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How to Buy Life Insurance as a Parent

Types of Life Insurance

There are two major types of life insurance: term life and whole life. Term is the most popular and most affordable form of life insurance. Term life insurance is established for a set time period -- which can be for as little as one year or up to 30 years. You pay a set amount (called a premium) for the term you've established with the insurance company. Your premium is paid either monthly, quarterly or yearly. If you're alive when the policy expires, you may have to look for coverage again. You may be able to buy an extension on your policy, but it depends on your insurance company and your personal health and age.

Whole life insurance is much more expensive than term life insurance, and it covers you for your entire life. Whole life is a blend of insurance coverage mixed with an investment fund, where part of your premium goes toward investments made by the insurance company. You pay a certain amount of money each month (also called a premium), and part of that money accumulates into an investment account. As you build cash value within your policy, you can borrow against the value and take out a loan, which will be deducted from your death premium. Or, you can leave the money in the account, and the money will accrue until you've paid the entire value of the policy.