Most people do not go shopping for life insurance but buy it only after having been contacted by a life insurance salesperson that convinces them that they need it. As a result those poorly informed about life insurance are apt to end up with the wrong type of policy for their specific circumstances and often end up underinsured. Grasping the basics before committing to a life insurance policy purchase raises the odds of getting maximum coverage and the right product.
Term Life Insurance
The most basic type of life insurance policy is term life insurance, a very straight forward product. In return for premiums paid, the life insurance company pays a death benefit equal to the face value of the policy in the event the insured dies while the policy is in force. There is no cash value associated with term insurance.
Term insurance then can be thought of as a safety net of sorts meant to support dependents, pay off mortgages and consumer debt and pay for the college educations of children in the event the major wage earner should die prematurely.