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Purchasing Life Insurance

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What kind of life insurance should I buy?

That depends on your needs and your budget. Generally speaking, term life insurance is a good fit for people with temporary needs, such as protecting a mortgage or covering costs associated with raising children, such as daily childcare. Initially, it's usually the least expensive coverage you can buy.

Many people have permanent needs, such as paying for final expenses and replacing income should a breadwinner die prematurely. Permanent insurance lasts for the lifetime of the insured.

Some companies offer term policies that can be 'converted' to permanent coverage without taking a medical exam. A term policy with a conversion privilege is a great option to explore with your sales representative, because if you're purchasing for the first time and can't afford the higher premiums associated with a permanent policy, you can start out with term insurance and convert it to permanent later on.

You may also be able to purchase a policy that's a combination of term and permanent coverage, allowing you to tailor your coverage to meet your needs and budget.

How much does life insurance cost?

For starters, the cost for your life insurance will depend on the type of policy you choose and the amount of coverage you select. Your gender, your age and your health also determine how much you will pay for your individual policy. Whether you use tobacco products also plays a part.

Generally speaking, Term Life Insurance is usually the least expensive type of coverage you can buy.

Many policies offer the option to add riders, which provide additional coverage or benefits in special circumstances, such as when someone becomes disabled. Adding riders will also affect the cost of your coverage.

Because the price of your policy will reflect your own unique situation, it's best to talk to an agent who can determine what level of coverage fits your needs.

Are there tax advantages to life insurance?

Under current tax law, the death benefit from a life insurance policy passes to named beneficiaries income tax free. Because of this feature, life insurance offers advantages over other financial vehicles that are taxed when they're passed to loved ones upon the owner's death.

Another advantage is that with a permanent policy the buildup in cash value is income tax deferred, under current tax law.1

Finally, policy owners don't have to pay income tax on policy loans.1 However, if there's a death claim while a loan is outstanding, the amount of the loan and loan interest will be deducted from the death benefit.

1Does not apply to Modified Endowment Contracts.

What if I already have life insurance coverage at work?

Many companies offer group life insurance coverage as a benefit. This type of coverage is often purchased as a multiple of your annual salary. Group life can provide valuable protection, but keep in mind that in many cases you can't take the same coverage with you if you change employers. In cases where you can keep your coverage, you may have to pay substantially more for it.

With an individually-owned policy, your coverage belongs to you as long as you pay the required premiums. It doesn't depend on your employment status. And individually-owned policies often offer more features and benefits than standard group coverage.

Where do I go from here?

A Liberty Mutual representative has the tools and the skills to analyze your needs and suggest solutions that work for you. Find a Local Agent near you and get started today.