Life insurance ensures your loved ones are taken care of after your death. However, you'll find there are several types of life insurance policies. It helps to know the differences between them and how to shop for them.

One type of life insurance is term life, which is valid for a set number of years. If you are still alive at the end of the term, the policy expires without you needing to take further action. Some providers may allow you a premium refund, and you can sell a convertible policy.

A whole life policy covers you for life and stays effective as long as you pay premiums. The premiums don't increase, but the cash value increases, and there is a guaranteed death benefit.

A universal insurance policy is a permanent insurance that allows you more flexibility in the premiums you pay. A variable policy has fixed premiums, but you can invest the cash value in stocks and bonds.

Many factors determine what type of policy you need and how much when you buy life insurance. A popular method of calculating how much you need is the DIME method, or Debt, Income, Mortgage, and Education.

Calculate your total debt, including mortgage, and what you expect a funeral, college education, and remaining mortgage to cost. Add in expected income replacement, which financial experts recommend to be 10 times more than your annual wages.

If you don't want to commit to a policy and want a lower cost, term life is ideal. If you want more security and your budget allows it, consider buying a whole life policy.

Before you buy a policy, get a free quote from at least three providers to compare rates. Be careful before you choose the cheapest, since you want it to meet your needs, but avoid overpaying.

Some providers may request you to take a medical exam, which they use to calculate rates based on various factors. While it speeds the process, prepare to pay more for a policy that doesn't require a medical exam.

Consider this option if you don't want the hassle of an exam and don't want to wait to get approved. Prepare for a phone interview from the provider, which requires you to answer some questions about your lifestyle.

Have your vital details ready, such as weight, medical records, and prescriptions, so you can promptly answer questions. Once you get approved and accept the offered premium, the provider will send you the documents by mail.