There are two basic types of life insurance:
1) Term life- this is the type usually advertised on TV and offered as a company benefit. It has a dollar amount such as $50,000, paid to a beneficiary that you designate if you die while the policy is in effect, and a time limit, such as 10 years, 20 years, or until you terminate employment with whichever company offering the insurance as a benefit. If you don't pay the premium on time, the policy will cancel, and you have no coverage and all the money you paid in premium is forfeited, kind of like car insurance. If the time period for coverage ends (the 10, 20 years mentioned or employment), all the premium is forfeited. Term life insurance is very useful for people who have, say, a house, kids in school or others who would be adversely affected in the wallet if they should suddenly drop dead.
2) Whole life- sometimes called universal life. This policy does not have a time limit attached to it. The premium is higher, BUT your money doesn't disappear. It's a bit like a savings account, but will also pay the dollar amount value to a beneficiary if you die. If you stop paying your premiums and the policy cancels, you will get your money you have paid in premiums back (usually minus some admin fees or shit).
Because the policy is building value with every premium payment, it can be borrowed against. The loan rate is very low and interest is usually charged only once per year.
There are also whole life policies with annuity features. An annuity is a sum of money distributed in predetermined amounts at a certain time. Many wills include annuities; for example, Grandpa dies & grandson receives an annuity payment of $500 per month at age 18 as long as he is in college and gets the rest upon graduation. My annuity will be whatever the cash value of the policy is upon retirement, which I can have distributed to me at a certain amount per month.
If I die at 75, let's say, my beneficiary will receive the balance in a lump sum. Also, with my particular policy, if I have a terminal illness, I have the option of having the face value paid to me in a lump sum before I die. Lots of options.
My point for starting this topic is the way life insurance premiums are set up - the sooner you begin a policy, the cheaper the premiums will be. Example: if you get a whole life policy for $100,000 with a premium of $50 a month at age 21, that's ALWAYS your monthly premium. If you wait until age 30 to get the SAME $100,000, your premium would be probably $100-150 a month. Unlike term life, the premium payments don't increase as you get older. The younger you start the policy, the more insurance you can probably afford. If I had started my policy when I was 20-25, I could have had a $200,000 policy for my $217 quarterly premiums, but the world was a happier place back then with weird things like company pensions and no threat to social security. I had no reason to be concerned about my retirement.
