No, your family will never be as happy as the one on the left. But , your probably just as concerned about insurance as they are. Here’s some basics.
Whole-life policies, a type of permanent insurance, combine life coverage with an investment fund. Here, you’re buying a policy that pays a stated, fixed amount on your death, and part of your premium goes toward building cash value from investments made by the insurance company.
Cash value builds tax-deferred each year that you keep the policy, and you can borrow against the cash accumulation fund without being taxed. The amount you pay usually doesn’t change throughout the life of the policy.
Universal life is a type of permanent insurance policy that combines term insurance with a money market-type investment that pays a market rate of return. To get a higher return, these policies generally don’t guarantee a certain rate.
The other type of coverage is term insurance, which has no investment component. You’re buying life coverage that lasts for a set period of time provided you pay the monthly premium. Annual-renewable term is purchased year-by-year.
When you’re young, premiums for annual-renewable term insurance are dirt cheap – as low as a few hundred dollars per year for $250,000 worth of coverage.
