"What questions should I ask about life insurance?" No matter how much they know about life insurance coverage, that may be the first question most people have when buying life insurance. Whether you know a lot about the different kinds of life insurance options available – or not much at all – here are some essential things to find out before you sign a life insurance contract.

The best way to start learning about life insurance? Get an actual quote. 

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1. Do I need life insurance at all?

If any of the following statements describe your situation, you should consider a life insurance policy: 

  • Other people depend on my income
    You don't have to be your family's primary wage earner – if people would feel economic hardship without you, they depend on your income. If you're single but planning to get married and have children in the next few years, your answer to this question should also be "Yes."
  • I have debts that others would be responsible for if I die
    Do you have student loans that your parents will have to repay if you can't? A car, mortgage, business, or personal loan with co-signers? If so, a life insurance policy can keep you from burdening a loved one with thousands of dollars in debt payments.
  • I don't have enough savings or assets to cover all my obligations
    Most individuals don't have enough saved to fully pay off their debts and support family members in their absence. So, if you're like most adults with financial obligations, you should consider buying life insurance.

 2. How much life insurance do I need?

There are several ways to get a life insurance coverage estimate. Our life insurance calculator uses the "Human Life Value" method, which looks at what you're earning now plus what you expect to earn in the future. Between the ages of 18 and 40, it multiplies current income by about 30; as you get older and have fewer working years left, that multiple decreases.1 Other rules of thumb to estimate how much coverage you need include:

Consider multiplying your income by 10
Take your annual salary and add a "0" at the end. So, $50,000 salary equals $500,000 of coverage, $75,000 equals $750,000, and so on. 

Consider multiplying your income by 10 – and add college for each child
How much should you add? Account for somewhere between $100,000 and $150,000 per child. If you split the difference – and have two kids – that's an extra $250,000.

Consider using the DIME formula
DIME stands for Debt, Income, Mortgage, and Education. This method estimates your life insurance need as the sum of your financial obligations and other expenses: 

·      Debt: Total all your debts other than your mortgage.

·      Income: Take your salary and multiply by the number of years you think your family needs protection – or at least as long as you have children at home.      

·      Mortgage: Look at your last statement and get the payoff amount. 

·      Education: The anticipated cost for sending each of your children to college.

 3. How much will the policy cost?

There's an easy way to find out. Get a complimentary quote for a life insurance policy in about a minute with our calculator. It shows the cost for a 20-year term policy, with a life insurance premium that reflects your age and gender. The life insurance policy you end up buying may cost more (e.g., if you decide to buy a permanent life insurance policy) or less (e.g., if you choose a lower coverage amount). But term life insurance quotes can provide a helpful start by giving you an educated guess of how much life insurance you need and what that could cost.

 4. What are the three main types of life insurance?

The three main types of policies are term life, whole life, and universal life. Term life policies provide affordable temporary protection; whole life and universal life policies are also called "permanent" insurance because they are designed to provide life-long protection with wealth-building benefits: 

Term life insurance

This form of protection lasts for a limited time, typically 10, 15, 20, or 30 years. Most term policies feature "level" premiums, but with some, premium payments may periodically increase, for example, at 5-year intervals. It can be more affordable than universal or whole life. Still, when your term ends, you're no longer protected – you either have to apply for a new life insurance policy at a higher cost (because you're older) or go without coverage.

Whole life insurance

This is permanent life insurance that can provide guaranteed protection for the rest of your life while building cash value that can be used for things like policy loans - or even cash supplement retirement income.1,2,3 Whole life policies don't expire as long as the premium is paid. A mutual life insurance company (such as Guardian) may also provide dividends.4 

Universal life insurance

Like whole life coverage, this type of policy provides permanent protection and can build cash value.5 However, universal life policies can give the added flexibility of adjusting your monthly payments within a specific range to help deal with variations in your income.5 Universal life flexibility must be monitored to help ensure that the policy does not lapse.6

5. What other types of life insurance can I choose?

Here are some other kinds of life insurance that can help people in different situations get coverage:

Final expense insurance
This is only meant to cover end-of-life expenses such as funeral and burial costs. The coverage is permanent, in the sense that if you keep paying your premium, the policy will remain in effect, but there may be minimal cash value with these policies. It is often bought by older people who want to protect their adult children from covering these expenses. While the cost tends to be modest, the death benefit is also minimal.

Simplified and guaranteed issue insurance
Life insurance policies are typically underwritten: the insurance company requires a medical exam to assess your risk to insure. Simplified issue and guaranteed issue policies don't require an exam; they are typically for older applicants or those with health problems who may not qualify for an underwritten policy. A simplified issue policy will ask you to fill out a health questionnaire in place of an exam. A guaranteed issue policy won't ask for an exam or any medical information. These policies typically offer low levels of coverage at relatively high rates because the insurance company must assume a high level of risk.

Group life insurance7
This is a life insurance plan you buy as part of a group – typically through work or via a member organization. These policies are often simplified issue, at least for lower coverage amounts. Group life may not provide all the coverage you want, but that's ok. You can own multiple policies, and group insurance can be an easy, affordable way to start or supplement your life insurance protection. 

6. Does the policy provide cash value (also called "living benefits")?

If you are getting term life insurance, you should know that there is no cash value. That's why these policies are sometimes called "pure life insurance": they are designed solely to give your beneficiaries a payout if you die during the term. If you want the advantages of cash value that grows in a tax-advantaged way – with funds that can be accessed while you are still alive – you should look into permanent whole or universal insurance.

7. What's covered if I become disabled?

Many policies have a "waiver of premium" rider (or optional feature): If you become disabled and can't work, this rider will help pay your premium, allowing you to keep your insurance policy in effect.8 It can be a valuable option to consider, especially since the additional cost is relatively affordable. However, life insurance doesn't pay a benefit if you are disabled. If you want a policy that provides replacement income benefits when you are too ill or injured to work, then you need short- or long-term disability insurance (which is also called disability income insurance).9,10

8. How are death benefits paid? 

The death benefit is paid out as an income tax-free lump sum unless the beneficiary chooses to take the benefit as an annuity or in installment payments. There are a few policies where the premium is paid with pre-tax dollars (for example, with some employee benefit plans); in that case, the death benefit may not be income tax-free. A death benefit can also be split: the policyholder can designate more than one beneficiary, for example, by dividing the benefit equally (or not) between their children.

9. Will my premiums change over time?

Two kinds of policies feature premiums that don't change over time. One is "level" term life insurance (the most common form of term life), where the premium stays the same from the day coverage starts until the end of the term. The other type is whole life insurance, where the premium remains the same for life. However, it's important to note that after some years, the cash value grows and can be used to pay part or all of the monthly premium – so the policyholder no longer has to pay the entire amount out of pocket.

10. Do life insurance policies require a physical exam?

Many do, but not all. It may be in your best interest to get a medically underwritten policy - with a physical exam - if you qualify for it. Why? Life insurance policies are underwritten: It's the process in which insurance companies assess a person's risk to insure. That assessment is done statistically, using tables of actuarial data that show how long someone of your age, gender, and health status (among other factors) would be expected to live. People in good health who don't smoke almost always get the lowest rates. And "simplified issue" policies (see #5 above) don't require a medical exam; "guaranteed issue" policies don't even ask any health questions. Either way, the insurer is taking a more significant risk – and has to charge higher rates – because without a medical evaluation, they have no real way of knowing your health status or verifying your medical history. Some people don't even realize they have a health problem, such as hypertension, until discovered in a life insurance exam.

11. What happens if I'm late on a payment or can't pay?

That depends on the terms of your policy contract (and, in some cases, the regulations that apply in your state). With a term policy, there is often a grace period: a time period after the payment due date (for example, 30 days) during which you can pay premiums without losing coverage. After that grace period, coverage will lapse. However, some companies may let you reinstate your policy if you bring your premiums up to date. A permanent policy typically offers more options, depending on how large the cash value has grown: Many whole life policyholders will tap into the cash value (for example, after they retire) to keep premiums up to date. A universal life policy, which features flexible life insurance premiums, offers even greater flexibility.

12. How do I know if the insurance company reputable?

That's an excellent question. All large insurance companies may seem alike, but they aren't. Some are more financially sound. Others are easier to work with. If you want to find and work with some of the best life insurance companies, there are objective metrics that can help:

  • High Financial Strength Ratings11
    Independent organizations rate the financial strength of insurance companies to ensure their ability to provide coverage and meet obligations.
  • High customer satisfaction score
    Customer surveys and reviews can tell you how satisfied others are with an insurance company's services. Many in the industry consider J.D. Power & Associates to be a reliable source of insurance satisfaction data because they conduct an annual customer satisfaction survey of more than 5,000 U.S. life insurance policyholders. In the 2019 J.D. Power survey, Guardian was ranked "Better than most" .12
  • Low customer complaints
    National Association of Insurance Commissioners (NAIC) collects data about complaints with state regulators. According to a recent analysis by NerdWallet, Guardian Life has had significantly fewer complaints to state regulators than expected for a company of its size over the last three years, as of [DATE].13

13. Who should be the beneficiary? Can I change beneficiaries?

In theory, anyone can be named as a  beneficiary: a family member, business partner, charitable organization, even a friend. However, if you are married and live in a state with common property laws, you may need your spouse's consent to name anyone other than him or her as your primary beneficiary. There are also issues around naming children as life insurance beneficiaries because minors cannot legally manage their own money. If you are unmarried with minor children and want to name them (or any other person below the age of legal consent), the life insurance company may require that you name a legal guardian as the beneficiary or designate one for them under the Uniform Transfers of Minors Act. 

As the policy owner, your life insurance company will ask you to designate each beneficiary as either revocable or irrevocable. Revocable means that you can change later on and decide to remove that beneficiary for another without notifying them. If a beneficiary is irrevocable, then you can't change your mind without their consent – the death benefit must go to that person if they are still alive. 

14. What questions should I ask an insurance professional?

These questions are a good start – but it's even more important to find an insurance professional who asks you questions. What's your current situation? What are your plans for your family? Your obligations? Your financial goals? There are a lot of different kinds of life insurance because people have so many different protection needs. If you're looking for more than just a complimentary quote, then you should talk with a knowledgeable financial professional who will take the time to learn about your needs, answer your questions, and guide you to the right type of coverage – or coverages – for your needs. If you don't have someone to discuss insurance with, Guardian can help you find a nearby financial representative who will take the time to learn about your situation and present you with options that fit your specific needs and concerns.

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1 All whole life insurance policy guarantees are subject to the timely payment of all required premiums and the claims paying ability of the issuing insurance company. Policy loans and withdrawals affect the guarantees by reducing the policy’s death benefit and cash values.
2 Some whole life polices do not have cash values in the first two years of the policy and don’t pay a dividend until the policy’s third year. Talk to your financial representative and refer to your individual whole life policy illustration for more information.
3 Policy benefits are reduced by any outstanding loan or loan interest and/or withdrawals. Dividends, if any, are affected by policy loans and loan interest. Withdrawals above the cost basis may result in taxable ordinary income. If the policy lapses, or is surrendered, any outstanding loans considered gain in the policy may be subject to ordinary income taxes. If the policy is a Modified Endowment Contract (MEC), loans are treated like withdrawals, but as gain first, subject to ordinary income taxes. If the policy owner is under 59 ½, any taxable withdrawal may also be subject to a 10% federal tax penalty.

4 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.

5 Permanent life insurance consists of two types: whole life and universal life. Cash value grows in a participating whole life policy through dividends, which are declared annually by the company's board of directors and are not guaranteed. Cash value grows in a universal life policy through credited interest and decreased insurance costs. The cash value of both policy types benefits when the policyholder pays an amount above the required premium.

6 Universal Life Insurance may lapse prematurely due to inadequate funding (low or no premium), increase in cost of insurance rates as the insured grows older, and a low interest crediting rate. This does not apply to universal life policies which have a secondary guarantee, but if the secondary guarantee requirements are not met the policy will most likely lapse.

7 Group Insurance products are underwritten and issued by The Guardian Life Insurance Company of America, New York, NY.  Products are not available in all states.

8 Riders may incur an additional cost or premium. Riders may not be available in all states. A Waiver of Premium rider waives the obligation for the policyholder to pay further premiums should he or she become totally disabled continuously for at least six months. This rider will incur an additional cost. See policy contract for additional details and requirements.

9 Individual disability income products underwritten and issued by Berkshire Life Insurance Company of America (BLICOA), Pittsfield, MA. BLICOA is a wholly owned stock subsidiary of The Guardian Life Insurance Company of America (Guardian), New York, NY. Product provisions and availability may vary by state.
10 Guardian’s Group Short Term Disability Insurance and Guardian’s Group Long Term Disability Insurance are underwritten and issued by The Guardian Life Insurance Company of America, New York,  NY.  Products are not available in all states.

11 Financial information concerning Guardian as of December 31, 2020, on a statutory basis: Admitted Assets= $68.1 Billion; Liabilities = $60.3 Billion (including $48.9 Billion of Reserves); and Surplus = $7.8 Billion.

12 https://www.jdpower.com/business/press-releases/2019-us-life-insurance-study

13 https://www.nerdwallet.com/blog/insurance/guardian-life-insurance/

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