Life insurance is a complicated financial instrument. But it is crucial to get a full understanding of many or most aspects of life insurance before you consider actually purchasing a policy. The internet is a great resource for familiarizing yourself with the basic terms and different types of policies, but inevitably you’re still going to be left with difficult questions such as what is the difference between term and whole life insurance? What’s the best policy for me? Am I doing the right thing by purchasing this particular policy?
You should strongly consider speaking with experts in the field such as an life insurance brokers, or an insurance agent who works directly for an insurance company. It is essential to remember that these people, while experts, are out to get you to sign a contract, so they aren’t always looking out for your best interest. That said, they are often able to provide you information, options and choices you wouldn’t get elsewhere, so they can be useful.
As a quick primer on life insurance, it’s very important to remember that simple term life insurance is almost always going to be your best option. It is the cheapest life insurance by a significant margin, and it is the least complicated. In the purest sense it is simply a contract that you have with the insurance company. If you die during that contract period, then they pay your family the face value of the insurance policy (think somewhere around $300,000-1,000,000 in most cases). If you don’t die during the contract period (or “term”), then the contract ends and both parties walk away. You would have paid them a premium each year of that term, and that premium was literally insurance against you dying during the term.
Though it might seem like you paid good money for “nothing”, you bought yourself insurance against the worst possible thing financially happening to your loved ones and you safeguarded them. It’s a win-win for everyone, and a very cost effective way to ensure your family is secure in case you were to die prematurely.
