Life Insurance 101: what you need to know
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Key takeaways
- Life insurance is a way to help provide financial protection for your loved ones.
- Policies generally fall into two main types: term life and permanent life insurance.
- Term life insurance provides coverage for a set period of time, while permanent life insurance lasts for your lifetime and usually includes a cash value component.
- The cost of a policy can vary based on factors such as age, health and the type of coverage selected.
- The right policy and coverage amount can depend on your personal situation and financial needs.
Learning about life insurance can feel complicated. To make things easier, we’ve pulled together the top 9 answers in one place. Whether you’re just starting out or brushing up on the basics, this is a great place to get all the info you need.
Q
Do I need life insurance?
A
Let us answer your question with a question: Will someone (a family member especially) suffer financially if you die? If the answer’s yes, then YES. You need life insurance.
The cash benefit of your life insurance will be needed to help replace your income so that your family and those left behind can continue on with their lives. This will help to take care of their immediate financial needs and hopefully their long-term ones, too. Losing you would be tragic enough. You don’t want them to have to make even more drastic changes to their future plans as well.
Q
How does life insurance work?
A
Life insurance is a contract between you and an insurer. You make regular payments, and, in return, your policy provides payments to your beneficiaries after you pass away. Getting started typically involves filling out an application and providing some personal information. Once finished, the insurer determines the details of your coverage. After your policy is in place, you’ll continue to make payments to keep it active. If a claim is made, the insurer reviews it and, if approved, pays the benefit to your beneficiaries.
Q
Isn’t the life insurance I have through work enough?
A
While it’s true that many employers offer life insurance as part of their benefits, it’s usually a “term policy” (more on that below) that’s equal to one or two times your annual salary. This is called group insurance, and it’s a really nice benefit to have. But it’s typically not enough to meet most people’s needs — especially if you have a family or plan on starting one.
Q
How much insurance coverage do I need?
A
Everyone’s financial goals and needs are different, so there’s no hard and fast rule of thumb. Depending upon the size of your family and their ages, you’ll want to account for their financial needs. This can include day-to-day basic living expenses to longer-term needs like paying for college, paying off the mortgage and retirement for your spouse. When considering all those needs, you may find you actually need somewhere between 5 to 10 times your current salary in coverage or more.
If you want a more personalized estimate, John Hancock’s life insurance calculator can help. Just answer a few simple questions to get an estimate of how much coverage may fit your needs.
Q
What kinds of life insurance are there?
A
The short answer is that there are two main categories: term and permanent.
Term life insurance: As the name implies, term insurance provides protection/coverage for a specified period of time. A term policy for 20 years is common, but you can get term protection for anywhere from 1 to 30 years. This type of coverage might make sense if you need coverage for a set period of time for events like your child’s college graduation or paying off your mortgage.
Term insurance offers the greatest amount of coverage for the lowest initial cost (premium), making it a good choice for young families or people on a tight budget. But it only pays a benefit if you die during that term. It does not offer any potential internal cash value build up like you could get with a permanent policy.
Permanent life insurance: This type of policy offers you lifelong protection, including a death benefit and the added advantage of the potential to accumulate tax-deferred cash value. Any cash accrued from the policy can be withdrawn to pay for personal expenses or bills or as a supplement to your retirement income.1
With that in mind, why doesn’t everyone just choose permanent insurance?
Cost.
The initial premiums you pay for a permanent policy are much higher than those for the same amount of coverage of a term policy.
No matter what policy you choose with John Hancock, they all come with the Vitality Program. It’s the only life insurance that helps protect your family into the future and rewards you today for the things you do to live a longer, healthier life. Activities like going for a walk, buying healthy food, getting a good night’s sleep, and more earn you rewards you can benefit from today. Learn all the ways you can benefit from the John Hancock Vitality Program here.
Q
How can I get life insurance?
A
In addition to your employer-provided life insurance, you can purchase insurance directly from a provider (via online, over the phone or by mail), or through an intermediary, such as an insurance broker or agent.
Many people need help determining how much coverage they really need and which type of policy is best for them. Speak with a John Hancock insurance professional today to discuss your budget, your needs and the options available to you.
If you need more help, you may want to consider working with an insurance professional (a broker or agent). Unless you have a personal reference, it may be best to talk to at least two before choosing who to work with with, so you have a point of comparison.
Q
How much does life insurance cost?
A
Insurance rates (premiums) are based primarily on life expectancy. There are several factors that go into figuring that out, including your gender, age, health and health history, as well as lifestyle (smoking, alcohol consumption, etc.). According to LIMRA’s 2025 Insurance Barometer Study, adults age 30 and younger overestimate the cost of life insurance by 10 to 12 times2. As a result, many people may put off exploring coverage because they assume it is much more expensive than it really is. In reality, buying life insurance earlier can often help you secure coverage at a lower cost.
Get started with a John Hancock financial professional to better understand what coverage may cost based on your personal situation.
Q
What does life insurance cover?
A
Your life insurance proceeds go to the beneficiaries named on your policy. Those funds can be used for anything they need to pay for, like:
- Outstanding debt, like the mortgage, credit cards and car payments
- Household bills, including rent, utilities and healthcare.
- College tuition
- Maintaining the continuation of a family business
- Funding a spouse’ retirement plan
- Funeral costs
Final thoughts
Life insurance can feel complex at first, but it often comes down to understanding the basics and knowing what questions to ask. Whether you’re just starting out or looking to build on what you know, taking the time to explore your options can make a difference. If you’re ready to take the next step, consider reviewing your needs with a John Hancock financial professional.
1 Loans and withdrawals will reduce the death benefit and the cash surrender value, and may cause the policy to lapse. Lapse or surrender of a policy with a loan may cause the recognition of taxable income. Withdrawals in excess of the cost basis (premiums paid) will be subject to tax, and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is made. A federal tax penalty of 10% may also apply if the loan or withdrawal is taken prior to age 59 1/2. Cash value available for loans and withdrawals may be more or less than originally invested.
2. https://www.limra.com/en/newsroom/news-releases/2025/adults-age-30-and-younger-overestimate-life-insurance-cost-by-1012-times/
Vitality is the provider of the John Hancock Vitality Program in connection with policies issued by John Hancock. Vitality rewards are subject to change and are not guaranteed to remain the same for the life of the policy.
This article is not an endorsement of any particular product, service or organization; nor is it intended to provide financial, tax or legal advice. It is intended to promote awareness and is for educational purposes only.
Vitality is the provider of the John Hancock Vitality Program in connection with policies issued by John Hancock. Vitality rewards are subject to change and are not guaranteed to remain the same for the life of the policy.
Insurance policies and/or associated riders and features may not be available in all states.
Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02116 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595.
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