What Type of Life Insurance Do You Need?


type of life insuranceLife insurance is often considered essential to individuals who have dependents.

But what kind of life insurance do you need?

If you have a spouse, children or other family members who are dependent on your income, you’ll likely want to be sure they’re provided for in the event of your death – meaning you may want life insurance.

There are many types of policies, but they essentially fall into two categories: term life insurance and cash-value life insurance.

Term Life Insurance

With a term life insurance policy, you pay an annual premium, and in exchange, an insurance company promises to pay a death benefit to your beneficiaries if you die while the policy is in effect.

Cash-Value Life Insurance

With a cash-value life insurance policy, only a portion of your premium is applied to your death benefit.

The remainder is allocated to another component of the policy called the cash value.

Depending on your policy, your cash value could be invested in something akin to a savings account with interest paid by the insurer.


Both types of life insurance have advantages.

A term life insurance policy provides the highest death benefit for your premium dollar, which frees up more of your money for other things such as saving for retirement.

On the other hand, the cash-value policy lets you save through your life insurance policy.

Whichever type of policy you decide is suitable for your individual circumstances, you’ll want to make sure your beneficiaries understand your policy’s payout in the event of your death.

Such a payout may amount to more money than they’ve ever seen, so you’ll want them to be prepared to obtain the maximum benefit from any payout.