- How much life insurance do I need?
- What is universal life insurance?
- What age should you take out a life insurance policy?
- How does a life insurance policy differ from a 401k?
There are three types of life insurance: Term, Universal, and Whole. Term life insurance provides coverage for a specific number of years. Universal and Whole provide permanent life insurance that accrues a cash value. As you pay your premium, part of it goes toward cash value and is invested for you by your policy holder (usually a 3.5% to 5% yearly return). This cash value can be dispersed to you while you are still living (taxes apply upon withdrawal of funds).
A 401k is an employer-sponsored account that helps people save for retirement. This type of account cannot be withdrawn from until retirement. You may make contributions to this account above the minimum withheld by your employer (usually around 3%) and you may get free money with a contributions match offered by some employers. You also do not pay taxes on the amount you pay into your 401k. That happens when the money is disbursed to you upon your retirement.