There are generally two types of life insurance.
The first type is life insurance that bundles life insurance and savings together, otherwise known as cash value life insurance. It comes in many different names such as whole life, universal life, or variable life. These types of policies are very expensive. An average 30 year old with $100,000 coverage would pay about $1000/year for it. In a whole life policy, no cash value is accumulated in the first two years. In the third year, the insurance company will put some of your premiums into it and it will get a fix rate of 1% to 4%. The cash value will grow very slowly because of tax laws that prevents cash value from growinng too fast. If you bought $250,000 coverage, it will take until you nearly 100 years old until there is about $250,000 in the cash value. If you wanted to take money out from the cash value, you will be borrowing and be charged 8% loan interest. That's similar to you going to the bank and taking money out from your savings account, but the bank going to charge you daily interest until you put the money back. In majority of life insurance policies, your beneficiary gets the face amount of the policy, but the insurance company keeps the cash value. If you want both the face amount and cash value included with your death benefit, you will have to pay more premiums for it.
With term life insurance, it does not bundle life insurance and savings together. It only provides a death benefit. Majority of term policies expire when you are 95 years old. How term insurance work is that premiums stay level dring the term. For example, a 30 year level term mean you are paying the same premiums for 30 years. At the end of the term, you have options on what you want to do. You may convert it to whole life, universal life, or term life insurance (it depends on the company). You can also renew the term annually, but you will pay higher premiums each time you renew.
An average 30 year old that buys a 20 year level term with $100,000 coverage will pay about $250/year for it. Lets say the person invest the difference of $750/year in mutual funds for the next 20 years. Conservative or moderate risk mutual funds have average annual rate of return of 5% to 8% in the past 30 years. Aggresive growth or high risk mutual funds have average annual rate of return of 10% to 14% in the past 30 years. If you invest $750/year and have an average return of 6%, you will have around $30k in 20 years. With 8% return, you will have around $38k and with 12% return, around $65k. All this money is yours and you don't have to put it back. If you die during the term, your beneficiary will get the face amount. Your savings will go to your wife or to a designated beneficiary or to your estate if you have no beneficiary.
I don't know how many years you have left on your mortgage or your current financial situation (do you have other debts to pay? do you have children dependent on your income? how old is the youngest child?). Financial experts say you need coverage between 8 to 12 times your annual gross income. so if you earn $40k/year, then you need around $400,000 coverage. If you get a 30 year level term with $250,000 coverage at age 34, you will be paying between $400 to $500 per year since you are not healthy. If you were healthy, it would of cost you between $250 to $350 per year.
I also suggest you and your wife open a Roth IRA if you are eligible for it (couples filing jointly must have Adjusted Gross Income of below $177,000 and earn taxable income such as your income from your job in order to open a Roth IRA and contribute to it). There is a maximum annual contribution limit of $5000/year. If you go IRS website and search for publication 590, it will go into full details about IRAs.