How do you know which type of life insurance you should buy? The details can get pretty complicated, but you can figure out the main differences in a few minutes. Before you start calling around to get prices for different policies, ask yourself a few questions.

• What are your reasons for buying a new policy? Do you want to make sure your family is covered, protect a business, or pass money on to future generations?
• How much coverage would it take to satisfy your needs? .
• Which type of policy makes more sense? Do you just need to be covered for a few years, or do you want a policy that you can keep forever?
• How much can you afford to pay for your coverage? Your budget will affect your decision a lot.

To help you figure out which type of basic policy you want, I have provided a quick summary. Understand that some policies offer more features, so this just covers the basics.

Term life is probably the most popular type of life policy today. You buy it for a specific time period (the term). Because it is temporary, the premiums will be the lowest. This means that people can afford to purchase a larger death benefit.

Whole Life is permanent life insurance. It does not expire. The policy will remain in force as long as it is paid for or paid up. Because it is permanent protection, premiums will be higher than they would be for the same amount of coverage with a temporary (term) policy.

Universal Life is a newer policy type. It combines features of insurance with savings. The two accounts work together, but they are kept distinct so the policy owner understands the value of each of them. It is, like whole life, considered a permanent policy.

Which Kind of Life Insurance Is Best?

I just covered the kinds of policies at the most basic level. Some products come with options that allow you to combine features of more than one type. This is where the details can be more confusing, but the policies can also become more flexible and useful.

For example, you may want to purchase a permanent policy for yourself and your spouse. But you may also want to cover your kids until they have their own jobs. You might want to purchase a whole life policy, but add a term rider (option) for your children. Figuring out the exact details can be a lot easier with a good agent.

Consider another example. Perhaps you would like to make sure your family can pay off your home loan if you pass away. But you would also like to plan for the future to make sure you have some sort of protection in your retirement years.

In this case, it may be a good idea to buy a larger tem policy to cover your mortgage until it is paid off. But you may also want to buy a smaller whole life policy now, when rates are lower because you are much younger. In this case, buying 2 policies may serve your needs better.

The best policy for you will depend upon your individual needs, goals, and budget. The answer will not be the same for any two different people.