Life Insurance

Life insurance aims to protect your family in the event of your death. Some policies offer death benefits, such as burial costs, larger policies may give your family a larger financial sum to use for living expenses.

There are two main types of insurance: term and permanent insurance. Term insurance is like renting your coverage. You have coverage only as long as you continue to pay your premium. This insurance provides coverage for a specific time period and for a specific premium. It only pays out upon your death and there is no cash value. It is initially less expensive than other types of policies, for the same amount of coverage. Premiums vary widely and may stay constant or change annually, depending on your policy. For this reason, it is important to shop around and carefully compare policies.

Permanent insurance is like owning your coverage and is a long-term commitment. Once you have coverage, you do not need to re-qualify for coverage unless you are increasing the benefits.

Whole life provides protection that can be kept for as long as you live. As the policy ages, its "cash value" increases on a tax deferred basis. If you cancel your policy, you receive the cash value that has built up. While you continue to own the policy, you can borrow against the policy as a favorable interest rate.

Universal life is more flexible for saving. Usually, a policyholder must pay a certain premium for death protection but can increase the premium in order to increase the savings aspect of the policy. The cash value will increase based on the current interest rates and the amount of premium going toward the savings or investment portion.

Variable universal life is a combination of mutual fund-like accounts and insurance. Policyholders must pay a minimum premium but can increase the premium, if desired. They can also increase or decrease the death benefit, if needed. Owners have the opportunity to obtain higher cash values and death benefits based on how their accounts perform.

Term insurance is best suited for a temporary need. You could use the death benefits to pay for college or your home mortgage. Because it is death-only protection, it is less expensive and therefore more attractive if you are relatively young.

Whole life insurance is best suited for older individuals with a permanent need. Whole life can be used for items such as paying estate taxes or buying a partner's business interest if your partner dies before you. Universal life is for those who want to have flexible premiums and death benefits. It is also useful for those who want to build cash values conservatively. Variable universal life insurance offers coverage as well as the ability to choose where the cash value is allocated, which could increase the amount of cash available if needed.

Choosing an Agent
Begin looking for an insurance agent by asking your friends and family for recommendations for agents they have used. Consider an agent's credentials and experience. You should also make sure that you can communicate well with your agent about your needs in buying insurance products and the reasons that you may need them. Ask questions about an agent's practice. You'll find that agents and companies specialize in different types of insurance products. Be sure that the agent you choose has knowledge about the type of insurance you need.

The National Insurance Consumer Help Line can give you general information about auto, life, health and home insurance. They can also help you register a complaint with an appropriate government agency. They can be reached at:

National Insurance Consumer Help Line
(800) 942-4242
P.O. Box 615
Riva, MD  21140-0615

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