Gauging the Health of Your Life Insurance

Life insurance comes in many flavors, each designed to suit a specific need. But the main purpose of life insurance is to guarantee the financial security for your loved ones after you pass away.

And the financial security of your insurance provider is an important factor in making sure your family is taken care of.

There are four main kinds of life insurance that offer different advantages and benefits:

• Term life insurance is a policy with a set time limit on the coverage. These policies, usually the least expensive in premiums, provide a stated benefit upon the death of the policy owner, as long as the death occurs within a specific time period. However, the policy does not provide any returns beyond the stated benefit, unlike permanent life insurance policies.
• Whole life insurance offers both insurance and an investment that accumulates a cash value you can withdraw or borrow against. With whole life, regular premiums pay insurance costs and contribute to a savings account that is allowed to grow tax-deferred. It also provides lifetime coverage with level premiums and a fixed death benefit.
• Universal life insurance is similar to term life insurance, but, like whole life insurance, it has a savings element. The key with universal is its flexibility in the amount of regular premium payments. This is popular with people with fluctuating incomes.
• Variable universal life insurance provides permanent protection to the beneficiary upon the death of the policy holder. This is generally the most expensive kind of cash-value insurance because it allows allocation of a portion of the premium to a separate account made up of investment vehicles within the insurance company's portfolios (i.e., stocks, bonds, equity funds, bond funds and money market funds). These policies are considered securities contracts, are regulated under the federal securities laws and must be sold with a prospectus.

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