The issue of life insurance is a recurring one. More and more people are starting to realize they need life insurance and for good reason. Here are some life insurance basics to help get you started:

1.) Term Insurance
“Term” implies that the life insurance will be for a specified period of time. The term is usually up before you die. This insurance is best for temporary needs or for those with very limited budgets. The most important thing is to have enough of the insurance. However, if you want to have insurance available for when you do pass away, term insurance probably won’t meet your needs. In that instance, only permanent insurance will provide what you’re looking for.

2.) Permanent Insurance
This type of insurance does cost more than term insurance and should only be purchased when your needs are met and your budget allows for a higher premium payment. The premiums for this type of insurance however will never increase whereas the rates for term insurance can be raised from time to time thus making it unaffordable in old age. Often the premiums can even be paid from earnings within the policy as you get older. This is a good option when you retire as your income will drop and you won’t be faced with paying premiums which makes it a good investment for retirement planning as well.

3.) On the same note, if you ever face financial crisis, the cash surrender value of a permanent policy can be used to pay the premiums and maybe provide some cash while you’re still in financial trouble.

4.) Permanent life insurance will also build savings over time. The earnings on those savings are tax-free while they are building up and maybe even forever. These values are given back to you if you take out a loan on the policy or when you cancel your policy. And you don’t have to pay it back. The amount of the loan plus any interest will just be subtracted from the amount of insurance paid out in the event of your death.

5.) It’s important to add the waiver for premium provision. This ensures that in case of disability, your will not have to pay the premiums and the insurance company will pay the premiums for you.

6.) The idea that’s becoming so popular of “buying term and investing the difference” is only good on the surface. However the reality is that most of us are not very good savers or investors. The negative U.S. savings rate will further prove this. Often as well, what we do save is often spent before it builds up much value. Even if we invest the difference, problems arise when we are too conservative and lose money because of inflation and lost growth opportunities or we are too aggressive and lose money because are not as experienced in the field.

Life insurance, no matter what type is best for you at any particular time, is an extremely important investment to make. You can always change your options so do what’s best for you at the time and then you can re-evaluate the situation further down the road as needed.