While term life insurance is an appropriate type of insurance for most people, other types of life insurance policies, including permanent policies may be a better choice in certain situations.

There are three types of permanent life insurance: whole life insurance, universal life insurance and variable universal life insurance.  Each of these provides protection for your entire lifetime, or in certain instances up to a specific age.

Unlike term life insurance, permanent life insurance policies can build cash values-money that you can borrow against and in some instances, withdraw to help meet future goals. In general, you pay no taxes on any earnings in the policy so long as the policy remains in force.  Withdrawals or loans against the cash value are, in many cases, tax-free.

So, when is buying permanent life insurance appropriate?

• If you have a long-term need for life insurance.
• If you are interested in accumulating policy cash value to provide funds for education, retirement or other future goals.
• If you want to take advantage of the tax-favored treatment of cash value life insurance policies.

However, before you make your decision, you should consider the following:

• Permanent life insurance is about 3 times more expensive than term life insurance.
• Loans, including any unpaid loan interest, and cash-value withdrawals generally reduce the death benefit, which could leave beneficiaries inadequately protected.
• If you cancel or surrender the policy, or it lapses, you may have taxable income to the extent that the total of cash value and/or distributions or withdrawals exceed your basis in the policy.

Finally, keep in mind that the best policy to purchase is one that will be in force when you die. If you cannot or do not think you can afford the premiums for a permanent life insurance policy then DO NOT buy it. You’ll lapse the policy and lose money and more importantly you’ll lose the life insurance coverage for your family.