Life insurance is an important financial resource for your loved ones when you die. At a minimum, you should purchase enough to pay for your debts and final expenses. Ideally, you should have enough life insurance to allow your survivors to invest the insurance benefit and use the interest generated as an additional income source after debts and final expenses are paid. Online tools can help you determine how much life insurance is right for you. Visit www.usaaedfoundation.org/insurance/ins_life_need.asp to calculate your needs.

Life insurance can be an important tool for:

Replacing your income for your spouse, children or others who may depend on it.
Creating an inheritance for your heirs.
Paying state or federal estate taxes.
Contributing to a charitable organization or other worthy cause.

Plan	Description
Term insurance	Provides only a death benefit in most cases. Covers you for a period or term equal to a specified number of years or until you reach a specified age. Beneficiaries receive payment only if you die during the policy term. Provides the largest immediate death benefit for the lowest cost for adults under age 45. After age 45, premiums rise sharply. There are three types: Level term means the premium and/or benefit amounts stay the same throughout the duration of the policy. Decreasing term means the death benefit decreases with time; the premium generally stays the same. Renewable term means your coverage automatically renews at the end of each term, regardless of changes in your health or occupation. At renewal, the premium may increase while the death benefit usually stays the same. Most term policies offer the ability to convert to permanent life insurance. Some life insurance companies charge a fee for this flexibility. Conversion can be a good benefit for those who desire long-term insurance coverage.
Permanent insurance	Combines a death benefit with a cash value — part of your premium is diverted into a cash value element that builds over time and helps you avoid paying higher premiums in later years. Covers an individual up to age 95, 100 and sometimes longer. By 2009, many insurance companies will offer policies that provide coverage to age 121. If you cancel coverage, you receive any accumulated cash value. May allow you to borrow or withdraw some of your cash value as long as premiums are being paid. This reduces the death benefit. There are several types: Whole life offers a death benefit with a cash value and sometimes dividends. The premiums and death benefit remain constant, while the cash value grows at a guaranteed fixed rate. You do not pay federal income taxes on the cash value until you receive it. Universal life offers more flexibility than a whole life policy. You may be able to increase the death benefit. When your cash value reaches a certain level, you may be able to alter your premium payments. The cash value grows at a guaranteed minimum interest rate on a federal income tax-deferred basis. Variable universal life is similar to universal life, but it allows you to select the investment vehicle that generates your cash value growth.

About Premiums

The amount you pay for a life insurance contract can vary widely among life insurance companies. You should compare similar policies based on your age, the coverage amount and the type of policy and its features. Premiums are based on your insurability and risk class — generally determined by the following factors.

Age	Younger individuals pay lower rates, as they tend to be healthier and have longer to pay premiums before they are likely to die.
Gender	Women, who as a group have longer life expectancy than men, typically pay lower premiums.
Lifestyle	Your use of nicotine and alcohol, as well as your hobbies, may affect your premiums. For example, an individual who enjoys sky diving will typically pay more than someone who plays golf.
Medical history and physical condition	Your blood pressure and cholesterol levels can affect your rates. If you have a chronic illness or a family history of diabetes, heart disease or cancer, you will likely pay higher premiums.
Occupation	If your job involves risk or travel to dangerous locations, you typically pay more for life insurance.

To Lower Costs

Exercise, eat well and do not smoke.
Maintain a healthy weight.
Purchase life insurance at a young age to get a lower rate.
Purchase the appropriate amount of life insurance using a combination of term insurance and permanent insurance to meet short-term and long-term financial needs.

Next: Health Insurance

Updated Thursday, February 07, 2008

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