There are two basic types of life insurance: term insurance and whole life. Both types of insurance have experienced dramatic changes over the past several years. If you bought a term policy more than a year ago, there is a substantial chance you could replace your existing coverage at a more favorable rate.

Term Life insurance is pure insurance and pays a benefit only if you die during the term. There is no cash build-up or surrender value to these policies. Term insurance generally provides a level death benefit at a level price for a fixed period of time: usually 5, 10, 15, or 20 years. Many term policies are guaranteed renewable, which means they may be continued in-force beyond the level term period, at the new current rate. Many term policies are also guaranteed convertible, which means they may be converted to whole life policies if the owner so chooses. The most important aspects of term insurance, other than the price, are the length of the term period and the extent of conversion rights. Although term insurance costs substantially less than whole life, it only meets very specific needs.

Whole Life (or Ordinary Life) policies generally have a cash building aspect to them, and the insured pays a guaranteed level premium for the life of the policy with virtually no risk. As long as you pay the premiums, the death benefit will always be there. In many cases, annual dividends will actually pay the annual premium. These policies are designed for you to keep over a long period of time.

Flexible premium policies, which allow the policyholder to vary the premiums and/or coverage as needs change, are called Universal Life (or Adjustable Life) policies. A Universal policy that provides death benefits and cash values which vary with the performance of an underlying portfolio of investments I called Variable Life. The flexible premium policy owner shares certain risks with the insurer.

With any life insurance, the best policy to buy depends on your current and future needs.

Do you need life insurance?

The answer may be with these five reasons you don't need life insurance:

You are never going to die. You are going to win the lottery Your children are going to support you. You are never going to retire. The government will take care of you. Two reasons for purchasing life insurance are to provide your family with long-term financial security and/or protect your estate. Essentially, you should consider what your family's immediate and ongoing needs will be if something happens to you.

Immediate needs can include the final expenses associated with a terminal illness, burial costs, estate taxes, the balance of an unpaid mortgage and even relocation expenses. Ongoing needs might include monthly bills and expenses, mortgage payments, daycare costs, education, income replacement and retirement.

Most people aren't so anxious to figure out how their family will replace the income lost if they die, or even to tackle such details as how much their own funeral will cost. One way to start the process is to consider this: you should have life insurance that is equal to five to ten times your annual gross income.

If you answer yes to any of the following you may have a need for life insurance. Do you have:

==> A mortgage?
==> A spouse and/or children?
==> Business leases?
==> Business loans?
==> An estate?


Term Life or Whole Life: What kind of insurance is right?

Only an in-depth interview with an insurance professional can answer that questions.

How do you buy the correct amount of insurance?

The simple answer is to buy for the right length of time, whether you need short-term or long-term insurance. A good rule of thumb is to talk with a qualified agent who represents top rated companies. A simple phone call or visit in person will greatly simplify the process. Basic information from you will allow the agent to assess your needs and help you make the proper decision. Life insurance choices should not be decided upon hastily.