When purchasing life insurance, you are often presented with the choice of term or permanent insurance.  The choices for life insurance term life insurance policies are typically 10, 15, 20, 25 or 30 years.  Choices for permanent insurance are usually whole life or universal life.  Universal life can be broken down further – traditional universal life, guaranteed universal life (with lapse protection) or variable universal life.  For whole life, you can purchase a participating policy, which pays dividends, or non-participating, which doesn’t pay dividends.

When you first set out to  purchase life insurance, you thought it would be fairly simple.  However, being confronted with all these options can make one’s head spin.  Then, you start getting conflicting opinions from different sources – whole life is the best choice, buy only term life, buy term and invest the difference, etc., etc.

I can make it fairly simple for you to make the right choice.  What are your needs for life insurance?  Are you interested in death benefit only or are you looking to accumulate some cash value with your policy?  Are you looking for coverage for a specified term or will you need life insurance for your whole life?  Once we determine the length of time you need the insurance, we then look at what product is the most appropriate for you.

If you are only interested in a death benefit for a finite period of time, the choice is easy – term life insurance is most probably the best choice for you.  You can also look at a return of premium policy, which pays you all your premium back at the end of the term (provided you survive the term period).  Return of premium term is usually priced well for younger ages.  As you get older, the added cost for this type of product might have you looking at regular term insurance again.

If you’re looking for a lifetime benefit with the potential of accumulating cash in the policy, I believe that life insurance whole life insurance, when structured properly, is a wonderful product.  It has guaranteed death benefit, guaranteed premiums and guaranteed cash values.  The only reason I don’t recommend it to everybody is because it can be cost-prohibitive to many folks.  However, if you have a positive cash-flow and are fully maxed-out in your qualified plan (401K, IRA, etc.), this is a great vehicle for accumulating additional tax-favored savings, in addition to the life insurance benefit.

If you want lifetime protection and don’t care about cash accumulation and whole life premiums don’t fit your budget, I would recommend a universal life policy with lapse-protection.  These policies will not generally accumulate much cash value and, even if the cash value drops to zero, the death benefit and premium are still guaranteed.  We often call this product lifetime term insurance, because it guarantees the death benefit and premium and will most probably not accumulate cash, and you are covered for your whole life, rather than a specific term.

Once we ascertain a client’s needs (and budget), we will assist in choosing the right product.  Sometimes, we will present a combination of term and permanent, as the immediate need for life insurance may be greater than it will later in life, although there will still be a need (funeral costs, debt elimination, etc.).

We recommend to our clients to do a policy review every couple of years, as needs change and, when needed, policies can be modified, dropped or added to.