Balancing Life Insurance Costs

Life insurance comes in two basic forms:

* Term insurance. You’re covered for a certain time period and you might be able to renew the policy.

* Permanent insurance. Also known as “cash value” insurance, with these policies you get an investment account as well as pure life insurance.

Term life insurance is much less expensive, at least to start with, so that’s what many people prefer. A non-smoking, 45-year-old man in good health might get a $500,000, 10-year, $1 million term policy for about $700 a year in premiums. That same man could pay $5,000 a year for $500,000 worth of permanent life insurance.

However, term life premiums increase as you grow older and you may have trouble getting coverage if your health fails. Permanent life insurance might be a better buy if you think you’ll need the coverage for 20 years or longer. If permanent insurance appeals to you, make sure you’re confident you can afford to pay the premiums, year after year, so that you’ll get the long-term benefits.