May 2 is National Life Insurance Day, an annual reminder for families to review their coverage.
Life insurance pays your family a tax-free lump sum if you pass away while the policy is active, which is why financial planners often describe it as the foundation of most household financial plans. Industry research has long shown that many American families either lack coverage entirely or carry less than they would need if something happened today. National Life Insurance Day, observed every May 2, exists in part to encourage families to close that gap.
This guide walks through what life insurance is, how the main types work, what factors influence coverage decisions, who tends to need life insurance, and how to start a conversation with a licensed agent from SandStone.
What is life insurance and how does it work?
Life insurance is essentially a contract between you and an insurance carrier. You pay regular premiums, and in exchange, the insurer agrees to pay a lump sum, called the death benefit, to the beneficiaries you name if you pass away while the policy is active. Your beneficiaries can use the proceeds to replace lost income, pay off a mortgage, fund education, settle final expenses, support aging parents, or fund a business buy-sell agreement.
Life insurance death benefits paid to a named beneficiary generally pass free of federal income tax under current law, which is one of the reasons advisors recommend life insurance early in the financial planning conversation.
What are the main types of life insurance?
The main categories of life insurance are term life, whole life, universal life, indexed universal life, and final expense (sometimes called burial or simplified-issue) coverage. Each one serves a different goal, so the right choice depends on what you want the policy to accomplish, how long you want it to last, and what fits your budget.
Term life insurance
Term life insurance covers you for a specific period, often 10, 15, 20, 25, or 30 years, and pays a death benefit if you pass away during that term. Term coverage is widely used by families who want substantial protection while children are at home or while a mortgage is being paid down. Many term policies also offer riders that allow you to access part of the death benefit if you face a qualifying chronic, critical, or terminal illness, although the availability and definitions of those riders vary by carrier.
Whole life insurance
Whole life insurance provides coverage for your entire life, builds cash value over time, and locks in a level premium that does not change as you age. Whole life premiums tend to be higher than term premiums because part of every payment funds permanent coverage and contributes to the policy’s cash value. Whole life can support estate planning, lifelong dependent care, and legacy goals.
Universal life insurance
Universal life insurance is permanent coverage with flexibility built in. Policy owners can adjust premiums and death benefits within limits set by the contract as their finances change. The policy’s cash value earns interest based on terms defined by the carrier, and the structure of universal life can vary significantly from one product to another, so a side-by-side review with a licensed agent matters.
Indexed universal life
Indexed universal life ties the cash value’s growth potential to the performance of a market index, such as the S&P 500, with a floor that protects against negative index years and a cap or participation rate that limits the upside. Indexed universal life can fit households that want permanent coverage with the potential for additional cash value growth, although the moving parts deserve careful explanation before purchase.
Final expense (burial) life insurance
Final expense, sometimes called burial or simplified-issue insurance, is a smaller permanent policy designed to cover funeral costs, burial expenses, and small final bills. Final expense often uses simplified or guaranteed-issue underwriting, which makes it a common choice for older applicants who want to protect their adult children from out-of-pocket end-of-life costs.
How much life insurance do I need?
The right amount of life insurance is a function of your financial obligations, your dependents, and your long-term goals. Two well-known frameworks help families think through the question:
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Income-multiple method. Some advisors suggest considering coverage equal to a multiple of your annual income, with the multiple climbing for younger earners with longer earning horizons or larger family responsibilities.
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DIME method. Many planners use a more individualized formula by adding up your Debt (excluding mortgage), Income replacement needed for the years your family would depend on it, Mortgage balance, and Education costs for your children. The total points to a death benefit that would cover what your family relies on you to fund.
What factors affect life insurance underwriting?
Carriers consider a range of factors when underwriting life insurance, including:
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Age at the time of application
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Tobacco and nicotine use
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Health history, current conditions, and prescription history
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Family medical history
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Height and weight
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Occupation and avocations (such as aviation, scuba, or motorsport)
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Driving record
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Foreign travel patterns
Younger, healthier applicants generally see broader product availability and more favorable underwriting outcomes, which is one of the reasons advisors encourage households to start the conversation early rather than wait.
Who needs life insurance?
Life insurance generally makes sense for any household where one person’s passing would create a meaningful financial hardship for someone else. Common situations include:
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Married couples with shared debt, a mortgage, or future college funding goals
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Parents with minor children at home
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Single-income households where one earner supports the family
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Stay-at-home parents whose work would cost real money to replace
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Business owners with partners, employees, or buy-sell obligations
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Adult children who want to protect aging parents from out-of-pocket end-of-life costs
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Anyone with co-signed debt that would pass to a relative
Life insurance can also fit households where no one currently depends on the applicant, but a change is on the horizon, such as marriage, a planned child, or a home purchase, since locking in coverage while you are healthy preserves your insurability for the future.
When is the best time to buy life insurance?
The best time to buy life insurance is generally the youngest, healthiest moment you can. Underwriting outcomes tend to be more favorable when applicants are younger and have not yet developed health conditions that affect eligibility. Major life events, including marriage, the birth of a child, a home purchase, or starting a business, are also natural triggers to review existing coverage or add a new policy.
National Life Insurance Day on May 2 is a useful annual reminder to revisit the question, although the practical answer for many families is simply “as soon as possible.”
Common life insurance misconceptions
“Life insurance is too expensive for my family.” Independent industry surveys consistently find that most consumers significantly overestimate the cost of life insurance, particularly term life.
“I have life insurance through work, so I am covered.” Group life insurance through an employer typically caps at one or two times your salary, often does not transfer when you change jobs, and rarely matches the level a family would actually need to maintain its lifestyle. Most households consider supplemental individual coverage in addition to any group benefit.
“I am young and healthy, so I can wait.” Insurability is not guaranteed in the future. A new diagnosis between today and the day you finally apply can change your eligibility, the riders available to you, or the underwriting class you qualify for.
“Stay-at-home parents do not need life insurance.” Replacing the unpaid labor of a stay-at-home parent (childcare, household management, transportation, meal preparation) costs real money. Many planners recommend that stay-at-home parents carry life insurance, although the right amount depends on the family’s situation.
How National Life Insurance Day can help your family
National Life Insurance Day is an opportunity to turn awareness into action. Use May 2 to:
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Pull out your current policy and confirm the death benefit, term length, and beneficiaries still match your situation
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Update beneficiaries if you have married, divorced, had a child, or experienced a loss since your last review
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Use a needs framework like the income-multiple or DIME method described above to sanity-check whether your current coverage still fits
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Request a no-cost review with a licensed agent from SandStone if you are not sure where you stand
SandStone offers complimentary life insurance reviews to clients and prospective clients.
How to get a life insurance quote from SandStone
Getting a life insurance quote from SandStone takes two simple steps:
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Visit the SandStone life insurance page to learn more about the types of coverage available.
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Click “Get A Quote” to launch the online quote tool and receive a quote immediately. The tool walks you through a few questions about your situation and returns options you can review on your own time.
If you prefer to talk through your options before requesting a quote, contact a licensed agent from SandStone Insurance Partners through our website, your nearest office, or your existing agent. SandStone is an independent agency serving households across Florida, Georgia, and South Carolina, and other states in the southeast.
Life Insurance FAQs
When is National Life Insurance Day?
National Life Insurance Day falls on May 2 every year. The day commemorates the long history of life insurance in the United States and serves as an annual reminder for families to review their coverage.
What is the simplest type of life insurance to understand?
Term life insurance is generally considered the simplest type to understand because it typically provides a fixed death benefit for a fixed period in exchange for a level premium, with no cash value component.
Do I need a medical exam to buy life insurance in 2026?
Many carriers now offer accelerated underwriting that can issue coverage without a paramedical exam for applicants who meet certain age, health, and coverage criteria. Whether you need an exam depends on your age, the amount of coverage you apply for, your health history, and the carrier’s underwriting program.
Is the life insurance death benefit taxable?
Life insurance death benefits paid to a named beneficiary generally pass free of federal income tax under current law. Estate taxes can apply in some situations, depending on policy ownership, the size of the estate, and applicable exemptions. For tax planning specific to your situation, please consult a CPA or estate attorney.
What happens to my term life policy if I outlive the term?
If you outlive your term policy, the coverage simply ends at the end of the term, and the insurer keeps the premiums you paid. Many term policies include a conversion option that allows you to switch to a permanent policy without new medical underwriting before a stated age.
Can I have life insurance through my employer and a personal policy at the same time?
Yes, you can carry life insurance through an employer and a personal policy at the same time. Many financial planners actually recommend supplementing group coverage with an individual policy that you own personally, since group coverage typically does not transfer when you change jobs.
How do I update the beneficiary on my life insurance policy?
To update a life insurance beneficiary, request a beneficiary change form from your carrier, complete it with your new designation, and return it to the insurer. SandStone’s licensed agents recommend reviewing your designations after every major life event, including marriage, divorce, the birth of a child, or the loss of a loved one.
What if I cannot afford the coverage I think I need?
A common approach is to purchase what fits your budget today and add additional coverage as your finances grow. Some coverage is almost always preferable to no coverage.
Can I buy life insurance for a family member?
You can typically purchase life insurance on a family member only if you have an insurable interest in their life and the family member consents to the policy. Insurable interest usually applies between spouses, parents and minor children, business partners, and certain caregiving relationships.
Ready to take action on National Life Insurance Day? Visit the SandStone life insurance page and click Get A Quote to receive a quote immediately, or find your nearest SandStone office to talk through your options first.
Disclaimer: This blog provides general educational information only. It is not insurance, legal, financial, or tax advice, and is not an offer to sell insurance, a solicitation, or a recommendation of any specific product, carrier, rider, or policy feature. Coverage availability, eligibility, premium, underwriting standards, and policy features vary by state, carrier, age, health, and individual circumstance, and they may change over time. Any product or feature references in this article are general industry descriptions and do not represent any specific carrier, plan, or guaranteed outcome. Tax outcomes depend on individual circumstances, and you should consult a qualified attorney, CPA, or financial professional for advice tailored to your situation. For coverage recommendations specific to your household, contact a licensed agent from SandStone Insurance Partners.
