Your choice of life insurance depends on how much coverage you need, how much premium you can afford and whether you want life insurance only for its death benefit or also for its savings potential.

Term insurance pays off only if you die; cash-value insurance combines a death benefit and an investment fund. For short-term protection, from one to 10 years, buy term insurance. It will give you the most protection for the least money. Term coverage starts with low premiums, which are either adjusted annually or can be locked in for periods of 10, 15 or 20 years. The longer the lock, the higher the premium.

Permanent insurance, by contrast, lets you lock in one premium rate for your lifetime. Whole life, the most widely known type of permanent life insurance, gets its name from that fact, although it is also true for other permanent policies. Part of your premiums are invested and build up a cash reserve with tax-deferred earnings you can draw from. However, cash-value premiums are much higher than term premiums. Many people believe that the best approach is to buy the cheapest term policy you can find and invest the difference between the term premium and cash-value policy premium in stocks, bonds or mutual funds.