The question to ask yourself when considering life insurance is this: would your family have enough money to carry on without you? If the answer is, "yes," you may not need it. If the answer is, "no," you probably do. Try to get it through work, a union or association to save money with group rates. If not, individual policies are available, too.
Deciding between term and permanent insurance can be tricky. Term is cheaper right away, but the premiums usually increase every year and it only pays out if you pass away within the stated time (term). Permanent costs more during the early years, but includes a savings feature that may end up being worth more than the amount you pay in premiums - and pays your beneficiaries no matter when you pass away. So how do you decide? Generally speaking, if you're going to have the policy for 10 years or less, choose term. If you'll keep it 20 years or more, choose permanent. In between 10-20 years, consult a professional.
People usually select term insurance to cover specific financial obligations, such as mortgages or college tuition, because it only pays if the covered person passes away within the stated period of time (the term). Die the day after and your family doesn't get a dime. So what's the point?
Let's say you have 5 years left on your mortgage, at $1,200 a month. That's a $72,000 obligation your family might not be able to meet without your paycheck. But by purchasing a five-year term $75,000 policy, your family may not have to move.
Term is cheaper than permanent insurance because short-term coverage is lower risk for the insurer. However, the longer the term the more expensive it becomes. In fact, your premiums may increase every year, unless you choose a version that locks the premium in.
There are four versions of term insurance available:
People usually select permanent insurance (or Whole Life, as it's also called) for the peace of mind of knowing their beneficiary will receive money no matter when they die. And because it includes a savings feature that builds up cash they can tap into while they're still alive. Permanent insurance is more expensive than term, but has four variations to fit different needs: