Life Insurance Knowledge Center:
Click any of the following general topics to reveal all the helpful details.
DISCLAIMER: Statements on this website provide general information only as it relates to policies and coverages. All coverages are subject to the terms, conditions and exclusions of the actual policy issued — contact one of our licensed agents for questions regarding your specific needs and policy.
Choosing An Amount
The solution to “how much life insurance?” begins with a careful review of your financial situation. Two key categories:
- Immediate needs — final expenses, burial costs, estate taxes, unpaid mortgage balance, relocation expenses.
- Ongoing needs — monthly bills, mortgage payments, daycare, education, income replacement, retirement.
As a general rule of thumb: most people should have life insurance equal to 5–7 times their annual gross income.
Choosing The Type
Term Policies provide coverage for a specified period (10, 15, 20, or 30 years). They generate no cash value but offer the most coverage per premium dollar. Good if you need protection for a finite period.
Cash-Value Insurance combines death benefits with a savings/accumulation feature. The buyer pays more in early years, but money not needed for the cost of the death benefit accumulates as interest. Cash value can be used as loan collateral. Avoid surrendering cash value policies early — early surrender penalties may reduce or eliminate the cash value.
Choosing Beneficiaries
A beneficiary is the person or entity named to receive the death benefits. You can name primary, secondary, and final beneficiaries. Always name backup beneficiaries — if proceeds pass to your estate, they face probate delays and costs instead of reaching your family quickly.
Types of Life Insurance
Life insurance comes in two basic forms: term life and permanent (cash value) life. Each serves different needs and budgets.
Term Life
Coverage for a specific period. No cash value. Lower initial premiums. Best for finite protection needs.
Whole Life
Permanent coverage with cash value accumulation. Fixed premiums. Lasts your entire life.
Universal Life
Flexible premiums and adjustable death benefits. Builds cash value at current interest rates.
Adjustable Life
Lets policyholders adjust coverage, premiums, or protection period length as needs evolve.
Other permanent types: Limited-pay whole life, Current assumption whole life, Joint life (first to die), Survivorship (second to die).
Designating Beneficiaries
A beneficiary is the person or entity named to receive death benefits. Name both primary and secondary beneficiaries to ensure proceeds reach your family quickly — not your estate.
Primary Beneficiary
The first to receive the proceeds when you die.
Secondary Beneficiary
Receives proceeds only if primary beneficiary predeceases the insured.
Final Beneficiary
Receives proceeds only if they outlive all other named beneficiaries.
Multiple Beneficiaries
Specify percentage shares to avoid any ambiguity over distribution.
Revocable vs. Irrevocable: A revocable beneficiary can be changed at any time. An irrevocable beneficiary requires their consent to change.
Reading Your Policy
A life insurance contract is made up of provisions, options, and riders:
Provisions
Describe features, benefits, conditions, or requirements of the contract.
Options
Features requiring you to make a choice regarding some aspect of coverage.
Riders
Additional coverage (endorsements) added to the standard policy for an extra premium.
Tax Considerations
- Life insurance premiums are generally not tax-deductible.
- Death benefits paid to named beneficiaries are generally not included in gross income for federal income tax purposes.
- Be careful about policy ownership and beneficiary designations to avoid potential estate taxes on proceeds.
Planning Concerns
Life insurance can be a key element in specialized business and estate planning applications:
Estate liquidity — proceeds available almost immediately
Buy-sell agreement funding for business partners
Estate tax payment & final obligations
Charitable giving vehicle at death
Long-term investment vehicle (cash value policies)
Key-person insurance for businesses
Each situation requires careful consideration. Medical history and estate planning issues may also play a role. Contact Tillman/Allen Insurance in Brentwood, Tennessee to speak with a licensed professional about your specific needs.