With a general understanding of insurance, it is far less complicated to delve into more complex and specific areas of insurance.

Life insurance is by far the most common and the easiest to understand. You are either alive or you are not.

There are two kinds of life insurance – term insurance and permanent insurance.

As its name implies, term insurance is temporary and generally used to cover a specific need. It could be a 10-, 20- or 30-year term. This is often used to pay off a mortgage or other debts and financially look after the family in case of death at a younger age. It is quite inexpensive as the odds of you passing away in your younger years is quite minimal. Term insurance will always be an expense as there is no return on your investment with term insurance.

Permanent insurance (meaning it will be in place until the day you pass away) is not an expense, it is an asset that has a cash value component that grows each year and can be used to supplement your retirement income on a tax-free basis. As the saying goes–there are two certainties in life–death and taxes.

Permanent insurance addresses both of those realities.