(800) 253-1482Life Insurance in Texas – Types, Quotes, FAQs
Summary: There is a wide range of life insurance policies available with the two main types being term life and permanent. Each can fit a specific need, including covering final expenses or generating a potential cash benefit you can borrow from. Many factors affect your policy with younger policyholders paying cheaper premiums on average. Compare life insurance companies to find the best protection for your family at the lowest cost. Estimated Read Time: 19 mins
Table of Contents:
Preparing for the end is an uncomfortable reality everyone must face sooner rather than later and while we all hope to extend our lives, it’s important to be prepared. This is where life insurance comes in.
Having a life insurance policy is important for families regardless of age and can be a strong financial tool to help offset the loss of income and final expenses death brings.
Additionally, your life insurance plan may also help you invest and accumulate interest, depending on your needs and the type of policy you decide is right for you.
Understanding your options and what you need in coverage is going to help you navigate life insurance.
Below, we’re looking at the different types of policies available, how to get a free online quote, and some common questions many Texans have regarding life insurance.
What Is Life Insurance?
Life insurance is a contract between a policyholder and an insurance company that pays a death benefit (sum of money) to the chosen person(s) stated on the policy known as beneficiaries.
Sometimes, your life insurance policy also covers terminal or critical illnesses.
You pay premiums regularly or as a lump sum, depending on the details of your policy. The money can help cover funeral expenses or other costs.
Each life insurance company includes terms within its contracts to detail how you are covered, however, policies aren’t blanket coverage.
Some things, like suicide or fraud, might not be covered, depending on your policy.
There are also many different types of life insurance to be aware of.
Some policies focus on protection, giving a lump sum if something happens. Others, like whole life or universal life, focus on building savings over time.
Types of Life Insurance
The two main types of life insurance are term and permanent. Both of them have their own advantages for your coverage and just as important, each category has its own generous choice of options.
Final expenses, investments, and covering loved ones after you pass is something that looks very different for everyone. Therefore, having a variety of life insurance policies is a major benefit.
Finding the best life insurance is going to mean comparing your coverage needs, your expenses, and how each policy can help you cover them affordably.
On the surface, this can feel like a daunting task by working with a licensed life insurance agent, you can identify your risks and find an appropriate solution.
Here are the many different options you have for your coverage to help you get started:
Term Life Insurance
Term life insurance pays beneficiaries if the policyholder passes away during a set time frame. After the term outlined in the policy ends, policyholders have the option of renewing, converting it to permanent coverage, or letting it lapse.
This type of insurance guarantees a death benefit payout to beneficiaries. Unlike permanent life insurance, term policies don't build cash value.
Premiums depend on many factors, including age, health, and life expectancy.
How long your term lasts is outlined by term life insurance plans, which typically last 10, 15, or 20 years, if not more.
Depending on your carrier and the details of your policy, you can renew your policy when the term is up for an additional term.
Beneficiaries have many different products available that can help cover final expenses, including these term life insurance types:
Renewable Term Life Insurance
A renewable term clause in an insurance policy lets the beneficiary extend coverage without re-qualifying, so long as the premiums are up to date and a renewal premium is paid.
This clause is beneficial for unpredictable health situations. Initial premiums may be higher to cover increased risk.
Many financial advisors suggest opting for policies with renewable terms. Most term life policies offer this option, but not all. Be sure to read the fine details and discuss your needs with a licensed agent.
Convertible Term Life Insurance
Convertible insurance allows you to switch from temporary to permanent coverage without a new health screening.
If you’re looking for a term life insurance policy that offers flexibility, a convertible plan is a great option to consider.
You can start with affordable temporary coverage and upgrade later.
As long as you meet policy conditions, like paying premiums on time, you can convert without undergoing a new medical screening.
You can expect higher premiums when you switch to a permanent life insurance policy, but you also receive lifelong coverage, level premiums, and tax-free cash value accumulation.
Furthermore, each policyholder needs to remember, that the conversion feature is an option benefit and you don’t have to use it if you choose not to do so.
Return of Premium Life Insurance
A return of premium (ROP) rider offers a refund for term life insurance policies. If you outlive your policy, you will get back your payments.
Without an ROP rider, the policy ends with no benefit if you're alive at the term's end, even if you have paid monthly to keep the policy active.
If you live past the term, the life insurance company refunds some or all of your payments.
Your refund may not be taxed in most cases unless there's a gain that requires reporting.
Keep in mind that missing payments may disqualify you from the benefit, meaning you’ll need to be sure you are timely with your premium.
If you die during the term, beneficiaries receive the death benefit. ROP riders are popular instruments for cautious individuals seeking extra financial protection.
Level-Term Life Insurance
Level-term life insurance offers a steady death benefit throughout the policy's duration.
Whether you pass away early or late in the term of your policy, your beneficiaries receive the same payout.
Also known as level benefit term life insurance or decreasing term life insurance, it ensures a consistent death benefit.
This predictability allows for straightforward planning, providing a fixed amount for beneficiaries.
Furthermore, with level premiums, budgeting becomes simpler as the premium remains constant over time, facilitating easy budget management as long as the policy remains unchanged.
If costs are a concern, level-term life insurance is a great consideration as it’s typically cheaper over time.
Health and age are big factors when it comes to how much premium you spend on your coverage.
With a decreasing term life insurance policy, your premium rate locks in at the rate you sign up for based on your current health.
Mortgage Life Insurance
Mortgage life insurance is a term policy aimed at covering mortgage debts if the borrower passes away.
Unlike traditional life insurance, a life insurance housing loan pays out only if the borrower dies while the mortgage is active. With these policies, the lender is the life insurance beneficiary.
The policy's term matches the mortgage duration, with the death benefit decreasing yearly to match the reduced mortgage balance.
There are two main types: decreasing term, which decreases with the mortgage balance, and level term, which remains constant.
Before opting for mortgage life insurance, consider its terms, costs, and benefits, as well as both the borrower's and mortgage's lifespan.
Permanent Life Insurance
Permanent life insurance covers the insured person for their entire life and includes a savings element that earns interest tax-deferred.
The two main types of permanent policies are whole life and universal life.
Whole life, otherwise known as full life insurance, guarantees a cash value growth rate, while universal life policies offer more flexibility in premiums and also earn interest based on market rates.
Other options like variable life and variable universal life allow investing the cash value in various financial instruments.
Before choosing a policy, research different life insurance companies and types of policies to determine the best option for your needs:
Whole Life Insurance
Having a whole life policy provides coverage throughout the entire life of the person being insured.
Policyholders cover the premium and whole life insurance provides a tax-free death benefit as well as savings in which cash value can build. You can also defer the taxes on the interest generated from the policy.
This term applies to a variety of permanent life insurance plans, including universal life, indexed universal life, and variable universal life coverages.
While you can withdraw cash from your policy, it’s worth noting that these loans reduce the amount of the death benefit if not repaid before the insured person passes away.
Cash Value Life Insurance
Cash value life insurance is a permanent policy with an investment component that generates interest and can be withdrawn or borrowed against in emergencies.
These policies typically offer both a death benefit and cash value while premiums contribute to both life insurance coverage and cash value accumulation.
Interest generated is tax-deferred but earnings vary depending on the policy type chosen.
Universal Life Insurance
Universal life (UL) insurance offers flexible permanent coverage with a cash value component.
Unlike whole life, UL lets you adjust premiums. However, if investments perform poorly or premiums are too low, it may affect the death benefit or policy status.
Policyholders can borrow against cash value with no tax implications, but withdrawals may be taxed.
Adjustable Premium Term Life Insurance
Adjustable life insurance, also called universal life, offers flexibility by allowing changes to premium payments and death benefits post-purchase.
Policies feature a cash value account, which is an interest-bearing savings component accessible during the policyholder's lifetime.
While offering adaptability, keep in mind managing adjustable life policies requires effort.
Key points to consider include the ability to modify your life insurance rates, death benefits, and cash values based on evolving life circumstances.
The cash value growth enables borrowing or premium payment usage, though the interest gains are usually modest.
Guaranteed Life Insurance
Guaranteed-issue life insurance doesn’t require you to take a medical exam or answer medical questions. If you’re looking for no medical test life insurance, coverage is available but the premiums are usually higher.
Also called guaranteed acceptance life insurance, you receive permanent coverage, even if you’re older or have serious health issues.
If you are having trouble finding coverage because of your age or health, guaranteed issue life policies can be a great solution.
Variable Life Insurance
Variable life insurance is a type of permanent policy with an investment component that includes a cash-value account invested in assets like mutual funds.
Unlike term insurance, it provides coverage until death, but keep in mind that the cash value may fluctuate based on investments, making it riskier.
Premiums can be allocated to a fixed account to reduce risk. Variable life policies offer tax advantages and potential tax-free income but are considered more volatile than standard life insurance.
It’s important to assess your risks with a licensed agent and/or financial advisor before making a decision.
Different Types of Life Insurance for Unique Coverage
While there are two main forms of coverage, we understand that certain life events can cause you to search for appropriate life insurance solutions. Here are a few unique coverage options and how they help your family:
Senior Life Insurance
Life insurance for seniors is tailored for older individuals aiming to cover final expenses and provide protection for their families.
While these policies resemble standard life insurance plans, they often offer fewer additional features.
Options include both term life insurance and whole life insurance policies, and there is typically a cash value component for expenses like mortgages and medical bills, alongside the death benefit for beneficiaries to handle final expenses.
Many children often search for life insurance for parents when their loved ones are reaching an advanced age to help their families prepare.
Keep in mind that children purchasing coverage for parents will save money the earlier in life their parents are at the time of the policy and you generally must get their permission to enroll them.
Parents who are seniors will need to typically undergo medical exams before being accepted by life insurance companies for coverage.
Supplemental Life Insurance
Supplemental life insurance, also known as voluntary coverage, extends beyond your employer's group policy and is accessible either through your workplace or privately, enhancing your basic coverage.
Basic employee life insurance is often free or low-cost, while supplemental insurance boosts coverage with an extra premium.
Employers typically offer basic group life insurance with a death benefit of $25,000 to one or two times your salary, often at minimal or no expense.
Supplemental coverage, available alongside your basic plan, increases the death benefit for a higher premium, ensuring ample financial support for beneficiaries.
Not all employers offer supplemental coverage and some that do won’t offer the right amount of flexibility for your needs.
You can find standalone policies from private insurers offering typically more choices and affordability compared to workplace supplemental insurance.
Life Insurance for Kids
The loss of a child is always a tragedy and while you may think it could never happen, we sadly never know when our time is up.
Parents or guardians typically procure life insurance for children as a precautionary measure in the event of their child's untimely passing.
Life insurance for kids is often either term-based, covering the child until adulthood, or permanent, offering lifelong coverage at a fixed, lower rate due to the child's youth after the policy is converted.
It's important to differentiate child life insurance from a child rider, which is an alternative form of coverage added to a policy.
With life insurance for kids, the parent or guardian is typically the beneficiary that receives the death benefit.
Additionally, parents often opt for child life insurance to secure future financial support.
Mutual Life Insurance
Mutual life insurance policies are coverage from companies of the same name that don’t have investors outside of their policyholders.
Working with an elected board of directors, mutual carriers typically issue participating life insurance policies, that may pay dividends based on the company's financial performance, alongside nonparticipating policies like term and universal life insurance.
A key difference lies in how each type of company raises funds: mutual insurers issue debt or borrow from policyholders, while stock insurers can raise capital by issuing more stock, granting them greater financial flexibility.
Many insurers have undergone demutualization, transitioning from mutual ownership to stock ownership, though coverage options through mutual carriers still exist.
How Much Life Insurance Do I Need?
Calculating the amount of coverage you need can be done in many different ways. Ultimately, you need to find coverage that meets your needs, which varies from person to person, and as a result, there are many different popular calculations to choose from:
- Many experts believe your life insurance policy should provide a benefit equal to 10 times your yearly salary.
- Another method many people use is multiplying their yearly salary by how many years they have left until they retire. Retirement can look different for everyone. To keep up with the latest retirement ages set by the government, you can use the retirement age calculator provided by the Social Security Administration (SSA).
- The standard-of-living method considers the money your family needs to live the same lifestyle once you pass away. You multiply this figure by 20 to determine the amount of coverage you'll need.
- Finally, you can use the Debt, Income, Mortgage, Education (DIME) method, which seeks to determine how much coverage you need to pay off your debts and replace your income for your family until your kids turn 18.
Regardless of which method you choose, working with a licensed agent can help you identify your needs and the best method of covering them with a life insurance policy.
How Much Is Life Insurance?
The only way to really know how much you’ll pay for a policy is to compare life insurance quotes. On average, many policyholders pay under $30 per month while others pay less than $170 per month.
There are several factors that can affect these differences and it’s important to know what variables will affect your rates and why:
Age
Age significantly influences life insurance premiums, with younger individuals generally paying less due to their longer life expectancy.
As you age, premiums typically increase by around 9% per year on average. Waiting to purchase life insurance means higher premiums later on.
Term life insurance premiums remain constant annually, but renewing coverage may result in higher premiums due to aging and potential health changes.
Whole life insurance premiums remain steady. However, as you age, medical exam requirements may become stricter.
Gender
Gender plays a pivotal role in determining life insurance premiums. Insurance companies employ statistical models to estimate life expectancy based on individual profiles.
Since women generally outlive men by almost five years on average, they typically enjoy lower insurance rates, but remember, many other factors will affect your rate regardless.
Health Factors
Many health factors are going to affect the cost of your life insurance policy, which is why for the most part, you're going to have carriers conduct underwriting processes that entail a medical examination, to assess various health factors.
This includes looking at the insured person's height, weight, blood pressure, cholesterol, and sometimes electrocardiogram (ECG or EKG) results to evaluate heart health.
Managing significant conditions such as high cholesterol and diabetes beforehand is crucial for obtaining competitive rates.
While some carriers offer life insurance with no medical questions, these policies typically come at a higher cost.
Additionally, a family history of stroke, cancer, or other serious illnesses may elevate insurance rates due to predisposition.
Insurers often consider familial health issues, particularly if they lead to premature deaths, with some companies weighing family health history more heavily than others.
Finally, smoking substantially heightens health risks, leading insurance companies to charge smokers significantly higher premiums, sometimes double those of non-smokers for comparable coverage.
Even occasional smoking of cigarettes, cigars, or vaping can lead to smoker classification by insurers, and providing false information about smoking habits risks policy cancellation if discovered.
Lifestyle Factors and Risky Behaviors
Engaging in high-risk activities like racing cars, scuba diving, or rock climbing typically results in higher insurance premiums.
Similarly, if the insured holds occupations with inherent dangers, you can expect premiums to be elevated as a result.
Life insurance companies also commonly review driving records as part of underwriting.
Even if violations aren't explicitly queried on applications, carriers can access Department of Motor Vehicles records.
Recent infractions, typically within the last three to five years, heavily influence premiums, but demonstrating improved driving behavior may lead to more favorable pricing.
Life Insurance Types and Coverage Limits
You’ll find that life insurance benefits come in all shapes and sizes. The type of policy you choose along with the coverage limits they provide is going to affect how much you pay for a policy.
If you want a policy with certain features or perks, you may also pay higher rates. It’s important also to remember that the cost of your life insurance policy will be affected by the carrier you choose as well.
Is Life Insurance Worth It?
Life insurance isn't solely for individuals of a certain age. Policies can benefit a wide range of age groups as the focus of your coverage should be to align protection with your life circumstances.
In other words, when you enroll in the right life insurance coverage, it’s a great investment.
Whether you're a young healthy 20-year-old or an older adult preparing for final expenses, your financial situation and coverage duration matter most.
You’ll want to weigh the differences between term life insurance and permanent life policies along with your needs to determine which best benefits your life in the present and future.
Overall, life insurance offers financial protection, easing the burden on loved ones by covering debts, living expenses, and final costs making it a worthwhile investment for families.
Get Texas Life Insurance Quotes
Shopping online for life insurance doesn’t have to be time-consuming. Receive free, accurate life insurance quotes online with just a few clicks and no obligation.
Freedom Insurance Group is proud to partner with top-rated carriers that can help you find personalized coverage that meets your needs both while you’re alive and after you’ve passed on.
Is Life Insurance Taxable?
Life insurance payouts for beneficiaries are usually tax-free and don't need reporting. However, any interest earned on the payout is taxable and should be reported.
If you acquired the life insurance policy for value, your exclusion for proceeds is limited to what you paid plus certain other amounts.
Keep in mind that exceptions to this rule exist and for any tax-specific questions, it’s important to work with a licensed financial professional before making any decisions.
If you do have a taxable amount due to a life insurance plan, you can report it on whichever income document you are given that is accepted by the IRS.
Does Life Insurance Cover Suicide?
Yes, beneficiaries may still receive a life insurance payout if the policyholder dies by suicide, but exclusions may apply.
Military life insurance policies like Veterans’ Group Life Insurance (VGLI) and Servicemembers’ Group Life Insurance (SGLI) typically pay out regardless of the cause of death, including suicide or acts of war.
Accidental death coverage depends on circumstances and what the insured disclosed at application.
Prescription drug overdoses may be covered if disclosed, but not illegal drug overdoses.
Most policies have contestability and suicide clauses, lasting two to three years after the policy starts. After expiry, life insurance suicide coverage is typically included.
The policy’s contestability clause assesses death circumstances for fraud. After it ends, only serious infractions are likely to deny claims.
Exclusionary periods restart with policy changes, except for maintaining the same death benefit and converting from term to whole life.
As long as contestability and suicide clauses expire without evidence of fraud, life insurance for suicide should cover the incident and the death benefit paid.
If suicide occurs within the exclusionary period, or if ruled by law enforcement or a medical examiner, the carrier may deny the claim.
Disclaimer: If you or a loved one is experiencing a crisis, help is available. Talk to someone now by clicking the link, or call or text 988 to speak with a counselor 24/7 free and confidentially through the Suicide and Crisis Lifeline.
Can You Borrow From Life Insurance?
You can borrow money from your policy, but each company has its own rules for taking out a life insurance loan.
When borrowing from life insurance, usually, you can borrow up to 90% of the cash value.
However, you can only borrow when there's enough cash value, and it might take a few years to build up. Furthermore, only whole-life or universal-life policies allow borrowing because term policies don't build cash value.
Life insurance loans from the policy lower the death benefit if not repaid and interest is added to the loan, which can cause the policy to end if not paid.
Unlike bank loans, life insurance policy loans don't affect your credit and there's no approval process or credit check since you're borrowing from yourself. You can use the money for anything without having to provide an explanation.
Another great perk is that since the loan isn't counted as income by the IRS, it's tax-free as long as the policy stays active.
Keep in mind you'll still need to pay back the loan with interest, but rates are usually lower, and there's no required monthly payment.
Can You Have Multiple Life Insurance Policies?
Yes, you can have more than one life insurance policy, and it’s an important consideration, depending on your needs, as sometimes, one policy isn't enough to cover larger items, such as buying a house or having a baby.
You may want one life insurance policy to help your family financially and another to focus on covering the cost of your long-term care expenses.
By doing so, if you get sick when you're older, your care costs can be covered and you still have funds dedicated to helping your family.
In some cases, buying different term lengths can also save you money on premiums rather than purchasing a longer term with higher coverage.
Overall, if one life insurance doesn't cover all your final expenses, you can get another to help with funeral costs. Speak with an agent to see what’s best for you.
