If you’re thinking about how your family would manage without your income, life insurance is usually where that conversation starts. The two questions we hear most are what it is and what it actually covers.
At Client Benefit Insurance Services, Inc. (CBIS), we help people around San Diego sort through their options every day. Here are the basics.
Want the full beginner’s guide, including how policies work and the main types? Read Life Insurance 101.
What is life insurance?
Life insurance is a contract between you and an insurance company. You agree to pay a monthly or yearly premium. In return, the insurance company pays a benefit to the people you name, called your beneficiaries. That payout is generally income-tax-free.
Your beneficiaries can spend that money however they need to, for example to:
- Cover outstanding debts or a mortgage
- Keep up with everyday bills and childcare
- Maintain their quality of life
What does life insurance cover?
Most policies pay out in a wide range of situations, but every policy also has exclusions. Here is what a policy usually pays for, and what policies usually leave out.
Commonly covered
- Illness, including conditions linked to age
- Accidents, such as a car crash or a fall
- A terminal illness diagnosis, on policies that allow early payment of part of the benefit
- Living Benefits on some policies (more below)
Some policies include riders that may let you access part of the benefit early after a qualifying illness such as cancer, stroke or heart attack. The details vary by policy, so ask what a specific rider includes. Our post on life insurance with living benefits goes through how these riders work.
Typically not covered
- A self-harm exclusion in the first years of the policy (the length varies by carrier and state)
- Illegal acts or criminal activity
- Misrepresentation on the application, such as leaving out a medical condition
- Risky hobbies or activities you didn’t disclose in advance
Read the exclusions section of any policy before you sign. If something in it isn’t clear, ask us and we’ll go through it with you.
Types of life insurance to consider
There are several kinds of life insurance. The three most common are below. For a side-by-side look at the first two, see our post on term vs. whole life insurance.
1. Term life insurance
- Lasts for a set term, often 10 to 30 years, with some longer
- A common fit when you have a mortgage, kids at home or a business loan
2. Whole life insurance
- Builds cash value over time
- Meant to last your lifetime, as long as premiums are paid
3. Universal life insurance
- Flexible premiums, and cash value that earns interest at a rate the insurance company sets
- Some versions credit interest based on a market index instead
- Details vary by policy
What can life insurance help with?
Life insurance matters when someone counts on your income. A few situations we hear about often:
- You have a mortgage and want your family to be able to stay in the home
- You have kids at home and want their plans to stay on track
- You took out a business loan and want it covered
- You and a partner split the bills, and the budget depends on both incomes
Housing and everyday costs in San Diego are high, so a family that loses an income can fall behind quickly. A policy gives them time to adjust.
How much coverage do people look at?
There is no single number that fits everyone. Most people start with a few questions:
- Income: How many years of your income would your family need replaced?
- Mortgage: What is the balance on your home loan today?
- Other debts: Do you have car loans, credit cards, student loans or a business loan?
- Kids: How many more years will your children be at home?
Put those together and you have a starting point. We can walk through it with you and show how different amounts and policy types compare.
How CBIS can help
We’re a licensed, family-owned agency. We compare plans from multiple carriers and help you find coverage that fits your needs and your budget.
Here’s what working with us looks like:
- One-on-one consultations by phone or video call
- A clear explanation of all your options
- Support throughout the application process
FAQs
Is the payout taxed?
The payout to your beneficiaries is generally income-tax-free. If it’s paid out with interest, the interest part may be taxable. A tax professional can look at your own situation.
Can I get coverage with a health condition?
It depends on the carrier and its underwriting. Each one looks at health history a little differently. CBIS can compare options across carriers and show you which ones may fit.
Should I get term or whole life?
It depends on how long you need coverage and what you want the policy to do. Term covers a set number of years. Whole life is meant to last your lifetime and builds cash value. Our post on term vs. whole life insurance walks through the differences.
Do I have to come into an office?
No. CBIS works by phone or video, from the first question to the finished application.
Ready to talk with CBIS?
No broker fee on life insurance.
You can also reach us any of these ways:
- Call or text CBIS at (858) 283-7575
- Email customerservice@cbisusa.com
- Book a free consultation by phone or video call (opens in new tab)
Family-owned since 1982, based in Santee.
We help families across San Diego County compare life insurance from 80+ carriers rated A or better for financial strength by AM Best.
CA Agency Lic. #0F09685.