What life insurance is: a policy that pays out if you die.
When you need it: if your death would cause financial hardship to someone, like a spouse.
How it’s priced: based on life expectancy. Any factor reducing life expectancy, like heart disease, will likely mean a higher price.
Comparing prices: Even if you have medical conditions, compare life insurance quotes from several companies. Insurers are competing for your business.
When you apply: A life insurance medical exam is often required. Insurance companies typically also look at your medical records, use prescription-drug databases to see what medicines you take, pull your driving record, and access a database with your answers for previous life and health applications.
Easiest life insurance to understand: term life insurance. You choose only the policy amount and the length.
Cash value life insurance: policies that contain an account that can build up money over time. Eventually you can withdraw the money or take a loan against it. Policies with cash value include whole life, universal life and variable universal life. Term life insurance has no cash value.
Once you buy: Your rates can’t go up once you have a policy, even if you develop new health conditions.
Life insurance payout: called a death benefit. It will go to the person (or people) you designate as the beneficiary.
Note on minor children: They cannot receive life insurance money directly. If you’re buying life insurance to benefit children, you should set up a life insurance trust for them.
This article was provided to The Associated Press by the personal finance website NerdWallet. Email NerdWallet insurance expert Amy Danise: firstname.lastname@example.org. Twitter: @AmyDanise.
NerdWallet: How and why to set up a life insurance trust for your children https://nerd.me/2iJ8eOq
Database of previous life and health insurance application answers: http://www.mib.com