The Pros & Cons of Life Insurance

There are four (4) major types of Life Insurance: Term Insurance, Universal Life Insurance, Variable Insurance, and Whole Life Insurance.  Each type has its pros and cons.  This guide will help you to choose the life insurance type that best suits your needs.

Term Insurance

The insured person is only covered for a set period of time.  The "term" will be specified in the policy.  A benefit is paid to a designated beneficiary only when the insured dies within the specified term.  Terms can be set at one to twenty years.  Term Life Insurance policies are renewable; however, the premiums increase with age.

Universal Life Insurance

Universal Life Insurance combines a death benefit with a type of savings vehicle.  The premiums are flexible and death benefits can be changed during the life of the policy, within limits.

Variable Life Insurance

Variable Life Insurance combines a death benefit with a savings account that can be invested at the policy-holder's discretion.  It also offers fixed premiums.  This option includes the following:

• No fixed return
• More investment options
• Less expensive
• Requires active participation
• Investment risk assumed
• Death benefit determined by investment performance
• Potential for high returns
• Popular among the 30- to 45-year olds.

Whole Life Insurance

The oldest cash value life insurance combines a death benefit with a savings component.  Coverage is provided over an individual's whole life.  Fixed premiums are charged annually or semiannually.  All investment decisions are made by the insurance company.  This option includes the following:

• Less risk
• Costly
• Requires less participation
• Most basic form of cash value life insurance
• Fixed death benefit
• Popular among those closer to retirement age