How does insurance work? What types of insurance do I actually need? Is term life insurance a good idea? All of these questions are addressed in these introductory resources on insurance and its different forms.
As a startup employee, you likely receive more cash compensation than the average corporate worker in the United States. If you have a family situation where others are dependent on your cash compensation for all or part of their lifestyle, term life insurance is a very affordable option to protect against your untimely death. For only around $1,000/year you can usually purchase over $1,000,000 in financial protection for your family if you were to die during the covered period. While your death is unlikely, the risk-adjusted returns may still be attractive: If you do die unexpectedly, an extra million-plus dollars can go a long way to make a terrible situation for your family financially easier.
The idea with insurance is that one party is exposed to some kind of risk (crashing a car, getting sick, dying, etc.), and they would like to transfer that risk away to someone else. Part of the transferring is converting the “risk” into “dollars,” which insurance companies do by assuming risk in exchange for payments. The insurance policyholder (“insured”) pays money (a “premium”) to the insurer. Then, if the insured-against-thing happens, the insurer pays out according to the policy terms.