What's the best life insurance for me?

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Answered by: Melinda, An Expert in the Life Insurance and Annuities Category
The best life insurance for you depends on your situation. Your life insurance needs if you're married with young children are very different than those of a single retiree with grown children, for example. In general, though, the best life insurance for you is life insurance that covers your potential life insurance needs in a manner that's affordable for you.

There are two basic types of life insurance: term life insurance and permanent life insurance. Term life insurance is the least expensive type of life insurance. It provides a set amount of life insurance for a set time period, or term. Term life insurance can be for five, 10 or 20 years or more. You pay a set premium amount for that period of time. If you want to continue the life insurance after that time, you may be able to renew it, depending on the terms of your policy, for a significantly increased premium.

Term insurance is ideal to cover needs that will exist for a limited period of time. For example, a parent with young children might purchase a 20-year term policy in a face amount that would be enough to cover their college education, child care and the mortgage for their home in the event of a premature death. By the time the term policy ends, the children would be grown and the parent could end the policy.

Permanent life insurance is designed to be in place for life. There are two types of permanent life insurance: whole life insurance and universal life insurance. Whole life insurance has a set premium amount and a set face amount, also known as a benefit amount. The policy continues until the insured person ends the policy, either through canceling it or through death. Whole life insurance accumulates cash value, or savings, within the policy. The cash value can be borrowed against or if you surrender, or end, the policy, you'll receive the cash value back. Whole life insurance is ideal for life insurance needs that are permanent, such as final expenses or estate taxes.

Universal life insurance accumulates cash value like whole life insurance. Universal life has flexible premiums, though. You can increase the premiums and accumulate cash value faster, or pay lower premiums if needed, or pay no premiums at all for a period of time. Universal life insurance has a set benefit amount that can increase based on the amount of cash value. You can borrow against the cash value in a universal life policy or withdraw the cash. Universal life insurance can be used to cover permanent or temporary needs, or it can be utilized as a savings vehicle for a future college education or retirement plan. Universal life insurance is more complicated than term or whole life insurance, and typically costs more than term insurance.

The best life insurance for you meets your insurance needs in a manner that's affordable for you. Rather than choosing one type of life insurance, you may want to purchase a combination of life insurance policies. Talk to a financial advisor or life insurance agent you trust and to review your life insurance needs and choose the best life insurance for you.

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