With term life insurance rates so cheap, why would anyone want to buy a permanent policy?

After all, premiums can be four, five or 10 times higher than with term insurance and comparing permanent plans isn't easy.

There's still a place for whole and universal coverage but by no means is it for everyone.

The chief advantage of permanent plans, also known as "cash-value" insurance, is that they are, indeed, permanent; they last until you die while term coverage lasts for 10, 20 or 30 years and the price can skyrocket when you try to renew.

If you have a child with special needs who will require care long after you retire or expect a large estate tax bill, a permanent policy could come in handy, says Kimberly Lankford, a contributing editor at Kiplinger's Personal Finance and author of "The Insurance Maze."

People are also living longer these days and you may want coverage well into your old age. At that point, buying term life becomes very expensive while whole life premiums stay the same forever.

See earlier tip on calculating life insurance costs.

Whole and universal life are known as "cash-value" insurance because, in addition to paying for coverage, you contribute to a savings fund that pays either a fixed rate of interest or is invested in mutual funds or other securities. As you build up that savings, you can borrow against it tax-free or, in the case of universal, use the dividends to pay your premiums.

The best way to view it, says Lankford, is not as an investment scheme but as a permanent term policy, so look for the least amount of savings and the most amount of coverage.

There are plenty of reasons to be wary of whole and universal life insurance. Commissions are high, sometimes as much as 90 percent of the first-year's premiums, so insurance brokers have a good reason to sell them to you.

Policies are complex, so comparison shopping is extremely difficult. A universal policy with a high premium might actually be a better deal than one with a lower premium that charges high fees.

Find an agent you trust, ask if he or she will reduce their commission and get "illustrations" of how the policy will work. Also, consider buying a no-load policy from, among others, Ameritas, USAA and TIAA-CREF, which cuts out the middleman fees — but you'll have to figure out the specifics on your own, Lankford says.

A financial planner or fee-only insurance advisor can also help if your insurance needs are substantial.

Above all, the most important thing is to buy enough insurance, regardless of what type it is.

Copyright (c) 2006 MarketWatch, Inc.