One of the tools available to do this is life insurance.

Life insurance gives you the ability to help protect your financial worth, while making sure that your family continues to thrive after you're gone.  After you slice through the haze & confusion that the industry provides you will find that there are only 2 types of policies in the world: Term Life Insurance and Permanent Life Insurance.

You figure this would be simple, right?  Maybe, maybe not. Let's break them down from a high-level overview first:

TERM - It covers your life for a period of time (the term). That can be 1 year, 5 years, all the way up to 40 years, though there are age limitations on who can qualify for certain term coverage lengths. If you die during the term of coverage then your beneficiaries receive the death benefit amount. If you die after the term has expired then the Insurance Company gets to keep all your money. It's inexpensive, builds no cash value, and is there for peace of mind (at least while you are under the "term" period).

PERMANENT - It's there for the rest of your life. And unlike Term Coverage, which only benefits if you pass away during the "term" length, this coverage does not go away until you do. Spoiler Alert: We all pass way at some point. Which means the Insurance Company has to have the money available to pay your claim. It really is simple math - it costs more because they you are going to die.

So how do you decide which option is right for you?

 We like to use the analogy of renting or owning a home when trying to compare the 2 these 2 different types of life insurance contracts. When you are renting a home, then you pay an established amount every month to live there until your lease is up. Once your lease ends, then you have a decision to make on whether or not you want to renew for another contract period, at which time it may be more expensive, or worst-case scenario, youa re unable to renew the contract, which would leave you without any coverage. The money you spend to rent is less than the cost of owning or buying a house, but it does not build equity for the future.

Term Insurance is similar to renting. You pay a premium based on your contract, and once that contract is up, you no longer have access to the benefit.

When you agree to buy a home with a mortgage, then you agree to pay a monthly fee for the lifetime of your loan. The mortgage payments that you make can build equity in your home over time, and once you've paid the mortgage off, then the property is yours.

Permanent Insurance is similar to buying a home. You enter into an agreement to purchase the amount of death benefit that you want, and then you pay a fixed premium for the life of the contract. As long as you pay your premiums, like a mortgage, then you own the benefit for life. A permanent policy can accumulate cash value (just like equity in a home) over the course of the contract.

In some cases this is not an either/or situation as you don't have to choose one or the other, as these policies can be used in tandem to protect you through the stages of life; Term Insurance for short-term protection; home mortgage, childcare, etc.., while Permanent can provide for the bigger picture; inheritance, retirement, etc..

The ARIES Foundation for Financial Education, Inc is a nonprofit dedicated to helping everyone have a better relationship with their money. Visit our webiste to learn more and see how we may be able to help you: www.ariesfoundation.org