The One Crucial Thing About Life Insurance That All Millennials Should Know


Most people probably know that they should get life insurance. It’s not a fun thing to think about, but every adult has to deal with it. We’re not here to lecture you on why you should sign on to a life insurance policy. We’re here to give you the 411 on something you probably never knew about it: there are two kinds.

Does your brain feel like this right now?

Don’t worry, we got you.

Most employers will give you the option to sign on to a life insurance policy. If they don’t or you don’t like their options for any reason, you can sign on to an independent policy (meaning a policy that is totally separate from your employer and one that doesn’t change once you leave your current job). But it’s important to understand the difference between the two distinct types of life insurance: whole life insurance and term life insurance.

Term life insurance is probably more applicable to you. This type of insurance is typically cheap and pays a lump sum of money to your beneficiaries in the case that you should prematurely die. The policy lasts for a term (yes, that’s where the name comes from) that you can decide (20 years, 30 years, etc.). If you die within that term, your beneficiaries will receive the sum. Fairly straightforward.

Whole life insurance is a specialized form of life insurance. You don’t have to choose a term — the insurance covers you through your entire life as long as you’re paying the monthly fee. The insurance is typically more expensive than term insurance, and that’s because whole life provides more benefits to your beneficiaries in its policy aside from receiving the sum of money. If you have important investments, a business, an estate or anything else you want your beneficiaries to inherit, whole life insurance will seamlessly transfer ownership to your beneficiaries.

Another cool thing about whole life insurance is that this kind policy allows you to grow your savings over time through a feature called “cash value.” “Cash value” pertains to an investment that the policy creates for you, which is just a small amount of money it sets aside in a separate account. That amount of money will automatically grow throughout the policy, and you don’t even have to pay taxes on it. Your beneficiaries will also receive this cash value upon your death.

So the choice is yours. If your employer doesn’t offer both types or you’re not interested in opting into your employer’s life insurance plan, go independent. And no matter what you do, keep yourself — and your loved ones — covered.