What kind of life insurance should you buy? There is no “right” answer but if you know the different kinds, you can make an informed choice.
* Term insurance. With this type, you’ll pay so much for a policy that stays in force for a certain time period. As you grow older, term insurance becomes more expensive.
* Permanent insurance. With this type, you get protection as well as an investment account. Permanent insurance (whole life, universal life, and variable life) initially will be much more expensive than term insurance. As you grow older, though, term insurance will become more costly while permanent insurance may become a better deal.
Many people prefer term insurance because it’s less expensive and once an identified need for the coverage is over—say, children have established themselves financially—it can then be dropped, having paid in less.
However, if you lack the discipline to invest regularly, permanent insurance might provide a means to lock in long-term security.
Note: The Federal Employees’ Group Life Insurance program is something of a hybrid. It does not accumulate cash value but premiums are stable within five-year age ranges.