What kind of life insurance?

Insurance isn’t one-size-fits-all, so if you’re serious about making life insurance part of your financial plan, you’ll need to calculate how much you need based on how much financial support you give your dependents now and how much they’ll need in the future. You’ll also need to make sure that what you pay to buy life insurance — called premiums — is affordable in your current budget.

There are several types of insurance, and several variations on each type. But your most basic choice will be between permanent and term insurance. The difference between the two can be thought of as the difference between buying and renting a home. With permanent insurance, your life insurance policy is a financial asset that you own. It has a cash value, which you can borrow against if you need to. And the cash value increases over time, similar to a savings account.

With term insurance, you are covered for a certain time period. The insurance ends once the coverage period is over or if you stop paying the premiums. There’s no cash value. But, if you’re young and healthy, term insurance is cheaper than permanent insurance and may meet your needs.

The best way to figure out whether you need life insurance, and which type of insurance would be most appropriate, may be to talk to a life insurance professional. He or she may charge a fee to analyze your situation and suggest a solution. Then you can search for a policy that best suits your needs.