But unless you educate yourself first, it's all too easy to get mesmerized by insurance policy lingo and end up paying too much for a policy that may not even meet your needs. Start by learning about the main types of life insurance, explained below. Term Insurance Term insurance provides a preset amount of cash if you die while the policy is in force. With term insurance, you pay only for life insurance coverage. The policy does not develop reserves.
Term insurance is the cheapest form of coverage over a limited number of years.
There are many types of term insurance, such as policies that have an automatic right to renew for an additional term, but these options don't change the basic fact that term insurance pays off if you die during the policy time period and doesn't pay anything if you live beyond that period. Term life insurance is particularly suitable for younger people with families, who want substantial insurance coverage at low cost. Since the risk of dying in your 20s, 30s or 40s is quite low, the cost of term insurance during these years is as reasonable as life insurance prices get. Also, if you need insurance for only a short time, say to qualify for a business loan, term is your best bet. However, the older you are, the more expensive term insurance premiums become compared to the payoff value of the policy.