Want the basics of life insurance explained in two minutes and with amazing animations of pigs? As always, we've got you covered.
Once upon a time there were three sickly pigs. Make that two. To pay for Pig 1’s funeral, Pig 2 had to use her penicillin money—and then she died. Now Pig 3 was stuck with Pig 2’s student loans because he was the co-signer. This new burden left Pig 3 so poor that he lost his house to the Foreclosure Wolf and had to raid his piglets’ college savings fund. Then Pig 3 died, and his piglets were forced to move into an abandoned microwave.
Life Insurance would have helped those pigs.
Life insurance pays cash when you die. You buy it to protect those close to you from your debts, and to replace income that they would lose in your absence.
There are two categories of life insurance: term life and permanent life. Both types provide a cash payout upon your death. Permanent life combines that with investment features, so the policy accumulates a cash value. For that reason, term life is much cheaper than permanent life. It’s also much simpler.
The other big difference? Term covers you for a specific amount of time. usually between 10 and 30 years. Permanent covers your whole life, so long as you pay the premiums.
Permanent life may be a good idea for people with complex financial needs. But for the vast majority of people, a good rule of thumb is to keep your investments somewhere else and stick to basic term life insurance.
Remember! You don’t necessarily need life insurance for your whole life. It’s all about covering your financial obligations.
For example, if you’re young and have a co-signer on your student loans, have term insurance until you’ve paid them off. If you have kids, buy a policy that covers you until they’re adults. And so on.
To recap: here are some tips to make shopping for life insurance easier.
Choose a term policy for basic life insurance protection.
Add up your current obligations, then only buy that much insurance.
Be sure to shop around because prices can vary.
The moral of this story? Don't end up like the three sickly pigs--buy life insurance.