The ultimate reason for buying life insurance is for paying
a benefit (i.e. a dollar amount) to a beneficiary when you
die. It can also help you save money. Life insurance
policies take one of several basic types. This article
summarizes each type and some of the benefits it offers to
your situation.

Life insurance is priced by the insurance companies based
on your age and health. Life insurance companies expect you
to live statistically so many years more at a given age and
health status and gear their costs accordingly. Because of
this, your acceptance by the insurance company depends on
how the condition of your health fits into their costing
scheme.

The types of insurance available may offer additional
living benefits such as a savings vehicle. Choosing the
policy type that best addresses your needs is the name of
the game. Here are the classic policy types to choose from.

Term insurance:

It offers no savings component to it which leaves no 'cash
value' associated with the policy. Therefore its premiums
(i.e. the payment you make to own the policy) covers only
the risk of death during that year. I.e. you're paying for
what is called 'pure' insurance.

Many insurance companies offer level premium term
insurance. Premiums may remain level (i.e. constant) for a
period of 5, 10, 15, 20, 25 or even 30 years. These
policies are inexpensive and can provide relatively long
term coverage.

Some level premium term policies contain a guarantee of
level premiums, while others don't. Without a guarantee,
the insurance company can surprise you by raising your
premiums (the amount you must pay to keep the policy in
force), even during the time you expected your premiums to
remain level. Make sure you understand the terms of your
policy.

Whole Life Insurance:

This is a form of permanent insurance because it's designed
to remain in effect throughout one's lifetime. Generally,
the premiums for this type of policy remain the same
throughout the life of the insured. During the early years
of the policy, premiums are much higher than those of term
insurance policies. That's because these policies develop a
cash value (i.e. it has a savings component) which the
policy owner can access through surrenders or policy loans.

Return of premium term insurance:

This is new type of coverage that generally combines low,
term-like premiums with a guaranteed refund of the premiums
paid during the level term period assuming the insured is
still living at the end of the level term. They are often
significantly less expensive than permanent types of
insurance. But, like many permanent plans, they may still
offer cash surrender values if the insured doesn't die.

Universal Life Insurance:

It's also a form a permanent insurance but differs from
Whole Life because it delineates and itemizes the
protection element, the expense element, and the cash value
element. This adds more policy flexibility for the policy
owner to modify the face amount or the premium in response
to changing needs and circumstances.

A Survivor or Second to Die insurance:

This is offered either as Universal Life or Whole Life and
pays a death benefit at the later death of two insured
individuals, usually a husband and wife. That way it can
pay estate taxes when they occur - at the second person's
death. Most individuals arrange to pay little or no estate
taxes at the death of the first person because of the
unlimited marital deduction in the estate tax. This
coverage is widely used because it is generally much less
expensive than individual coverage on either spouse.

One of these types may best suit your situation.
Understanding all its options is the next step to deciding
which.