Let’s talk life insurance. Got any?

Of all the different types of insurance choices you’re faced with, it’s easy to forget about life insurance. 

After all, you can’t legally drive a car without car insurance. Most mortgages require homeowner’s insurance. And we’ve all lived through or heard horror stories about medical bills without health insurance.   

But life insurance? You can live without it … you know, legally. 

But should you? Well, that’s a personal question.  

Typically, life insurance is generally affordable, averaging around $26 per month. But because premiums are based on life expectancy, rates vary dramatically based on the applicant (you), the insurer and the policy type.  

So while price is certainly a factor in your decision, it’s not the only one. 

One of the primary reasons people buy life insurance is to provide peace of mind and prevent financial hardships to loved ones left behind. If you’re a breadwinner, your family would not only be emotionally devastated upon your passing, they could also be financially devastated. Mortgages, debts, funeral expenses, monthly bills — those things all still need to be paid whether you’re there or not. These policies can help. 

So if you’re thinking about getting life insurance but aren’t sure where to start, here’s an overview of the options: 

Term life insurance 

This is your basic, straight-up life insurance. It’s the least expensive type of policy for the amount of coverage—not to mention the simplest to understand—which makes it ideal for most people. 

With term life insurance, you typically pay a set premium for a set amount of coverage that lasts a set period of time, which can range from five to 30 years or more. If you outlive your insurance policy, you’ll no longer be covered once the term ends. At that point, you can choose to buy a new policy at a higher premium. That’s because term life insurance is cheapest when you’re young and gets more expensive as you age. 

There are, however, a few variations you might want to know about. 

• Annual-renewable: Instead of a multiyear policy, you purchase insurance year-by-year. Premiums steadily increase as you age. 

• Decreasing: The premium stays the same but the total coverage decreases over time. Some people buy coverage equal to their mortgage balance so they’ll decrease in tandem. 

• Convertible: The term policy can be converted into whole or universal life insurance at any point without having to medically re-qualify. 

Whole life insurance 

Looking for permanent coverage? Unlike a term policy, whole life coverage lasts your entire lifetime — as long as the premium gets paid. 

With whole life insurance, your premium typically gets locked in and stays the same regardless of health issues or advancing age. For some people, such as those with preexisting conditions that pose a high risk, certain whole life policies may be the only option available. 

In addition to paying a death benefit if something happens to you, permanent policies such as whole life also act as an investment. Part of your premium goes toward building cash value through the investments your insurance company makes. This value is tax-deferred for as long as you keep the policy, and you can eventually borrow against it without getting taxed. 

Since permanent policies are more expensive and complex than term coverage, it helps to seek guidance from a professional before you buy. 

Universal life insurance 

This is another form of permanent coverage. Like whole life, it includes both a death benefit and cash value growth, which you can borrow against. 

It’s more complicated and expensive than a whole life policy, though. That’s because it combines term insurance with a money market-type investment that pays a market rate of return. As the policyholder, you get to decide — within certain guidelines — how much of your premium will go toward the death benefit and how much will go toward cash value. 

Since the premiums go up over time — sometimes rapidly — and the interest your cash value earns isn’t always enough to cover it, your policy can eventually become underfunded. If that happens, you may have to pay extra to keep it going. 

With its complexity and expensive administrative fees (which come out of your premiums), universal life insurance isn’t recommended for most people. But the ability to borrow against its cash value at low interest rates makes it an attractive option for some consumers. 

Now that you know the basics about life insurance, you can start thinking about what type of policy is best for you, or, more specifically, your loved ones.