In 2008, some 68 million Americans did not have life insurance, according to the Life and Health Insurance Foundation for Education. However, if you have loved ones who depend on your income, a life insurance policy is a must-have. If you were to die today, an effective life insurance plan will ensure that all your family's financial needs will be covered-from the monthly mortgage and utility bills to your child's college education.

If you already have a life insurance policy, good for you. You've taken an important step in protecting your family. However, you may want to take a closer look at the type of life insurance coverage you own. Most Americans who have life insurance only carry the group coverage offered by their employers, according to a 2008 LIMRA International study. Unfortunately, this type of coverage typically ends as soon as you leave that job or retire.

If you want to make sure your family is covered well beyond your working years, you may want to consider permanent or "whole life insurance.

While term insurance typically only covers you for 15 to 20 years, permanent or whole life insurance remains in effect for your entire life as long as you keep paying premiums. For the first few years after you purchase a permanent life insurance policy, your premiums will probably be higher than the actual cost of insurance protection.

Because you are contributing these excess premiums, the policy can accrue cash value. (That's why permanent life insurance is also known as cash-value insurance.) You can borrow against this cash value for a number of reasons, such as to pay off a mortgage, cover your child's college tuition or supplement your retirement income. Of course, these policy withdrawals or "loans will reduce the cash value of your policy by the amount of your outstanding loan balance plus interest. You could even use your cash value as collateral for a business loan.

Generally, once a permanent policy is in force, your premiums will remain level. This ensures continual protection for your family as you age, even if your health becomes poor. While whole life insurance commands an initial higher premium than term life, you won't have to worry about re-applying every 10 or 20 years at a considerably higher rate as with term life.

While almost everyone needs some kind of life insurance, it's up to you to decide whether a permanent or term life policy is the best choice. It all depends on your specific needs and situation. If you are uncertain about what kind of life insurance policy you should purchase, talk to your financial advisor or an insurance agent.

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Article Submitted By: Mark Stjean
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