Your Life Insurance Decisions

With all the different kinds of life insurance available from life insurance companies, how do you know which one is right for you? Discover some tips for making life insurance decisions to choose the best life insurance for you.

Do You Need Life Insurance?

The first decision you'll need to make about life insurance is whether you need it at this time in your life. Life insurance is a valuable protection if you:

• Have a mortgage or another large financial obligation
• Have dependents who rely on you for financial support
• Own a large or complex estate
• Own your own business alone or with a partner.

If you have no dependents and are not planning to have any in the future, are retired or the members of your household are self-supporting, you may not need life insurance right now.

Best Life Insurance Type

Another important life insurance decision is what type of life insurance is best for you. With all the products offered by life insurance companies, this may seem confusing. In reality, all life insurance falls into only two major categories:

• Permanent life insurance: This coverage can protect you for your entire lifetime, and also has an investment component that builds cash value over time. Whole life, universal life and variable life are types of permanent life insurance.
• Term life insurance: A term life policy covers you for only a specified term, usually between five and 30 years. It provides only insurance without investments and doesn't build cash value.

Making a Life Insurance Decision

To help you decide between permanent and term life insurance, consider how long you will need life insurance. For example, if you are purchasing insurance only to cover your children's expenses if you die, you'll only need that coverage until they are self-supporting. In this case, a term policy may be right for you. If you're young and healthy, a term policy offers low premiums with the highest death benefit for your dollar.

If, on the other hand, you need life insurance coverage that lasts your entire lifetime, you may do well with one of the permanent life insurance options. Although premiums are higher initially with a whole life policy, your premiums will not go up, and in your later years will be less expensive than purchasing a new term policy.