Insurance

• Insurance is a business agreement between an individual and a company. The individual agrees to pay the company a certain amount of money, most often divided into monthly payments. In exchange, the company agrees to pay the individual a set amount of money if something happens. Insurance is intended to provide financial support during times of hardship. Insurance is different from other investment relationships because it pays out money after an event, rather than paying interest over a period of time.
  
  

Life

• Life insurance is specific kind of insurance. It pays out a "death benefit" upon the death of the insured, an individual specifically named in the policy. This money is paid out to a beneficiary, an individual also named in the policy, as the person who gets the money. Life insurance is different from other forms of insurance in that the person who gets the money is rarely the person who paid for the insurance. Other forms of insurance pay money in the event of a house fire, a car accident or a lawsuit.
  
  

Term

• There are two basic kinds of life insurance: term and whole life. Whole life insurance pays out the death benefit no matter when the insured person dies. Term insurance pays out only if the insured person dies within a period of time specified by the policy. Term insurance is significantly less expensive than whole life insurance for this reason.
  
  

Direct

• In insurance, "direct" means that the policyholder is also the insured. That is, the person who must die in order for the death benefit to be paid is also the person who is paying for the insurance policy. Other insurance policies might be paid for by an employer, trade union or family member.
  
  

Who Needs It

• According to financial guru Dave Ramsey, life insurance is one of the five indispensable insurance options. Direct term life is just one of many life insurance options. Many experts, including Mr. Ramsey, agree that term life insurance is better than whole life, in that you get much more benefit for money invested. Direct insurance, on the other hand, is usually only appropriate if you don't have access to insurance through a group membership. This is because group insurance often costs less and carries fewer health restrictions than insurance you buy on your own.