Get the Life Insurance That's Right for You

Life insurance policies are not plain vanilla, one size fits all. So understanding your options is critical if you are to choose the right policy for your situation. You will want to be well armed with information before dealing with an insurance agent, who works on commission and naturally has a perspective on what you should buy.

When considering what might be the most appropriate insurance, you will need to look at several factors that will help guide you towards the best choice, including but not limited to marital status, health, age, children, debt ratio, and current financial situation. These factors can help determine your family's or beneficiary's future financial needs.

Term life insurance is very simple and very affordable - until about age 50, when rates start to leap simply because of declining life expectancy. Term's only function is to provide beneficiaries with the value of the life insurance policy. It provides insurance coverage over a specific period of time, anywhere from five to 30 years.

Some policies are renewable at the end of the term without taking a physical, but the rate will still rise as you age. So term insurance works great for providing heavy protection at a reaonsable cost for young families with children. Then in the senior years, when family responsibiliies are typically light, the skyrocketing cost of the policy could be offset by reducing the amount of protection to a bare minimum. Term insurance also is something for business partnerships to consider. Proper coverage ensures that the business won't fail because of premature death.

Some term policies can be converted to whole life insurance. Whole life has some advantages over term, though it costs considerably more. The premium, which is determined by such factors as health and age, is fixed. You can also borrow against the policy because it builds cash value.

However, the considerable extra cost of whole life derives from its combination as both insurance and investment. And it can be a bad investment, say many experts. Because fees and commissions are attached to your policy, you might fare better by investing the added cost of whole life elsewhere.

A financial planner could analyze the differences in such possible investments to show the real return on whole life. The Consumer Federation of America will also perform that service for a fee at http://www.consumerfed.org/backpage/life.cfm.

While the investment issues are the same, there are some variations on whole life:

* Universal Life: This insurance provides for flexible premiums. You can earn interest, withdraw cash amounts and borrow against the policy.

* Variable Life: Depending on how investments fair, the amount issued to beneficiaries can change. But setting the base amount high enough would ensure adequate coverage.

Before you purchase any life insurance, you will want to be sure that the company issuing the policy will be around when the time comes to redeem it. Some companies are more stable than others. Standard and Poor's rates them using a letter grade system, from AAA to CC. Ask your potential insurer to document its ratings, or check with Standard and Poor's. Better safe than sorry, especially when you are doing your best to protect your loved ones.

Kirk Crenley contributes to http://fpminsurance.com">FPM Insurance, the information resource for Insurance. Sign up for the freeInsurance newsletter at http://www.fpminsurance.com .