| Traditional Whole Life, is the original cash-value policy. The insurance
stays in force as long as you pay your premium, i.e., it is permanent. The
premium you pay is fixed and depends on your age when you buy the
insurance. The insurance company will invest your premiums and you can
borrow from the cash value built up if you so wish at a favorable rate of
interest. |
| The amount of insurance you need depends on a number of factors such as
your mortgage payments, and the cost of education, health care and daily
living expenses of your family. You will also need to consider questions
such as: Is your spouse working? If not, will he or she require job
training to be able to provide enough income for the whole family? Will
your house be sold or retained? What effect will inflation have on your
estate? How many years will your children be living at home? Answers to
these questions will help in determining the amount of insurance you should
buy. Several rules of thumb and formulas are available to use as a guide
in deciding the amount of life insurance coverage you need. One of the
simplest is to take your annual salary, multiply it by 5, and minus the
coverage you already have. |
| Universal Life, differs from the traditional whole life by investing the
premiums in fixed-income securities that provide better rates than the
traditional whole life. You can choose to use the accumulated cash to buy
more death coverage or to pay the annual premiums, or both. |
| Disadvantages
* It is not permanent
* You may not be able to renew it above a certain age, e.g., above 70
years in some states. However, this may not necessarily be
disadvantageous since you may not need life insurance at that age because
your dependents will most probably have been able to establish on their own
by then. |
| Should you have life insurance?
Who should get life insurance?
What type of life insurance should you have?
Which type of insurance should you pick?
How much life insurance do you need? and
How can you shop for life insurance? |
