Most professionals are more aware of the death benefits of life insurance than the living benefits. All insurance options have advantages and disadvantages. The type of insurance you select - whether term life, whole life, universal life, variable life, or other available insurance options — ultimately depends on your financial situation, goals, and the advice of your life insurance agent.

Term life insurance provides benefits for a specific time and is often selected when the death benefit need is great and resources are limited. Whole life insurance has a fixed guaranteed premium payment for an agreed upon time and also has guaranteed cash values and death benefits. If a waiver-of-premium rider is added to the policy, the premium is waived if the insured becomes disabled. The cash value grows tax-deferred and is easily accessed throughout the life of the policy without penalty or financial qualification, unlike many investments or loans. Universal life insurance is a popular form of permanent protection for budget-conscious consumers because it allows more flexibility in premium payments and the ability to vary the death benefit amount. Universal life differs from traditional whole life because it specifically separates and identifies the mortality, expense, and cash value parts of the policy. This design provides the policyholder increased flexibility, but subjects the owner to non-guaranteed costs that may increase over time.

Just as you insure your home and its contents for “replacement cost,” you should insure yourself for replacement cost or your “human life value.” To determine your human life value, estimate how much you’ll make during your lifetime and establish a present value for that number. For example, a 35-year-old earning $75,000 with a 5% annual increase will earn $4,982,914 by age 65. The present value of this amount, assuming a 4% interest rate, is $1,536,325, or approximately 20 times the individual’s current income. Under the human life value method, this individual should purchase approximately $1.5 million of life insurance.

Obviously, life insurance is least expensive when you are young and healthy. The irony is that many don’t consider purchasing insurance for their full human life value until later in life. Consult an experienced, knowledgeable life insurance agent to help you determine what kind of and how much life insurance to purchase.