bluecollardollar: on permanent life insurance

The Who, What, When, Where and Why of Retirement

The mutual fund investor has a great many more options available to them in the post-Great Recession marketplace. The question is: are they right for you as you make a retirement plan using 401(k)s or IRAs?
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There are many different types of permanent life insurance (from whole life policies to universal life policies to variable life insurance policies, all of which are priced according to health, age, and type of policy. But permanent life insurance starts out as a term policy.

Picking the right policy can be difficult. Often, it depends on where you are in your financial plan. For those just starting out, term insurance provides the least expensive coverage. But because of the limited amount of time that these policies cover, your coverage may be running out just as you hit the years when you need it most.

Before we get to term policies, let's take a look at some of the other types of policies, some of which can act like a savings plan as well.

• Whole life: This is the most common type of permanent insurance policy. It offers a death benefit along with a savings account. If you pick this type of life insurance policy, you are agreeing to pay a certain amount in premiums on a regular basis for a specific death benefit. The savings element would grow based on dividends the company pays to you.
  The earlier you purchase this type of policy, the less expensive it is. The longer you hold on to the policy, the greater the cash balance becomes. Eventually, the policy can begin to pay the premiums from this cash reserve.
• Variable life: This policy combines death protection with a savings account that you can invest in stocks, bonds and money market mutual funds. The value of your policy may grow more quickly, but you also have more risk. If your investments do not perform well, your cash value and death benefit may decrease. Some policies, however, guarantee that your death benefit will not fall below a minimum level.
• Universal life or Adjustable life: This type of policy offers you more flexibility than whole life insurance. You may, during the course of the policy, be able to increase the death benefit provided you pass a medical examination.
  The savings vehicle (called a cash value account) generally earns a money market rate of interest. After money has accumulated in your account, you will also have the option of altering your premium payments ­ providing there is enough money in your account to cover the costs.
  This can be a useful feature if your economic situation has suddenly changed. However, you would need to keep in mind that if you stop or reduce your premiums and the saving accumulation gets used up, the policy might lapse and your life insurance coverage will end.
  You should check with your agent before deciding not to make premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.
• Variable universal life: If you purchase this type of policy, you get the features of variable and universal life policies. You have the investment risks and rewards characteristic of variable life insurance, coupled with the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.

It is important to remember that your policy is only as good as the company issuing the policy. Because permanent life insures you for your whole life, you want that company to be highly rated.

There are several agencies that do just that. To see how these ratings are assessed, you can see a list of agency rating types here.