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Introduction to Life Insurance

Life insurance helps your beneficiaries maintain their current lifestyle if you die.  If you have children or others who depend on your income, you should consider purchasing life insurance.  However, if you don’t have anyone that relies on your income, you are less likely to need life insurance.  The Texas Department of Insurance has a comprehensive explanation of most types of life insurance at their Understanding Life Insurance webpage. 


What types of policies are available?

There are two main types of life insurance:  term and permanent (a.k.a. whole, universal, or cash value).  

A term policy guarantees a set payout to your beneficiaries if you die during the policy term.  Term life insurance typically provides a significant amount of coverage at a relatively low cost.  

Permanent life insurance provides death benefits and cash value.  These policies can cost significantly more than term policies and only begin to accumulate cash value after 3-5 years.  Permanent life insurance is a complicated financial product.  If you are considering it, please discuss it with an insurance or finance professional.


How much life insurance should I purchase?

The money your beneficiaries receive from your life insurance policy can help pay for daily living expenses, mortgage debt, tuition, and any other anticipated future expense.  Make a list of your ongoing and anticipated financial responsibilities and discuss how much life insurance you should buy with your agent.


Does the policy automatically renew?

Ask your agent if the policy is guaranteed renewable or if you must submit evidence of insurability to renew the policy at the end of the term.  Guaranteed renewability will ensure that you can renew a policy even if you get sick during the term.  Also ask your agent if there is an age at which you can no longer renew the policy.


Does the policy have a “free-look” period?

A free-look period gives you additional time to look over your policy and decide if it is right for you.  During a free-look period you may cancel your policy for any reason and receive a full refund.  Texas law does not require life insurance policies to include a free-look period, but many policies include at least a ten-day free-look period.  Check the terms of your policy or ask your agent to find out if the policy you are considering has a free-look period.


How do I research a life insurance company?

You should check a company’s license, financial strength, and complaint record before purchasing life insurance.  This information is available by calling TDI’s Consumer Help Line at 1-800-252-3439 or by using TDI’s company lookup feature available by clicking here.