Life Insurance Fundamentals
Life insurance replaces your income if you die while others depend on it financially. Term life insurance provides coverage for a specific period (10, 20, or 30 years) at a fixed premium—it is pure insurance with no cash value. A healthy 30-year-old can get $500,000 of 20-year term coverage for $25-35 per month. Whole life insurance provides permanent coverage with a cash value component that grows at a guaranteed rate—premiums are 5-10 times higher than term. Most financial advisors recommend term insurance for the vast majority of people: buy enough term coverage to protect your family during your working years, invest the premium savings in tax-advantaged accounts, and by the time the term expires, your investments should exceed the coverage amount.