When buying life insurance, remember rule #1: don't trust insurance salesmen. Some are honest, but you don't know which ones. Seek independent advice from reputable sources. Begin right here with some basic terms:

• Cash Value Life Insurance: Cash value life insurance, known as whole life and variable universal life, combines life insurance with a savings account.
• Term Life Insurance: Term insurance provides a specific amount of coverage for a specific period of time.
• Premium: the cost of insurance, stated as a yearly or monthly amount.
• Term: the number of years the coverage is in force.
• Face amount: the amount of money paid to the beneficiary when the policy owner dies; also called the death benefit.
• Beneficiary: the person who gets the money when you die.

Cash Value Life Insurance

If you're looking for a product that combines overpriced insurance with a horrible investment, then cash value life insurance is the product for you. Here are some of its outstanding features:

• There is no cash value for the first 1-5 years.
• When cash does accumulate, it does so at a very low rate.
• If you need your money, you borrow it at a high interest rate.
• If you die, the company keeps the cash value.
• The cost of insurance increases every year, lowering the amount of money going into your cash account.

Don't be fooled by the salesmen boasting about the tax-free accumulation of your insurance investment. Roth IRAs and 401 (k)s allow you to accumulate money for retirement tax-free at a much better rate.

Cash value life insurance benefits one person, the salesman, who makes a fat commission.

Term Insurance

For 99.9% of people, term insurance is the right choice. It's much less expensive than cash value insurance, and investing the difference, known as buy term and invest the difference, provides a much larger investment sum.

It's not as simple as it looks, however. Once insurance giants realized consumers had caught on to the deceptive practices of cash value agents, they created variations of term insurance to make cash value products look attractive. Here's a look at different types of term insurance:

• Level premium/level term: you choose the amount of coverage you need for a period of time, up to 30 years. For most consumers, level premium is the right choice.
• Increasing term: the coverage stays the same, but the premiums increase each year. Most owners of increasing term cannot afford the premiums when they need coverage the most.
• Decreasing term: premiums stay the same, but the amount of coverage decreases. Decreasing term provides coverage for debts that decrease over time, such as a mortgage.
• Accidental Death and Dismemberment: Many are fooled by the low cost and high face amount. These policies pay only in case of accidental death. The definition of an accidental death is very narrow.

Shop Around

Compare identical products when shopping around. Age, term, health, face amount, and tobacco use affect cost. When determining the proper amount of coverage, add your debt, funeral expenses, and amount of yearly income your survivors would need x 10. To determine the term, calculate how long it will take you to accumulate enough wealth to render life insurance unnecessary.