Life insurance should actually be called “death insurance,” since it pays a specified sum to someone you name (a “beneficiary”) if you should die while the insurance is in force. You only need life insurance if someone like a spouse, child or parent will be put into a financially difficult situation by your death. It’s up to you to figure out how much the beneficiary will need if you should die suddenly. A two year old child will need more than an eighteen year old.
There are two basic types of life insurance, “term” and “whole life.” Term life insurance is much cheaper. With whole life, you are actually making an investment. Whole life has many drawbacks, however, since high commissions are paid to the insurance salesmen out of the premiums you pay. If you are going to invest your money, you could do a lot better yourself than by letting the insurance company do it for you. Buy term insurance and keep control of the money you save.
Next Section:Health Insurance
Personal Finance: Chapter Home
Life in the USA Home Page.