Just like a car owner has to have car insurance, it makes sense that a person would have life insurance. This is not necessary for everyone to have but it's a good idea for the head of the household or people who want to protect their families to have. The type of life insurance needed can vary from person to person depending on individual situations. These are the types of life insurance available and what each one entails.

Term Life Insurance

This type of insurance is the simplest and usually most affordable type of insurance that a person can purchase. This is because term life insurance only does one thing- it pays the beneficiaries a fixed amount of money when you die. This type of insurance is set for a certain amount of time so it won't pay if you live past the length of the insurance. However, this is a good option for anyone who wants to be financially protected for only a certain amount of time.

Permanent Life Insurance

There are several types of permanent life insurance but the goal of this coverage is to pay beneficiaries while also being an investment account. This type of policy includes cash value. It's a pool of money that you own and can access. The major differences also include that this type of insurance will not expire and continues until you die or don't pay the premium. The types of permanent life insurance include whole, universal, or variable universal life.

Whole Life Insurance

This policy locks in a premium rate so you pay on a monthly basis to the company. Part of the cost goes into the cash value and grows over time. This means that the longer you own the policy, the more its cash value similar to a savings account. However, this money will be paid to beneficiaries if you die and tends to be more expensive than term insurance.

Universal Life Insurance

This insurance type has a death benefit and a cash value. However, it has an adjustable premium. This means that you can take some of the cash value and use it to pay for the premium. Part of the premium cost will go towards paying the death benefit and the other part will be invested as savings. The idea is that the investment will grow over time and be more profitable in the long run.

Variable Universal Life Insurance

This is the most complicated of policies as they are trying to combine life insurance, a savings account, and a mutual fund into one account. You can decide how your money is invested and there are a variety of choices. You'll get a life insurance payout but also get to have a cash value where you can gain or even lose money. This is probably the worst type to purchase if concerned about losing money in the policy.

These are the types of life insurance available today. Determining your budget and needs for life insurance can help narrow down these choices to find the one that best meets your situation.