Life insurance is a contract between you and your insurance provider. You pay regular premiums, and in return, the insurer provides your beneficiaries with a tax-free lump sum upon your passing.

Some policies also offer living benefits. For instance, you can access the policy's cash value to help with major expenses like college tuition or a home down payment. However, withdrawing cash value reduces the policy's surrender value and death benefit. If you're diagnosed with a terminal illness, certain policies allow you to accelerate the death benefit to cover healthcare costs.

The right policy depends on your needs. Life insurance typically falls into two broad categories: term life and whole life.

• Term Life Insurance: Offers coverage for a set period, such as 10 or 20 years. It’s straightforward and ideal for those starting out. Some term policies can be converted into long-term coverage if your circumstances change.

• Whole Life Insurance: Provides lifelong protection and builds cash value over time. Variations like universal and variable universal life insurance can include additional features, such as flexible premiums or growth opportunities for your policy’s cash value.

Choosing the right policy may involve a combination of term and whole life coverage to meet both short- and long-term needs.

The amount of coverage you need depends on your stage in life and who relies on you financially. If you’re starting a family, consider a policy that replaces your income to ensure your spouse or partner and children are supported. Later in life, when your kids are independent and major debts like your mortgage are paid off, you may want to adjust your coverage to focus on final expenses, remaining debts, and leaving a legacy for your loved ones.

Life insurance costs vary based on factors like your age, gender, health, lifestyle, and occupation. Fortunately, with the help of a financial professional, you can find a policy that provides the coverage you need at a price that fits your budget.