Everything You Need to Know About Life Insurance

Life insurance is one of the most important financial tools available for protecting your loved ones' future. Yet, for many of us, it remains confusing and complex. 

Whether you're wondering if you need life insurance, what type to buy, how to handle an employer’s life insurance mistakes, or what to do if a claim is wrongly denied, this guide is here to help.

At Morgan & Morgan, we believe in empowering people with the knowledge they need to make informed decisions. That includes understanding your rights when insurance companies deny claims unfairly or act in bad faith. And when you need legal intervention, you can contact us for a free case evaluation to learn more about your options.

What Is Life Insurance?

Life insurance is a contract between you and an insurance company. You pay premiums, and in return, the company agrees to pay a lump sum (called a death benefit) to your designated beneficiaries upon your death.

The primary purpose of life insurance is financial protection. It ensures that your loved ones have the means to cover expenses such as:

• Funeral and burial costs
• Mortgage or rent
• Outstanding debts
• College tuition
• Everyday living expenses
• Estate taxes

The right policy can also serve as an investment vehicle or offer tax advantages, depending on the type you choose.

Do You Need Life Insurance?

You may benefit from life insurance if you:

• Have dependents (spouse, children, aging parents)
• Own a home or have substantial debt
• Are the primary earner in your household
• Want to leave a legacy or charitable gift
• Are a business owner and need to fund a buy-sell agreement
• Wish to cover estate taxes or provide liquidity for heirs

Even stay-at-home parents often need coverage, as replacing their services (childcare, household duties) can be expensive.

The Main Types of Life Insurance

Understanding your options is crucial to choosing the right policy. Here’s a breakdown of the most common types:

Term Life Insurance

Term life insurance is coverage for a specific period of time, be it 10, 20, or 30 years. It’s ideal for people seeking affordable coverage for temporary needs, with lower premiums and a simple structure. However, this insurance has no cash value and expires after the term.

For example, a 35-year-old parent buys a 20-year term life policy to protect their family until the kids are grown.

Whole Life Insurance

Whole life insurance is permanent coverage that lasts your entire life and is best for those seeking guaranteed death benefits and cash value accumulation. This insurance type builds cash value with fixed premiums, but it comes at a higher cost than term insurance.

Someone who wants to lock in lifelong coverage and build wealth through policy dividends would typically use whole life insurance.

Universal Life Insurance

Finally, universal life insurance is permanent coverage with flexible premiums and death benefits. This life insurance is best for people who want more control over their coverage and investment component. The pros are that it’s adjustable and can build cash value, but the cons are its complexity and potential for underperformance.

A high-income earner using life insurance as part of an estate planning strategy could benefit from universal life insurance.

Life Insurance Lingo: Terms to Know

There’s a lot of unique language that comes along with purchasing a life or AD&D insurance policy, trying to file a claim, or dealing with the insurance company. 

Here is a glossary of common life insurance terms and their meanings. 

AD&D: This stands for accidental death and dismemberment, a kind of insurance policy that pays out if the insured suffers very specific kinds of accidental deaths and serious bodily injuries. Commonly acquired through an employer. 

Active Employment: Many policies acquired through an employer require the insured be ‘actively employed’ to be eligible for coverage. Active employment can be defined slightly differently depending on the terms of the policy. 

Administrator: The administrator is the person or company responsible for managing a policy you acquired through your employer. The administrator may be your employer or a third party hired to handle your group’s policy and is responsible for keeping you notified of any changes to your coverage. They can be held liable if they fail to uphold this duty.

Beneficiary: The beneficiary is the individual selected by the insured to receive the proceeds of a life insurance policy.

Contestability Period: The contestability period, also called the incontestability period, is a period of time (usually the first 2 years after purchase) during which insurance companies can request medical and other records during an in-depth claim review if a claim is filed.

Conversions: If you have a policy through your employer and your employment status changes, be it through retirement, a layoff, or termination, you have the right to convert your group policy into an individual policy.  Administrators are required by law to provide you with notice of this right and instructions on how to convert your policy.  If you didn’t receive this when your employment ended, your claim may still be payable.

Dependent: Some policies offer coverage for an insured person’s spouse and/or children.  

ERISA: The Employee Retirement Income Security Act, or ERISA, is a federal law that governs most life and accidental death insurance policies acquired through an employer and supersedes state law. ERISA also impacts how claims are handled in numerous ways, including restricting your time to file an appeal if your claim is denied.  If you obtained your policy through your work, chances are ERISA applies to your claim.

Evidence of Insurability: This refers to the application process for some policies from some providers. Applicants will be required to provide evidence that usually includes medical records, though this can vary.

Exclusions: These pertain to injuries, accidents, and incidents that a policy doesn’t cover.

Grace Period: By law, insurance companies cannot terminate a policy immediately if a premium payment is missed.  The grace period is a period of time (typically 30 days) after a premium payment is due during which the policy is still active, and you have the opportunity to catch up on any payments. Even if this grace period is passed however, there may still be circumstances which would by law prevent the insurance company from terminating the policy. 

Insured: The insured is the person who is covered by the life or AD&D policy.

Insurer: The insurance company, also known as the provider. 

Lapse: Regular premium payments must be made to keep your life or AD&D policy in force.  If premiums are not paid, the policy can lapse, and claims are no longer payable. 

Misrepresentation: One of the most common reasons insurance companies deny claims is a misrepresentation on the application for insurance. Misrepresentations can be about your medical records or even your lifestyle. Do you go scuba diving? Getting your pilot’s license?  Planning your dream trip to Egypt? These may not seem relevant, but insurance companies consider activities like this to put individuals at a higher risk, and so they can deny claims if activities like these are not disclosed on the application. 

Next of Kin: The next of kin is the insured person’s closest living family member.  This is often a spouse, but could be a child, parent, sibling, or other family member.

Personal Representative: The personal representative (also called the Executor or Administrator) manages an individual’s estate after they die.  This person may be named in the individual’s will, or may be a family member who is willing to take on this responsibility. The personal representative may need to provide authorization for the insurance company to obtain documents needed to review your claim.

Policyholder/Owner: If you purchased your policy on your own, you are most likely the policyholder.  If you acquired your policy through your job, your employer is the policyholder.

While this glossary of terms can be used to help you navigate complex insurance policies and claims, the most important thing is not to let your life insurance company intimidate you with technical language. An experienced life insurance attorney at Morgan & Morgan can always help make the difference.

How Much Life Insurance Do You Need? Here’s How to Choose Your Plan

Here are a few things to look out for and keep in mind while you’re going through the sometimes-complicated process of purchasing life insurance. 

What Can You Afford To Pay Long-Term?

Any life insurance policy is going to require regular payments of premiums for the policy’s duration. Those payments will vary based on what kind of policy it is and how large the death benefit is. Often, those payments will have scheduled increases over time.

You need to make sure that you’ll be able to make those payments for the full length of the policy. Of course, the future is unknowable, but using a reasonable projection of what your financial situation will be over the entire course of the policy, you need to confirm that you’ll be able to afford those premiums. 

How Much Life Insurance Is Right for You?

There’s no one-size-fits-all number, but here are a few ways to calculate your needs:

1. Roughly 10–15x Your Annual Income

This rule of thumb provides a quick estimate, though it may overlook specific needs.

2. DIME Method

This life insurance calculation method factors the following:

• Debt: Mortgage, loans, credit cards
• Income: Number of years you want to replace income
• Mortgage: How much is left?
• Education: Tuition for kids or dependents
  
   

3. Human Life Value

This method calculates your lifetime earning potential and insures accordingly.

Working with a financial advisor can help fine-tune your number based on goals and assets.

Consider Hiring An Agent

A life insurance agent can walk you through the whole process by helping you understand your needs and options. A good agent will not only help you find the right policy, but they’ll also help you get a better deal financially and help you navigate what can be a complicated application process. 

But there’s a catch. Not all agents are great, and some are more interested in upselling or hitting numbers than they are in making sure their clients are taken care of. And you should be aware that some agents work directly for a specific insurer and will only sell that company’s products. If you have an agent you already know and trust, go right ahead. Otherwise, make sure you do your due diligence. Shop around, get references, and read reviews so you can make an informed decision. 

Life Insurance Scams to Avoid

Unfortunately, scams are common. Be cautious of:

• Agents pushing unsuitable products with high commissions
• Fake policies from unlicensed providers
• Calls or emails asking for personal info under false pretenses
• High-pressure sales tactics

Always research the insurance company’s rating (A.M. Best, Moody’s) and verify licensure through your state’s insurance department.

Common Riders and Add-Ons

Life insurance riders are optional provisions that enhance or customize your coverage. Common riders include:

• Accelerated Death Benefit: Allows you to access part of the death benefit if diagnosed with a terminal illness
• Waiver of Premium: Premiums are waived if you become disabled
• Child Term Rider: Provides life insurance for children under your policy
• Guaranteed Insurability: Lets you buy more coverage in the future without a medical exam

Riders can increase premiums slightly, but they offer valuable flexibility.

The Application Process

Here’s what to expect when applying for life insurance:

• Complete an application: Includes your personal, financial, and health information
• Undergo a medical exam (for most policies): Includes bloodwork, urine tests, and vitals
• Wait for underwriting: Can take a few days to a few weeks
• Receive an offer: With your premium, terms, and policy details
• Accept the policy and pay your first premium

Some policies offer no-exam life insurance, often with lower coverage limits and higher costs.

When Life Insurance Claims Get Denied

Despite paying premiums diligently, some beneficiaries find themselves in a tough spot when an insurer denies a claim. Common reasons include:

• Material misrepresentation: Incorrect or omitted info on the application
• Policy lapse: Missed payments may result in cancellation
• Contestability period issues: If death occurs within two years of purchasing, the insurer may investigate for fraud
• Exclusions: Such as death by suicide (within a certain period), illegal activity, or dangerous hobbies

If you believe a claim was wrongly denied, you may have legal options. At Morgan & Morgan, we fight for policyholders and their families when insurers act in bad faith.

What Is Insurance Bad Faith?

Bad faith occurs when an insurance company fails to uphold its end of the contract. Examples include:

• Unreasonable delays in claim processing
• Denying valid claims without proper justification
• Not conducting a thorough investigation
• Misrepresenting policy terms

If your life insurance claim was unfairly denied, our attorneys can help you file a lawsuit and potentially recover the death benefit, plus damages.

Things to Know About Employer Provided Life Insurance

Here are key insights you should know to protect your policy and make sure you get the payout you’re owed if the worst happens.

If you get fired, you still get to keep your policy. Without a new medical exam!

It’s the law. If you get terminated, even if due to sickness or terminal illness, you have the right to convert your policy from a group policy into an individual one. And here’s the important part: The insurance company cannot ask you to undergo a new medical examination or physical before granting you the new policy. It simply requires that you timely complete the necessary conversion forms and then pay the required premium to maintain your coverage.

This means that even if you’re suffering from a serious illness, even if that illness is what caused you to lose your job, you can keep your life insurance policy at the same exact terms. Without this, anyone suffering from an illness would likely be refused coverage and would lose their life insurance policy.

But you have to move quickly

In order to take advantage of this law, the policy has to be converted within 30 days following termination of your group insurance policy. If not, those policy terms may be lost forever.

This is something your employer should be telling you about and assisting you with. It is their legal responsibility to inform you about the 30-day deadline, and to give you detailed instructions on how to make the switch.

Lost the policy? It may not have been your fault

What happens if you didn’t convert the policy in time, and so it lapsed and was lost prior to death? The insurance company no longer has any legal responsibility to either cover you or issue payment of the death benefits, and the life insurance policy you’ve been paying for and relying on for financial protection is now void.

This happens far too often, and too often, it happens because the employer was negligent in their responsibility to inform and instruct. In those situations, the legal responsibility has now shifted: Away from the insurance company, and onto the former employer.

If your claim gets denied, hope is not lost

If the policyholder whose life insurance policy was allowed to lapse dies in a manner that would have triggered a payout had the policy not lapsed, the insurance company does not have to pay, and will not pay. This can be crushing to the family or other beneficiaries who were relying on that policy payout to keep afloat in an emergency.

But it’s far from over. That’s because the former employer can and should be held accountable for the full policy payout that wasn’t paid thanks to their negligence in failing to properly inform you of the need or the means to maintain your coverage Morgan & Morgan’s life insurance benefits attorneys have a long track of holding employers accountable for allowing crucial life insurance policies to lapse.

Bad Faith, Wrong Denials, and Competing Claims: Situations to Consult a Life Insurance Attorney

Unfortunately, insurance companies won’t pay the death benefit if they think they can get away with it, and they can be very creative in trying to do so. If that happens, know that you don’t have to fight alone for the benefits you need and deserve. Morgan & Morgan insurance recovery group attorneys have fought every tactic these companies attempt, and with the help of an attorney, you’ll have a much better chance of a successful resolution. 

Insurance Companies Denial Tricks

Not all life insurance claim denials are legitimate. Depending on the situation and the company in question, the bereaved family or hobbled business may face one or more of the following ploys: 

• Retroactive Cancellation: The insurance company will claim that the policy was voided, expired, or wasn’t paid for prior to the death.
• Death Doesn’t Qualify: It will claim that the way the policyholder died is not covered.
• Misrepresentation: It will allege that the policyholder misrepresented essential facts about himself or herself in the agreement, therefore voiding the policy. 

This is not an exclusive list. Insurance companies are exceedingly creative because denying claims means more money in their pocket.

Competing Claims

In addition to denied claims, other problems can arise with life insurance. Often, there can be a competing-claims dispute between a newly added beneficiary and the claimant, or a beneficiary who has been removed from the policy and still pursues a claim. Whether an ex-spouse, new spouse, a child, stepchild, friend, or business partner, these situations can be complicated. 

Determining the rightful beneficiary and proving their claim successfully can be taxing, painful, and lonely. Morgan & Morgan takes competing-claims cases, and we fight to get our clients the benefits they need and deserve. 

Don’t Give Up – We’ll Fight for You 

To start, a Morgan & Morgan insurance recovery attorney will review your case for free. And if we take your case, it will still be free. We work on a contingency fee basis, which means we get paid only if you win. And free means free — we won’t charge you for outside expenses like investigations or expert witnesses. In addition, in many of our cases, we are able to force the insurance company to pay our attorney fees and costs if we win.

Your insurance company won’t be happy to hear you’ve hired us. We have a well-earned reputation for being willing to do whatever it takes for our clients, including going to trial if we have to. 

Our team of experts and investigators will carefully go through the details, circumstances, and fine print of your case and insurance contract. Flimsy excuses and unfounded assertions will fade away, and your chances of getting your benefits will greatly improve. 

Call Us – Don’t Give Up

Life insurance isn’t just a policy; it’s a promise to the people you love most. Whether you're buying your first policy, reevaluating your coverage, or facing an unjust denial, the right information and the right legal team can make all the difference.

When insurance companies break their promises, we’re here to hold them accountable. With a team of over 1,000 attorneys and law offices in every state across the country, Morgan & Morgan is the nation’s largest plaintiffs’ firm, For the People, not the powerful.

If you believe your life insurance claim was unfairly denied, it’s important that you call us right away. The faster we get involved, the sooner your case might be resolved in your favor and the less likely you’ll miss an important detail that could cause problems if not dealt with in time. 

Let Morgan & Morgan help you understand your options and fight for what’s rightfully yours. Contact us today for a free case evaluation.