How to Determine the Type of Life Insurance You Need

The best life insurance to have is the kind that is in force when you die. But since most of us live a long time, some thought should go into the type of contract we choose.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Term Life Insurance
• Insurance
• Whole Life Insurance

1. Determine how long you want your life insurance coverage to be in effect - for example, from now until your children finish college, or throughout your life.
2. Buy a term (fixed-length) contract with an increasing premium (annually renewable term, or ART) if that length of time is less than four years.
3. Buy a term contract with a level premium if you need coverage for a longer time (5, 10, 15 or 20 years).
4. Buy a permanent (lifelong) contract if you wish to provide a death benefit for your beneficiary no matter how long you live.

Tips & Warnings

• Most types of permanent insurance (often called whole-life) have a cash value. You may borrow against it at a low interest rate while keeping most of the death benefit in force.
• If your employer offers term life insurance and that's what you need, buy all you can because group life is the least expensive term insurance available.