Simply stated, life insurance is a policy that will pay a specified sum to beneficiaries upon the death of the insured. Purchasing life insurance can seem daunting. Like anything else you buy, knowing what you're shopping for before you set out can save you time and money. When shopping for life insurance, consider these potential money saving tips. Below are a few tips and defintions that can aid you during your life insurance purchasing.

There are two common kinds of life insurance:

Term Insurance, which provides protection for a specific term of time, usually from 1 to 30 years. Your family receives benefits only if you die within that term of time. When the term expires, you may be able to renew the policy, but your premiums will increase.

Permanent insurance, which provides protection for as long as you make the premium payments. This kind of insurance is designed for someone who intends to keep the insurance over a long period of time. Permanent policies usually provide a ‘cash value’ or ‘cash surrender’ option.

What does ‘cash value’ mean?
Cash value means you can cancel the policy and receive the cash value as a lump sum. You can also use the cash value to continue your insurance protection for a specific period of time, or to borrow money from the insurance company.

What kinds of permanent life insurance are there?

Whole (or ordinary) life insurance usually features premium payments that remain constant over the life of the policy.

Universal (or adjustable) life insurance usually allows the buyer to pay premiums at any time, subject to maximums and minimums. The amount of the death benefit is also adjustable.

Variable life insurance allows the buyer to allocate premiums among a variety of investments and varies the death benefits and cash values of the policy according to the performance of the investment portfolio.

Term insurance has lower initial premiums in the beginning, so you can afford higher levels of coverage when you're young. This could be helpful in covering things like mortgage payments, should you die at an early age. Term life insurance premiums increase as you age and the policy generally doesn't offer cash value or paid-up insurance. If you want insurance protection only, and not a savings and investment product, buy a term life insurance policy.