Ask the Life Insurance Expert

I'm a 36-year-old single mom. Should I buy a 30-year term life or whole life insurance policy? I don't want my son to worry about my final expenses.

You're smart to think about life insurance now, but there is no cut-and-dry answer to your question, given the small amount of information provided.

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To find the best life insurance product, you need to think about how much insurance you need, how long you need insurance coverage and your cash flow.

A few types of life insurance

Term life is far cheaper than whole life insurance. It offers coverage for a certain number of years, such as 10, 15 or 20 years. You can still find 30-year policies, but they are less prevalent than shorter terms. If you die sometime within the term period, the policy pays a death benefit to your beneficiary. Term life does not have any cash value, so you can't borrow against the policy or cash it in early.

Whole life is a type of permanent life insurance. It pays out a death benefit no matter when you die and has cash value. You can borrow against the cash account, but if you don't repay the money plus interest, your beneficiary loses out on part or all of the death benefit.

Universal life insurance offers more flexibility than term life or whole life, and involves many moving parts. After the initial payment, you can increase or decrease the death benefit and pay premiums at any time or any amount as long as you meet a minimum level set by the policy. Universal life can also be structured to perform similarly to a term life policy.

The smallest policy you can buy from the largest life insurance companies is generally $25,000. Some other companies, though, market smaller whole life policies as funeral insurance, promising coverage without a medical exam. But if you're healthy, you'll get a better rate per dollar of coverage applying for a $25,000 policy and going through a medical exam.

Regardless of what type of life insurance you choose, check out the financial rating of the life insurance company before buying. Financial strength ratings indicate the likelihood that companies will be able to pay claims.

For more, see Life insurance basics and the Life insurance needs estimator tool.

Last updated: Aug. 16, 2011
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