Life Insurance: The Basics

A lot goes into life insurance (some might say your whole life)!

There are two major types you need to know:

  • Term: Term insurance only pays if death occurs during the term of the policy. These policies range from one to thirty years, on average, and have no other benefits. Within term insurance, there are two subcategories - level term and decreasing term. A level term policy maintains the same payout throughout the duration of the policy and a decreasing term has a benefit that goes down each year the policy is held.
  • Whole life: Whole life (or permanent) insurance pays a benefit whenever you die. This one has three major subcategories - universal life, traditional whole life, variable universal life. If you have this insurance, the monthly cost increases for every $1000 of benefit and that cost increases as a person grows older. These policies can also converted into a cash payout after a certain point if the policyholder no longer wants to continue the policy.

So before you go saying yes to life insurance, first figure out what type it is and then ask yourself what makes sense for not just you, but for your loved ones financially.


Life insurance is often overlooked, but can be very useful. If you want to learn more, check out this great article that goes in-depth on the all the life insurance plans available.

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