Introduction

Life insurance provides financial protection for your loved ones in the event of your death. The goal of this article is to provide an in-depth overview of life insurance, with a focus on online tools to help you determine your needs and get quotes. We'll cover the different types of life insurance, how policies work, calculating how much coverage you need, where to get quotes online, factors that impact costs, types of policies for seniors, beneficiaries, optional riders, and more. Our aim is to equip you with the knowledge to confidently shop for life insurance online and select the right policy for your needs and budget. With the proper coverage, you can gain peace of mind knowing that your family will be financially secure if the unexpected happens. Read on to learn all you need to know about purchasing life insurance online as an adult or senior.

Types of Life Insurance

There are several main types of life insurance policies to choose from:

Term Life Insurance

Term life insurance provides coverage for a specified period of time, typically 10, 15, 20 or 30 years. It pays out a death benefit if you pass away during the term. Term policies are a popular choice because premiums are affordable, especially when you're young and healthy. However, they do not build any cash value. Once the term is over, coverage ends unless you renew the policy or convert it to permanent insurance.

Whole Life Insurance 

Whole life insurance offers lifelong protection as long as you continue paying premiums. It builds cash value that you can borrow against or withdraw. Premiums are guaranteed to remain level for the life of the policy. It's more expensive than term initially but becomes more affordable at older ages as premiums rise for term policies. Whole life is a good option if you want permanent coverage or to build tax-deferred savings.  

Universal Life Insurance

Universal life insurance provides permanent coverage with flexible premiums and death benefits. Part of each premium goes toward the cost of insurance, while the remainder is invested. Returns on investments make up the cash value, which grows tax-deferred. You can adjust premium and death benefit amounts along the way, as long as there's enough cash value to cover costs. It's more flexible but requires closer management than whole life.

Final Expense Insurance 

Final expense, or burial insurance, provides a small death benefit starting around $5,000 to $15,000. It covers end-of-life costs like funeral and burial expenses. Premiums are paid over a certain number of years, after which coverage is guaranteed for life. The benefit amounts are low but the coverage is easy to get, regardless of age or health. This type of insurance provides an affordable way to spare loved ones from financial burden when you pass away.

Survivorship Life Insurance

Also called second-to-die insurance, this type covers two people and pays out when the second insured person passes away. It's often used by married couples to pay estate taxes or leave an inheritance. Premiums are based on the younger age of the two applicants. Rates are lower compared to individual policies with the same death benefit. However, the policy does not pay anything until both people have passed away.

How Life Insurance Works  

Life insurance is a contract between an insurance policy holder and an insurance company. The policyholder pays premiums (usually monthly) to the insurance company in exchange for a death benefit that will be paid to the policyholder's beneficiaries upon their death.  

The insurance company pools money from all of its policyholders' premium payments and invests this money to generate a return. The company uses the returns on these investments to pay out death benefits, cover administrative costs, and earn a profit.

When a policyholder dies, the insurance company pays out a lump-sum death benefit to the beneficiaries named in the policy. This ensures that the deceased's family has money to cover final expenses, repay debts, and maintain their current standard of living without the income of the deceased.

Types of life insurance policies differ in whether they accumulate cash value. Whole life and universal life policies have a cash value component that grows over time that the policyholder can borrow against or withdraw. Term life insurance only pays out the death benefit, without any accumulated cash value.

By pooling premiums and investing the funds, insurance companies are able to pay out large death benefits in a way that is more affordable than saving the full amount individually. Life insurance provides financial security for policyholders' families after the policyholders pass away.

Calculating Your Needs

When determining how much life insurance coverage you need, there are several factors to consider:

Income Replacement

If you have dependents who rely on your income, you'll want to calculate how much money they would need to maintain their current lifestyle if you were to pass away. Consider your current income and expenses. How much of the household income do you provide? Don't forget to factor in a bit extra for unexpected costs and inflation over the years. A common guideline is to get a policy worth 10-15 times your annual income.

Final Expenses 

Funeral costs, burial plots, headstones and other final expenses can run tens of thousands of dollars. Get a policy large enough to cover these costs so your family is not left with the burden.

Mortgage 

If you have dependents living in a home you own, you'll likely want to get enough coverage to pay off your mortgage in full so they can remain in the home. Review your mortgage balance and interest rate to calculate the total remaining payments.

Debt

Tally up any other debts like credit cards, auto loans, student loans, etc. that you would want paid off. Include both the balances and interest rates in your calculation. 

College Savings

If you have young children, factor in money to replace the college savings contributions you would have made over the next several years. Estimate costs using current college prices for when your child will enroll. Planning ahead for college expenses can ensure your family's education goals remain funded.

Aim to get a total amount that covers all of these costs and allows your dependents to maintain financial stability after you're gone. Online calculators can help you estimate totals. A financial advisor can also provide personalized guidance based on your unique situation.