Anna Vander Broek, 12.16.08, 09:35 AM EST
Life insurance gives your family security if you die, but it can also help you while you're still alive.
You're young and invincible. The phrase "life insurance" probably means even less to you than the phrase "saving for retirement."
Even if you're not ready to buy life insurance for yourself (or are happy with the minimal coverage you may be already getting through your employer), it's still good to understand what life insurance is all about. It might be something you're interested in.
First, why would you want life insurance? If you have people who depend on you, such as a spouse or children, life insurance is used as a security measure to make sure they are taken care of if anything were to happen to you. If you're single and without debt, you don't necessarily need life insurance as a protective measure now.
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Life insurance can also be used as an investment opportunity.
It is complicated, but there are basically two different types; term and permanent. Permanent can be broken down into whole, universal and variable insurance.
Term life insurance is pretty much like any other form of insurance. You get exactly what you pay for. Term is probably the type of coverage you're getting from your employer. Since term life insurance is temporary, it's usually inexpensive. If you do have a family, term insurance is important and many will pay for it until their children are out of college (when presumably they can support themselves).
Permanent insurance combines insurance with an investment or savings option. The premium of permanent life insurance is going to be higher than that of term. The additional money is then invested.
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