Life insurance pays a tax-free death benefit to your beneficiaries when you die, covering most causes of death — illness, natural causes, and accidents. The main exclusions are suicide in the first two years and misrepresentation on your application.
By the Home & Dime Editorial Team · Updated 2026 · 7 min read
Life insurance is really about the people who depend on you. This guide covers what’s protected, the two main policy types, how much you need, and how to choose beneficiaries.
What life insurance covers
A policy pays your beneficiaries the death benefit for nearly any cause of death once the policy is active, including illness and accidental death.
Term vs. whole life
Term life covers a set period cheaply; whole life is permanent and builds cash value at a much higher cost. Term is right for most families.
Common misconceptions
What people get wrong
- It covers most causes of death, not just accidents.
- Suicide is excluded only in the first two years, then typically covered — see suicide coverage.
- You don’t always need a medical exam, though it usually lowers your rate.
- Stay-at-home parents should be insured too (childcare and household costs).
How much do you need?
A common guideline is 10–15 times your income, adjusted for your mortgage, debts, and future costs like college, minus existing savings.
Choosing beneficiaries
Name both a primary and a contingent beneficiary, and update them after marriage, divorce, or a new child — the policy overrides your will. See beneficiaries explained.
Cost considerations
Premiums depend on your age, health, coverage amount, term length, and whether you take a medical exam. Buying young and healthy locks in the lowest rates.
About this guide
Written by the Home & Dime Editorial Team. Reviewed for accuracy against Insurance Information Institute (III), Consumer Financial Protection Bureau (CFPB), FEMA, and state Department of Insurance guidance. Last reviewed: 2026. We update this guide whenever coverage rules change.
Frequently asked questions
Does life insurance cover natural death?
Yes — illness and natural causes are covered.
Does it cover suicide?
Usually not in the first two policy years, then typically yes.
Do I need a medical exam?
Not always, but a fully underwritten policy usually costs less for healthy applicants.
Which is better, term or whole life?
Term is best for most people; whole life suits lifelong or estate needs.
Related guides
- Term vs. whole life insurance
- How much life insurance do I need?
- Life insurance beneficiaries explained
- Insurance glossary
Sources: Insurance Information Institute (iii.org); Consumer Financial Protection Bureau (consumerfinance.gov); FEMA (floodsmart.gov); state Departments of Insurance. This guide is general information, not personalized insurance advice.
Complete Life Insurance guide
Every life insurance question we’ve answered, in one place:
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