For many younger people and those who have never had life insurance before, the best and least expensive way to be certain your family can afford your final expenses is term life insurance.
An important thing to know about term insurance is that it is not building any value. From the day the coverage policy takes effect until the day it is terminated, it has exactly the same value. Term life insurance is simple, kind of like car insurance. You buy the life insurance policy, usually two or three years in length and pay a monthly premium toward that policy.
When you select the term life insurance policy, you decide how much the value of the policy will be. Then, from the day it is effective to the day that the policy ends, it has the same value, if you make the monthly premium payments. An insurance premium is the amount you pay on a regular basis--usually monthly, yearly or every six months--to keep the insurance. In short, the premium is the cost of the insurance.
The two biggest issues with term life insurance are that it does not continue if you miss a payment and it does not accumulate any value. If you get sick or lay off and cannot pay the premium, the policy is ended and your money is gone.
One option that can be better and provide an investment is a universal life policy. A universal life policy is more expensive than a term life insurance policy, but it allows you to build savings in your life insurance plan. Depending on the terms of your life insurance plan, those savings can be applied to paying your premiums, adding on to the long-term value of your life insurance policy, or as a type of savings plan that you can access if you meet certain criteria or need to later on.
With a universal life policy, you will pay a higher premium than with term life insurance. However, you will be building value in your policy and earning interest on some of the money you are paying into the insurance company. Because the interest you earn on the premiums helps pay for the cost of managing the insurance, this can be especially good insurance when interest rates are high. When interest rates are low, the interest rate is about the same as your average money market account.
Either way, you are guaranteed a minimum amount of interest on the savings generated by your life insurance policy. This becomes the "cash value" of the policy. In dire circumstances, or when you have acquired other investments making life insurance no longer necessary, you can cash-in the policy and recoup some of the money that you have paid in over the years. And, if the interest rates have been high, you might even have a little extra to go with it.
Another option is a variable universal life policy. This is an insurance policy that is exactly what it sounds like, variable. Instead of committing to a long-term policy with long-term payments, you commit to a long-term policy that you can change when the need hits. This is a particularly good plan for young adults who will need to adapt their life insurance policies later in life depending on marriages, children, increased assets and other life changes. The drawback in a variable policy is it will generally cost more than a standard universal life policy.
These are just some of the options available for first-time life insurance buyers. But before you buy, you need to help determine the best life insurance policy for you. One way to do this is to discuss your situation with an expert and then obtain a life insurance quote from them. Of course, as a consumer, you should consider shopping around for the best price. Now days, you can get free online insurance quote from multiple Internet based insurance companies like US Insurance Online, Quote Guardian and InsureMe.com. Just be sure that they are licensed to sell life insurance in your state of residence.