There are two main types of life insurance available, Term Life Insurance and Permanent Life Insurance. An Income Replacement Calendar can help you determine how much life insurance you need.

Term insurance is like leasing a car. The policy holder purchases death benefits for a specified period --usually 5, 10 or 20 years. Once the period is over the deal is done and you walk away.

Term insurance pays a specific lump sum to your designated beneficiary if you should die during the term of the policy. Protecting your family by providing money they can invest to replace your salary, as well as cover immediate expenses incurred by your death. Term life insurance is best for young, growing families, with high financial needs and limited resources to cover those needs.

Conversely Permanent insurance, is like buying the car you intend to drive forever. Permanent insurance stays in force as long as you live as long as you pay the premiums,. Providing protection for your dependents by paying a death benefit to your designated beneficiary upon your death.

In addition, a portion of your premiums are deposited into a tax-deferred cash value account that you can use while you are alive. Whole Life, Universal Life and Variable-Universal Life are examples of permanent life insurance.

What Can Life Insurance Do for Me?

Under a Term Life contract, an insurance company promises to pay your beneficiaries a specified sum of money in the should you die within a period of time defined in the contract (such as 5, 10, 15, 20 or 30 years).

Under a Permanent Life contract, a portion of the money you pay in premiums is invested in a fund which earns interest on a tax-deferred basis. As time progresses, your policy accumulates a "cash value" that you can use during your lifetime. For example, you can borrow against the value of your policy. You may choose a Permanent Life contract that will accumulate enough cash so as to be "paid up" by a certain age (e.g., "Paid Up at Age 65"). The premium you pay to keep is based on the type of life insurance you buy, the amount you buy and your chance of death while the policy is in effect.

One's need for life insurance can change over a lifetime. You should consider your individual circumstances and the standard of living you wish to maintain for yourself and your dependents. In most cases, you need life insurance only if someone depends on you for support.

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