Life insurance, it turns out, is the wrong name altogether. What we’re really talking about here is death insurance. If you die, the people you’ve named as heirs in the policy get some money. Simple as that.

There are two main kinds of death, err, life insurance:

1. Term insurance - You buy this policy for a specific period of time – usually 10 to 30 years. You pay a monthly premium, say $50, for $750,000 of coverage over 20 years. Then, if you die during that term, the person you named as the beneficiary of your policy gets that $750,000, tax-free. If you live beyond 20 years, the insurance company keeps your premiums and you don’t get anything.

The vast majority of people reading this guide ought to have term insurance.

2. Whole life insurance - You can keep this life insurance for your whole life if you want, not just for a specific term. Like term insurance, the policy comes with a death benefit, but there’s an investment component to it too. You can borrow against the invested money while you’re still alive and draw on it later in other ways too.

Whole life sounds great, right? Well, these policies cost a ton more and have sky-high recurring fees on the investments. For all but the wealthiest people (mostly older, at that), whole life makes no sense. You can do far better by buying some term insurance for $50 a month, then investing the extra $150 you would have spent on $200 whole-life premiums in some low-cost index mutual funds.