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Life Insurance: How it works, Why you need it and how much it costs

When you have a family, it’s really important to ensure that they are taken care of if something were to happen.

Life Insurance is the best way to provide for your loved ones after you’re gone. In this guide, we’ll talk about what life insurance is and how it works.

We’ll also give information on why everyone should have some form of life insurance protection and discuss costs and benefits in detail so that you can make an educated decision about whether or not life insurance is right for you!

Life insurance is an important part of financial planning, but it can be hard to understand what you need and how much coverage you should get.

This post contains affiliate links but all opinions are our own.

Getting the right amount of life insurance isn’t just about protecting your family financially in case something happens to you. It’s also about making sure that they aren’t burdened by debt or other expenses after losing a loved one. It’s also a great idea to include details about this in your Will and Estate plans.

The average American household has $258,000 in debt (including mortgages), so even if someone dies with enough life insurance, their family might still have to take on more debt than they can handle.

There are many different kinds of policies available for purchase, which makes choosing the right policy confusing and overwhelming for most people. 

Only 7% of people actually have the right amount of Life Insurance coverage.

How much life insurance do I need?

The life insurance coverage amount you choose should depend on your specific needs and the types of expenses that will increase after you pass away.

About 75% of life insurance policies are term life, which covers a certain period of time (typically 20 years) and pays out benefits to your loved ones if death occurs during this timeframe.

The other 25% is permanent life insurance, which is paid out for as long as the insured person lives.

A common misconception about life insurance policies is that they are meant to replace your income or pay off debts. This isn’t true!

Life insurance should only be used if you have a family who would struggle financially after losing their main source of income (you).

How much insurance coverage should I get?

These are the factors to consider with your decision

– Outstanding debt
– Monthly household expenses (e.g., mortgage payments)
– Your children’s future and likely expenses
– School or college tuition and fees
– Expenses related to funeral or estate settlement

If you had life insurance, this would be paid out before your outstanding debts are settled. Your life insurance coverage amount should at least equal the total of these expenses after your death.

If it doesn’t, then you will have left something uncovered and family members could still be responsible

Why is life insurance important?

The main question you need to ask yourself when considering life insurance is “if I were to die tomorrow, would someone be adversely impacted if they were no longer receiving my income?”

If that answer is ‘yes,’ you probably need life insurance. 

Here are a few other questions we’d recommend asking yourself to decide whether life insurance is right for you:

Do you have children who rely on your income?

Unless your child is the breadwinner in your family, your children are dependent on your income and likely will be until they are grown. So, if you have kids, you probably need life insurance. 

Do you own property with your spouse/partner?

If you are both contributing to mortgage payments, think about life insurance. If either of you passes away, then one of you will be solely responsible for making those payments without the other person’s contribution. 

Does your spouse/partner rely on your income?

Are you the breadwinner in the household? Whether or not you have children, life insurance is most likely right for you.

If you were to die tomorrow, who would assume your debt?

Whether you have credit card debt, a mortgage, or you’re paying off a large purchase, that debt usually doesn’t disappear if you die. Someone will usually have to assume it, so definitely consider life insurance.

Life insurance, in general, is to make sure if one person were to pass away, their family would receive the funds they needed to help replace the income lost.

Most companies offer a huge one-time payment that can be anywhere from $100k, $500k, or even $1M. Regardless of how much that lump sum is, that payment is meant to sustain a family’s way of life whether that’s paying for bills, the mortgage, or other day-to-day expenses.

But the problem with a huge lump sum payment upfront is that much money is often misspent or mismanaged. One of the reasons we love Dayforward is because they pay this to your beneficiaries in regular installments over time.

How does life insurance work?

There are life insurance options that can protect your family or loved ones in case you pass away.

You will typically pay a monthly fee (a premium) for this protection, and the life insurance company pays out either a lump sum of money to your beneficiaries when you die, or they will continue paying out the same amount every month until the term of the life insurance policy is over.

There are life insurance options that can protect your family or loved ones in case you pass away.

You will typically pay a monthly fee (a premium) for this protection, and the life insurance company pays out either a lump sum of money to your beneficiaries when you die, or they will continue paying out the same amount every month until the term of the life insurance policy is over.

Life insurance policies come in many different forms, including:

– Term life (temporary life insurance)

– Universal life (can be permanent or temporary depending on your needs and circumstances).

– Whole life (which provides lifetime coverage that isn’t subject to medical underwriting)

– Variable life (which invests the cash value of your life insurance into investments that fluctuate over time).

– Survivorship life (covers both you and your spouse if one of you passes away).

Term life insurance is a kind of life insurance that provides protection for a defined length of time—typically 20 years, but most policies run between 10 and 30 years.

If you die while your policy is active, your family receives the benefits described in the policy. If you die after your policy ends, your family does not get any money… but you’ve lived a long and fruitful life with the reduced stress of knowing your loved ones were protected!  

Because not everyone who buys term life insurance passes away while the policy is in effect, the cost to pay the benefits of those who do die is absorbed by the people who pay premiums but do not die while the policy is in effect.

As a result, premiums are relatively inexpensive compared to other kinds of life insurance.  

Dayforward is a new kind of term life policy that replaces your income if you pass away, and the policy lasts until your children are grown up.

How much does Life Insurance cost?

The costs for life insurance depend on several different factors, including:

Your age

Your family’s medical history

Your family’s life insurance history

Where you live

What are the benefits of Life Insurance?

There is a guaranteed return on your investment in the form of a lump sum payout if you die during the lifetime coverage period.

Having to pay only one premium for life insurance, rather than being locked into monthly payments that can last 20 years or more.

Life insurance with Dayforward starts at $7 per month for applicants determined to have excellent health.

The premiums include a monthly $5 subscription fee and a fee per every $1,000 protected under the policy. Other major competitors include Bestow and Fabric, and they advertise rates starting at $10 per month and $13 per month, respectively.

To get an estimate to see how much it could cost to protect your family with Dayforward, use their quick price tool here!

We love Dayforward because they’ve simplified the process by offering affordable term life insurance policies online.

You’ll receive fast quotes based on your answers to our questionnaire; no complicated medical exams are required! Our goal is to make getting started as easy as possible while keeping costs

How does a Dayforward policy work?

One of the reasons we love Dayforward is because its application process is very simple.

You’ll be asked for your income, details about your children, and depending on the answers to questions about your medical history and current status, you may be sent an at-home test kit.

You’ll need to manage it, as your policy is a plan for life that you can adjust as your life changes. 

If your income changes, your Income Protection can change as well. If you have another child, you can extend the length of your policy so your family is protected until your new child is grown up

If you pass away while your policy is in effect, your beneficiary will be paid the twice-a-month income that you protected, until the end of your coverage period (which is typically when your youngest child is grown up).  Plus, they’ll get $10,000 for funeral and other end-of-life expenses.  See how much total money your family would get, and what exactly happens if you die.

Do you pay taxes on life insurance?

Generally, most of the money received by the beneficiary should be tax-free, although death benefits may be partially or wholly taxable in certain situations.

Also, a small amount of the twice-a-month payments your beneficiary receives is technically interest that was accrued since the time the insured passed away. That “earnings” amount is taxable as ordinary income.

See your accountant or tax planner for more details on the tax treatment of life insurance death benefit payments in relation to your specific situation and policy.


Why we recommend Dayforward – Our Review Of The New To Texas Life Insurance:

Dayforward is a direct-to-consumer insurance company, that offers something completely unique for today’s families.

According to a study from JAG Institute in 2020, 1 in 17 children will lose a parent by the age of 18. This is exactly why a term life insurance company like Dayforward is a breath of fresh air for people with young families. If you have a young family, you want to make sure that if you die, your family will be financially secure until your kids are ready to leave the nest. So if most people buy life insurance to replace their income if they die, Dayforward finally created a type of life insurance that literally protects your income until your kids are grown up. 

How Dayforward Works

A Dayforward life insurance policy simply replaces your income by sending your family a twice-a-month payment equivalent to your income (or lower-income level you may decide to protect), and they will continue to receive those payments until your youngest child turns 18, 21, or even 26.

So if you were to die, your family’s standard of living can remain the same as it is today. Plus, your beneficiary will receive an additional one-time payment of $10,000 to help cover funeral costs and other afterlife expenses. 

The best part is, a Dayforward policy can be personalized to you and can be adjusted as your life changes through available add-on features (AKA riders) to meet your needs. So if you get a raise, you can increase the amount of income they protect with their Increase Income rider. Or if you have a new child, you can extend your coverage to protect the newest addition to your family until they grow up.

Benefits in summary: 

If you die, your family will continue receiving your income twice a month (like paychecks) until your kids are grown up. 

With Dayforward, most people only need one policy with the innovative add-on features that come with pre-set pricing.

If you get a raise, you can increase the income you’re protecting

If you have a new child, you can extend your coverage until they grow up

Additional one-time payment of $10,000 to help cover funeral costs

Coverage in summary: 

Protect your personal or household income of $12,000-$500,000 per year, with a term length ranging from 10-27 years

Ages 18-50 are eligible for instant coverage, max coverage until age 67

Coverage options as high as $10M on the first day of the policy term  

Where To Apply For Dayforward

Applying for a Dayforward Life Insurance policy only takes minutes and can easily be done all online. When you apply for a policy, Dayforward will ask you a few questions about your health and lifestyle, your date of birth, gender, annual income and the birthdate of your youngest child. If you’re not ready to apply just yet, you can use their quick price tool to get an estimate in seconds to see how much it could be to protect your family.

Dayforward even has a dedicated help email, a phone number, live chat service and a text option where you can connect with their non-commissioned licensed life insurance pros, who can answer your insurance questions and discuss your coverage and budget needs.  

How much does it cost? Dayforward Policy Pricing

If you’re in excellent health, coverage can start as low as $7 a month. While pricing may vary, they’ve designed their structure with the goal to be as affordable as possible. Their non-commissioned licensed life insurance pros are also a call (or email) away to help work with your budget to find coverage that fits you and your family’s personal needs. Plus, you are not required to make a yearly payment as premiums are payable monthly. 

Dayforward policies also provide valuable coverage for those who die later on in their policy, when their children are older. Beneficiaries will receive at least 3 years of income when filing a claim, even if the children have reached the final year of coverage

Pricing in summary:

Starting at $7/month based on excellent health

Premiums include a $5/month subscription fee, plus a cost per every $1,000 of the income Dayforward protects

Why Choose Dayforward

Dayforward offers a different kind of life insurance, one that completely changes how nearly all companies think about their policies and coverage options. Dayforward protects your family with life insurance that literally protects your income so if you die, their standard of living can stay the same until your kids are grown. 

Why we think Dayforward is the best option in the market

Semi-monthly income payments for your beneficiaries until your youngest child is 18, 21, or even 26

Guaranteed coverage whether you die early or late in the policy, with more coverage provided if you die early on than if you die later into your policy term

Low premium options are available 

The ability to adjust the policy after the purchase with pre-set pricing through their unique, available riders

A flexible policy designed to eliminate the need for supplemental insurance

Dayforward owners have saved an average of 10% over comparable policies. (A comparable policy’s coverage is 12x the annual protected income and the nearest Dayforward term length.)

Our Overall Rating ★★★★★

Legal Caveats: none of the content on this website constitutes financial or legal advice and should not be taken as such. Please consult a professional and speak directly to any and all insurance companies before taking out a policy and making decisions about any financial products.