What kind of insurance is right for you?

This is life insurance you buy for a specific period of time, usually 5, 10, 15, 20 or 30 years. It pays the amount of the policy to your beneficiary if you die before the end of this period. By buying a longer term policy, your costs can be stretched out to avoid the annual increases found in non-guaranteed term life.

Whole Life or Ordinary Life

Whole life policies stretch the cost of insurance out over a longer period of time in order to level out the otherwise increasing cost of insurance. In this case, however, it is spread not over a few years but over your entire life. Your excess premium dollars are invested in the company's general portfolio.

Universal Life

This option offers greater flexibility than whole or term life. After your initial payment, you can reduce or increase the amount of your death benefit (although to increase the amount, you'll probably have to give the insurance company medical proof that you are still in good health). Also, after your initial payment, you can pay premiums any time, in almost any amount within the policy's required minimums and maximums.

There are both Universal and Whole Life versions of Variable Life. This option provides death benefits and cash values that fluctuate with the performance of the insurance company's portfolio of investments (you'll receive a prospectus along with your policy). The cash value is not guaranteed, but you get to choose where your premium dollars go among the variety of investments in the portfolio. Thus, while there is no guaranteed cash value, you have control over your money and can invest it according to your own tolerance for risk.

If your investments perform well, you'll have a higher cash value and death benefit. If they don't, you'll have a lower cash value and death benefit, although some policies guarantee a minimum death benefit.

You can also take loans against the cash value of your policy, but if you don't pay them back with interest, your beneficiaries will receive a reduced death benefit. You can also surrender your policy for cash or convert it into an annuity, but keep in mind that cashing in a permanent policy after only a couple of years is an expensive way to get insurance protection for a short time.