Finding a life insurance policy that works for your budget is one of the most important investments you can make for yourself and your loved ones.
After you find a life insurance policy that works best for you, you will make monthly payments (a.k.a. premiums) in exchange for a lump sum payment that will be distributed to your beneficiaries after you die.
A 2020 study on life insurance revealed that paying for end of life expenses, transferring wealth, and paying off mortgage were among the reasons people chose to purchase their life insurance.
There are two types of life insurance. Term life insurance essentially puts an expiration date on your policy— if you die during the term, your insurance benefit will be paid out to your designated beneficiaries.
If your policy expires before you die, there is no payout unless you renew your coverage or convert to permanent life insurance.
Permanent life insurance (also known as a cash-value policy, Whole Life, or Universal Life) is an investment product fused with a life insurance policy.
This works kind of like a mortgage: part of your premium goes to pay for the insurance portion, and the other part builds up equity (or cash value). The longer you hold the policy, the more cash value you build up, and you're able to keep the policy into your 90s, which you can’t do with term life insurance.
Want to learn more? Read more about your life insurance options here.