Most people are familiar with “whole” life insurance. This is the kind of insurance where you will get back a certain amount of money when it “matures” at the end of the insured period.
What you may not know is that there is another form of life insurance called “term” life insurance.
Similar to whole life insurance, when you get a term life policy, you pay a sum of money (the “premium”) to the insurance company, and in exchange the company promises to pay out a certain amount of money should you die during the period for which you are covered under the policy.
In other words, you are buying insurance coverage for a certain period of time.
But unlike whole life insurance, you will not get back any money at the end of the insured period when you buy term insurance.
Well, one advantage of term insurance is that it’s cheap. In fact, for the same amount of insurance coverage, the premium for a term policy is only a small fraction of the whole life policy’s premium.
And this is why term policies are a great way for you to make sure you are sufficiently covered. If you’ve never checked out the premiums of a term life insurance, I highly suggest that you go do it soon. You’ll be surprised at how cheap it is to bump up the insurance coverage for yourself!
This strategy is generally known as “buy term and invest the difference”, and it’s something I recommend that you take into consideration as you do your financial planning.
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