loan plus interest your death benefit will be reduced by any outstanding loan and interest amounts. Learn more about the cash value of life insurance.
We'll Help Guide You to the Best Option
At American Family Life Insurance Company, we offer DreamSecure Whole Life and DreamSecure Flexible Life insurance for long-term protection to help ensure your loved ones have some financial protection upon your death.
Want to compare coverages? Our life insurance comparison chart shows you our life coverages side by side, so you can compare your options and select the best coverage for you and your loved ones.
View Comparison Chart
When Is Life Insurance Necessary?
Starting a family?
Life insurance can help ensure they have some financial protection if you or your spouse were to pass away.
Do you have a mortgage?
Life insurance can provide funds to allow loved ones to pay off the mortgage and keep the home if you were to pass away.
Taking care of a loved one?
You can put protection in place to help ensure they could continue their current standard of living once you’re gone.
How Much Life Insurance Do I Need?
How much life insurance you need is completely dependent on your own unique circumstances. You’ll want to take into account things like your income, debts, final expenses and assets, among other things.
You can read more to find out how much life insurance you need, otherwise head to our Life Insurance Calculator — it’s a quick and easy tool to help you determine how much life insurance coverage you need and what it might cost.
When Should I Get Life Insurance?
Your age and health (as well as other factors) play a large role in determining your eligibility for coverage and the premium you’ll pay, so the earlier in life you apply, the better.
Most policies will lock in the premium for the entire policy term, so when you get life insurance when you’re young and healthy, it can be more affordable. Find out more about when you should get life insurance.
Life Insurance 101 FAQs
The life insurance application process, like many others, begins with contacting an agent. Then, after connecting with an agent, you’ll choose the amount of coverage and type of policy you want. You'll also fill out an application that includes some basic information about you, including info about your health and beneficiaries. You may have a telephone interview or be asked to complete an in-person medical exam, where you can choose a place that’s convenient for you, like your home, work or at a lab facility. Here’s more about the life insurance buying process.
A beneficiary is a person, a number of people or even an entity, such as a charitable organization, that receives the proceeds of a life insurance policy when the insured person passes away. After all, you’re not really buying life insurance for you, you’re buying life insurance to financially protect the people you love. Find out more about beneficiaries.
In general, the life insurance payout from a death benefit is not subject to federal income tax.** There are situations where proceeds may be taxable, but your tax advisor can help you better understand these instances.
When you have a life insurance policy, you’ll pay a premium, which is the amount of money you pay the insurance company to keep your coverage in effect. Your premium is determined by a number of factors, including the type of coverage you have, like term or whole life coverage, and your age and health — among other things.
Typically, you’ll pay your premium in installments, like monthly or annual payments. Some people even choose to pay for the entire policy in one lump sum. If you stop paying your premiums, depending on the type of policy you own, your policy may lapse, which means you would no longer be covered. Most insurance companies offer a grace period, which is the amount of time past the due date in which you can pay your premium and your coverage will continue.
If you have a whole life insurance policy and wish to stop payments, you can choose to use the accumulated cash value in your policy to purchase a policy with a lower death benefit or you can choose to surrender the policy, which means you stop paying the premiums and collect the accumulated surrender value. If you choose to surrender the policy your beneficiary will not receive a death benefit and you may have to pay taxes on some of the surrender value.
We make it easy to pay for your American Family Life Insurance Company policies by giving you a variety of payment options. You can mail in a payment, set up automated payments, use the automated pay by phone option, or use Pay Now on amfam.com.
Learn more about paying for life insurance.
Buying your child life insurance when they’re young and healthy has many benefits. As we’ve mentioned, the cost of life insurance largely depends on age and health, so buying a child life insurance means you can get a policy on them that is not only affordable, but it’ll lock in that low rate for the life of the policy (as long as premiums are paid) and ensure that they have life-long life insurance coverage. You can get them a low coverage limit that may simply cover the cost of final expenses, and they may be able to add coverage as they get older.
Buying a permanent life insurance policy on a child, such as DreamSecure Children’s Whole Life, is also a simple way to start a financial safety net for them, since a permanent life policy gains cash value, which can be borrowed against* later on in life to help with things like a down payment on a home or college tuition. Not convinced? Find out more about the benefits of life insurance for children.
Life insurance helps financially provide for your family and can help ensure they have the resources to meet their financial needs if you were to pass away. It can help replace an income, pay for final expenses, cover medical bills, go towards a mortgage or pay for other expenses that your family might be responsible for. The bottom line? Life insurance is a financial safety net for your loved ones.
Sometimes it can feel like insurance has a language of its own. Check out our life insurance glossary of terms to familiarize yourself with the jargon.
Get Started With a Quote
Behind every quote is an agent with experience, advice and more. Get a life insurance quote and we'll work with you to ensure that you're protecting what matters most.
*Any loans taken from your life insurance policy will accrue interest. Any outstanding loan balance (loan plus interest) will be deducted from the death benefit at the time of claim. If the loan balance grows too large for the cash value to support it, the policy could terminate.
**Neither American Family Life Insurance Company nor its agents are authorized to give tax or legal advice, and this should not be construed as such advice.
Policy Forms: ICC18-33 (10), ICC18-33 (15), ICC18-34 (20), ICC18-35 (30), L-33 (10)(ND), L-33 (15)(ND), L-34 (20)(ND), L-35 (30)(ND), L-33 (10)(SD), L-33 (15)(SD), L-34 (20)(SD), L-35 (30)(SD), ICC18-36 (10), ICC18-36 (15), ICC18-36 (20), ICC18-36 (30), L-36 (10)(ND), L-36 (15)(ND), L-36 (20)(ND), L-36 (30)(ND), L-36 (10)(SD), L-36 (15)(SD), L-36 (20)(SD), L-36 (30)(SD), ICC21 L141 MS 01 22, L141 ND 02 22, L141 SD 02 22, ICC17-225 WL, L-225 (ND) WL, L-225 WL, ICC17-227 WL, L-227 (ND) WL, L-227 WL, ICC17-223 WL, L-223 (ND) WL, L-223 WL, ICC17-224, L-224 (ND) WL, L-224 WL, ICC17-228 WL, L-228 (ND) WL, L-228 WL