Life insurance basics explained: term vs permanent

Life insurance is the part of the money stack people avoid thinking about, which is precisely why it is worth an honest hour: it is cheap relative to what it protects, it is simplest to buy while you are young and healthy, and the industry's complexity is mostly packaging around a very simple question — if your income stopped tomorrow, who would struggle, and for how long?

Who actually needs it

The NAIC, the US insurance regulators' body, frames the need as income replacement: cover matters when someone depends on your earnings — a partner, children, a mortgage that needs two incomes, or a family business. If nobody's finances would break at your death, you may need no cover at all, and any salesperson telling you otherwise is selling. If dependants exist, the honest target is a number: years of income, plus debts to clear, plus future costs like education — minus existing assets.

The two families: term and permanent

Per the NAIC's consumer guidance, virtually every product is one of two shapes:

Term life covers a fixed period — 10, 20, 30 years. It pays out only if you die within the term, carries no savings element, and is dramatically cheaper, especially at younger ages. For most families the logic is clean: cover the years when the dependants are financially exposed (until the mortgage shrinks, the children finish education), then let the cover lapse as the need lapses.
Permanent (whole/universal) life covers you for life and builds a cash value you can borrow against. It costs substantially more, and the cash-value component is an investment wrapper with fees and complexity — sometimes useful for specific estate situations, frequently oversold to people whose actual need was a cheap term policy.

The NAIC's buying tips make the practical point: compare similar policies across companies, and ask whether you could still afford the premium if it rose. A lapsed policy protects nobody.

How much cover, and other plain questions

A common planning heuristic is income multiplied by the years dependants will need it (often 5–10×), then adjusted for actual debts and assets — but the real method is listing the actual obligations, not applying a multiplier. Beyond the number: name beneficiaries explicitly (and update them — an ex-partner still on the policy is a classic unforced error), disclose health honestly (non-disclosure is the leading reason claims get contested), and re-check cover at every life event — marriage, a child, a mortgage, a business.

UK and Nigeria notes

In the UK, term cover is typically written as level or decreasing term — decreasing term aligns with a repayment mortgage and is cheaper; writing the policy in trust keeps the payout outside probate and faster to the family. In Nigeria, the market is smaller and less standardised: verify the insurer is licensed by NAICOM, read the exclusions (they carry the real content of any policy), and treat “investment-linked” life products with the same suspicion this desk applies to any product that is two products wearing a trench coat. Life insurance that is also a savings plan usually does both jobs badly; an emergency fund and a term policy do them separately, better, and cheaper.

Sources and further reading

Links were reviewed 2026-09-25. Regulatory permissions, firm status and product terms can change; use the current official register before acting.