By M. Kotch

The subject of life insurance is complicated and very personal. Just search for one type versus another and you will be bombarded with strong opinions that try to sway you either way depending on the views of the author or commentator.

For many of us, trying to understand the complex choices available is nearly impossible—especially when we hear this expert or that expert advocating a one-size-fits-all approach to life insurance. Unlike car or medical insurance, the terms can be more difficult to decipher, so before you think about purchasing a plan get informed. Speak with family, friends, coworkers and more than one agent all while holding a calculator and being honest with yourself about your budget and needs.

Some of the factors you need to consider include:
Children: If you have kids, are they very young or nearly going to college?
Spouse: Is your spouse still working and does he/she have a 401k or Roth IRA account to fall back on?
Age: The rule is, the older you get, the more expensive (and in some cases difficult) coverage becomes.
Overall Health: The big question that determines a spike in the price of coverage is whether or not you’re a smoker, though other health questions may come up and affect your individual plan

The two main types of life insurance are term and permanent. Here’s what you need to know about both:

Term:

• Term life insurance spans a certain number of years and expires after the “term”
• Once the term ends, you cannot recoup any part of the money you’ve paid toward the policy
• Plans typically range from 10 to 30 years
• The value of term insurance policy is often high ($100,000- $500,000 and can be even higher), while the cost (premium) is generally low (current estimates are $15-$30/month for males, and $10-$25/month for females, depending on your age, as well as the length and amount of coverage)
• Term life insurance is often recommended for those with young children to ensure their welfare until they are adults
• Insurance companies often push this type of insurance because about 98 percent of customers out-live their terms plans.

Permanent:

• This type of insurance coverage does not end or run out
• Permanent insurance policies are far more expensive than term policies (expect to pay a minimum of $100 every month, though that sum goes up depending on your age, health and amount of coverage)
• A permanent insurance policy can be locked-in, where you will pay the same amount every month. Other plans offer flexible periods that allow you to lapse/pay lump sums at certain points
• Some permanent life insurance policies, such as traditional whole life insurance, include accumulating growth that is known as cash value
• Accumulating interest on your whole life insurance policy is tax deferred, though the cash value may be subject to estate and federal taxes later on
• Permanent life insurance is recommended for those who are sure they will be able to pay their premiums consistently, and ensures that your beneficiaries will be eligible for your claim whether you live for another 5 or 50 years
• There are many types of permanent life insurance including: whole, universal, variable and single premium

Some experts suggest one type of plan over another, while others advocate getting term and permanent if you can afford it, and other still suggest getting term insurance and investing your money in lieu of permanent life insurance. We will explore the different options in upcoming articles.

Note: This is just a brief overview of the two main types of life insurance. Always consult with more than one insurance agent to compare prices and coverage plans to determine the plan that best suit your needs.

This entry was posted on Thursday, July 23rd, 2009 at 12:56 pm and is filed under Pre-need. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.