Life > Basics
When looking at purchasing a life insurance policy, the first thing you should do is thoroughly examine your financial situation and the standard of living you want to maintain for your dependents and survivors. You need to determine who will pay your funeral costs and final medical bills.
Your life insurance policy should be reevaluated on a yearly basis, and whenever you experience major change in your life such as marriage, divorce, birth or adoption, or a major purchase such as a home or business.
Term insurance provides protection for a specific period of time. It pays a benefit only if you die during the term. Some term policies can be renewed when you reach the end of the term, anywhere from one to 30 years, though the premium rates will increase with each renewal.
Initial premiums are generally lower for term insurance than for permanent insurance, making it possible for you to buy higher levels of coverage at an earlier time, when the need for protection often is greatest. But it is important to keep in mind that your premiums will increase as you grow older and your coverage may terminate at the end of the term or become too expensive to continue.
For more on term insurance, see Term Life Insurance .
Unlike term insurance, permanent plans provide lifelong protection. As long as you continue to pay the premiums, the death benefit is valid. These policies are designed and priced for you to keep over a long period of time. If you don't intend to keep the policy for the long term, you may want to consider term insurance.
Permanent policies are known by many names: adjustable, ordinary, universal, variable, and whole life. Most of them have a cash value, not found in most term policies, which provides you with some options:
There are also several types of permanent insurance, enabling you to tailor your policy to your specific needs:
Variable life bases your death benefit and cash value on the performance of an investment portfolio. You will receive a prospectus with your variable life policy.