Make Sure Death Benefit Is Adequate

Now, what kind of life insurance should you buy? Guess what? It depends. But keep this very important principle in mind:

Consumer TIP: Whatever kind of policy you buy, you should make sure it provides enough of a death benefit to meet your family's needs if you aren't here. So when you consider buying life insurance, start off with a number in mind of what your family must have in terms of a death benefit. Don't lose sight of this number.

What kinds of life insurance policies are there? There are several, but keep in mind that the terms and costs of the policies vary widely among insurers.

There are two basic types:
term life, which is good for only a certain period of time, and, cash-value, which is "permanent" insurance that also includes a buildup of value in cash in addition to your death benefit. You can borrow against your cash value. You can even take out some of that cash value, but your death benefit will be reduced.

What exactly is "cash value?" It's that part of a permanent life insurance policy not needed for so-called "mortality expenses." The greater your risk of dying, for whatever reason, in the near term, the greater your mortality expense to your insurer.

When young, healthy people buy life insurance, they have a very low mortality cost to their insurer (which is why life insurers are so willing to provide coverage to the young and healthy).

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