When you buy life insurance, you make regular payments (called “premiums”), and in return, the insurance company pays a lump sum to the people who depend on you financially if you pass away. Most relevant if you have a family or anyone who relies on your income. There are two main types: term life, which covers you for a set number of years and is usually affordable; and whole life, which is permanent and much more expensive.
- PremiumsYou pay each month
- 20 yearsYou are covered
- $500,000To your family if you die
Walk through the numbers
A healthy 35-year-old might buy a 20-year term policy for $500,000. If they die during those 20 years, their family receives $500,000. If not, the policy simply ends.
If anyone depends on your income, it protects them while your investments are still growing.
Related terms
For education only and not personalized investment advice. Examples are hypothetical illustrations, not a prediction or a promise of results. All investing involves risk, including the possible loss of principal.