The oldest millennials are approaching their 40th birthday. This means they’re starting families that depend on them financially.
But in a poll, 82 percent of millennials said they don’t even know what life insurance is for. Sorting through the different types of life insurance can feel daunting. You should do it all the same.
Finding out more information about the types of insurance coverage can help you figure out what plan will meet the needs of you and your family. A little trouble now is better than dying young and leaving your family without financial assistance.
Keep reading for the basics of life insurance explained.
Term Life Insurance
Term life insurance gets called that because it lasts for a specific period of time.
Let’s say you’re 35 years old and buy a 30-year-term life insurance policy. If you die at any time during that 30-year-period, your family can receive the value of the insurance.
But what if you’re still alive after 30 years? That’s where term life insurance can get tricky.
Obviously, living longer is good. But finding a life insurance policy as 65 is harder than finding one at 35.
But if you want a cheap life insurance plan, term life is your best bet. You can often get a plan for $50 or less a month.
As far as life insurance types go, term life is one of the simplest to explain. But it doesn’t work for everyone. For a plan that lasts as long as you’re alive, see the next entry on the list.
Whole Life Insurance
Whole life insurance gets called that because, well, it’s designed to last for your whole life. Term life insurance lasts a certain number of years, but whole life insurance lasts as long as you do.
If that sounds good, you may wonder why more people don’t pay for this type of life insurance. The big reason is the cost. Buying one of these policies requires a significant amount of extra money.
Whole life insurance doesn’t just come with a death benefit for family members you leave behind. It also includes a cash value that escalates over time.
When you pay monthly premiums, you’re paying for the cash value as well as the death benefits.
Why does the cash value matter? Because you can use it for certain things while you’re still alive. Whole life insurance treats that cash value as something like a piggy bank.
Since it’s more complicated, you’ll need a life insurance company willing to go over every detail of your whole life insurance policy with you. You can learn more here about finding such a company.
Final Expense Insurance
Final expense insurance is more limited than term and whole life insurance. It works best for senior citizens worried about funeral and memorial expenses.
The death of a loved one is stressful enough as is. It’s even more stressful if your survivors don’t know how they’ll pay for your funeral.
It may also cover medical bills associated with your final illness. It’s only worth a few thousand dollars, though. That said, it’s not a bad option for older people who don’t carry any of the other types of life insurance policies.
Types of Life Insurance
If your family is on a tight budget, then it may seem wasteful to price different types of life insurance. But you need a plan for the worst-case scenario.
It’s also never too soon to start planning your retirement. Check out our guide to saving for retirement for more on that topic.