Term life insurance provides insurance for a specific amount of time. Like, for one year. You can usually renew annually, and this is called “Annual Renewal Term”. This works until about age 80. Level Term offers you a level premium for a fixed amount of years. You lock in a rate for 20 years. Then you have to get a new rate or new policy.



Permanent Insurance is also called whole life, universal life, etc. This form of life insurance also has a built in savings plan. You get a death benefit with a cash value savings plan attached. Of course, this plan is more expensive, but allows for some financial latitude.

You may be wondering why you would need insurance and what could you do with the proceeds if your spouse or loved one died. Here are some ideas that would help with the financial loss.

1. Income. Even if your spouse works, loosing one salary could be devastating.

2. Housing. The money could be used for rent or payoff the mortgage. Your spouse may not want to stay in the house, but it will give some options for them.

3. Debt. Reducing debt due to the loss can help the surviving spouse continue to be financially solvent. This will help your spouse survive on one income.

4. Pay Expenses. Funeral and hospital bills can be tremendous. The average funeral is $6,000.

5. Social Security. Its there, but it takes a while for it to kick in so to speak. Better cover yourself until that first check arrives.

6. Education. Think about the high costs of education and the burden that would be with only one income. Account for an educational nest egg to give your kids a head start.

7. Charity. If you don't have anyone, this would be a good option. Also, you can get a tax deduction for the rest of your estate if you give some money away. In other words, give a chunk away and you might be able to keep some assets to give to your family.

8. Taxes. Two things certain. Death and Taxes. You may have to pay taxes on your 401k and other assets even though you are dead. If you don't get these assets before you die, then the person receiving the benefit must pay the tax.

These last two items are a bit tricky and would require expert assistance from a tax attorney or estate attorney.

Think about your family and decide what type of life insurance would protect them the best. Let me know if you can think of other helpful information on what to do with life insurance proceeds.