Life insurance is an essential part of financial planning. The main purpose of purchasing life insurance is to ensure that your dependents are financially protected in the event of death. Life insurance is a way to plan for the future so you need to be sure that the coverage you purchase fits your needs.

"44% of all U.S. households, 48 million don’t own life insurance and believe they should, or own life insurance and know they need more. "

There are many options available to you when purchasing life insurance. Some policies provide coverage for your lifetime and others provide coverage for a specific number of years. With certain policies, you are able to combine different kinds of insurance and even build up your cash value. Your choice should be based on your needs and what you can afford.

"Nearly three out of four Americans agree that life insurance is the best way to protect against premature death of a primary wage earner. "

Term Life Insurance

Term life insurance is an insurance policy that is in effect for a specific period of time. If the insured dies within that timeframe, the beneficiary of the policy receives the death payment. However, if the insured survives that period of time, the beneficiary receives nothing and the policy is closed. Term life also provides the ability to convert to a permanent kind of coverage at a later time. The main reasons people buy term life insurance include:

• Coverage for a specific amount of time until they are able to build up their assets.

• Coverage for the amount of time the mortgage is for so in the event of an untimely death, the mortgage is taken care of.

• Coverage for those that cannot afford a permanent policy, especially newlyweds and new parents.

"Twenty-four million households have no life insurance protection at all. Almost one third of adults have no life insurance protection."

Some uses of term life insurance include mortgage life insurance, key man insurance, business life insurance, and family insurance protection.

Permanent Life Insurance

Permanent life insurance covers a longer period of time than term life insurance or for the entire life of the insured. This kind of insurance combines death benefits with a savings component. The amount of money that is not used to cover the amount of the insurance is invested by the company and builds up a cash value that may be used in a variety of ways. You may borrow against a policy's cash value by taking a policy loan. If you don't pay back the loan and the interest on it, the amount you owe will be subtracted from the benefits when you die or from the cash value if you stop paying premiums and take out the remaining cash value. The cash may also be used to increase your retirement income or to help pay for needs such as a child's tuition without canceling the policy. However, to build up this cash, you'll pay higher premiums. There are several types of permanent life insurance, including whole, universal, variable universal, and survivorship universal.