Your term life policy is only as good as the beneficiary line you filled out.

What term insurance does and does not do

A term policy pays a death benefit if the insured dies during the coverage period. Premiums are usually level for the term. If the term ends, coverage ends, and the policy has no cash value to return. Some policies offer a conversion privilege that allows switching to permanent coverage without new medical underwriting, which can be valuable if your health changes.

Permanent policies such as whole life or universal life build cash value and can last for life, at a much higher premium. Term coverage is designed for a temporary need: the years when children are young, a mortgage is outstanding, or a business depends on you.

Riders can add features such as accelerated benefits for terminal or chronic illness, or a return of premium. Each adds cost, so compare them against simply buying more coverage.

Decide how much coverage your family needs

Common approaches include a multiple of income, such as 10 times salary, or a needs analysis, sometimes summarized as DIME (debt, income, mortgage, education), that adds up:

• Income your family would need to replace, and for how many years.
• Mortgage and other debts.
• Education goals for children.
• Final expenses and estate administration costs.
• Funding for a business buyout or key-person need.

Then subtract existing savings and coverage. Some families "ladder" policies, for example a 30-year policy for long-term needs and a 15-year policy for the years when children are at home, so coverage declines as needs decline.

Choose beneficiaries with the estate plan in mind

Life insurance passes by beneficiary designation, not by your will. Common mistakes include:

• Naming minor children. Insurers will not pay large sums directly to a minor. In Florida, significant amounts payable to a minor generally require a court-supervised guardianship of the property, and the child receives control at 18.
• Naming your estate. Proceeds then go through probate and, in Florida, lose the creditor exemption that applies when insurance is payable to a named beneficiary.
• Forgetting to update. A former spouse or a deceased beneficiary on the form can produce a result no one wanted.

The usual solution is to name your revocable living trust, or a separate trust, as beneficiary, so the trustee can manage the money for your children on the terms you set. See beneficiary designations and your estate plan.

Income tax and estate tax treatment

Life insurance proceeds paid because of the insured's death are generally not taxable income to the beneficiary. Interest paid on delayed proceeds is taxable, and policies transferred for value can lose part of the exclusion.

Proceeds are included in your taxable estate if you own the policy or hold incidents of ownership, such as the right to change beneficiaries. With a federal estate tax exemption of $15 million per person in 2026, most families will not owe estate tax. Larger estates often hold policies in an irrevocable life insurance trust, which keeps proceeds outside the estate. Transferring an existing policy to such a trust generally must occur more than three years before death to be effective, so new policies are often purchased by the trust directly. When premiums are large, some families fund the trust's policy through a private split-dollar arrangement rather than annual gifts.

Creditor protection in Florida

Florida provides strong protection for life insurance. Proceeds payable to a named beneficiary other than the insured's estate are generally exempt from the claims of the insured's creditors, and the cash surrender value of a policy is generally exempt from the owner's creditors.

Once proceeds reach a beneficiary outright, they may be exposed to that beneficiary's own creditors or a divorce. Holding proceeds in a continuing trust with spendthrift provisions can preserve protection for your family.

Review your coverage regularly

Revisit your policies when you marry or divorce, have a child, buy a home, start or sell a business, or update your estate plan. Confirm the owner, insured, and beneficiaries on each policy, and keep a copy of each policy with your estate planning documents so your trustee can find it.

Insurance is one of the simplest parts of a plan to get right, and one of the most damaging to get wrong.