By BankingMyWay Staff

You've just realized that you need life insurance. Perhaps you want to provide for your children after you die, or you want a head start on your estate planning. But once you've decided to purchase an insurance policy, it’s important to choose the right type of coverage. But even to the most financially savvy among us, that’s easier said than done. Here’s a few things to consider when sorting through your options.

What's Available?
The two main life insurance options are term and permanent insurance. Term insurance involves coverage for a set term, often 10 to 30 years in length. When the policy lapses at the end of the term, you receive nothing -- much in the same way you don't get anything from car insurance policy if you never get into an accident. Permanent insurance, on the other hand, lasts your whole life and includes a component that allows you to accumulate and save money in a tax-deferred account.

Permanent insurance comes in four general types: whole-life, universal, variable and variable-universal insurance. Each type differs in terms of the flexibility of the premiums and how the savings component of the policy is invested.

Premiums
With a temporary policy, you pay strictly for the death benefit -- an amount that gets paid out to your beneficiaries when you die. Premiums on a permanent policy, however, are generally higher than those on term policies because cover money for the investment component along with administrative fees. This difference in premiums can help steer your decision.

"Unless you need the benefit of the tax-deferred investing strategy, you may be better off just purchasing term insurance and maxing out your 401(k) or IRA contributions," says Daniel D'Ordine, a certified financial planner with New York City-based Life and Wealth Planning. "A lot of people get caught up in the sexiness of a permanent policy when it might be more than they actually need."
Duration of coverage

It's important to figure out how long your coverage needs to last. If you need 20 years of coverage to make sure there's enough money to pay off your mortgage and send your child to college, then purchasing a 20-year policy might be the right move. However, many insurers won’t sell term policies to those aged 70 or higher because the premiums would be unaffordable due to the increased risk of dying. As a result, if you need coverage to extend into retirement, consider purchasing a permanent policy.

Layering
In some cases, the right type of coverage might include both term and permanent insurance. If you already have a permanent insurance policy but need to boost your coverage for a short period of time -- perhaps a result of taking on a new mortgage on a second home -- you can purchase a term policy to temporarily increase your coverage.

Shopping Around
Term insurance is extremely competitive with respective to premiums, so it's important to shop around for the best-available rates. BankingMyWay.com's Insurance Center can help you find quotes on term life insurance from the major carriers in your area, including MetLife (Stock quote: MET), American International Group (Stock quote: AIG) and Allstate (Stock quote: ALL).

To discuss your options in regards to permanent insurance, consider contacting a certified financial planner near you. Head to the website of the National Association of Personal Financial Advisors to find a CFP near you.

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