Withdrawals from cash value reduce the coverage amount.

Also, unless you're young and you're putting a lot of money in an insurance policy, it's not going to develop enough cash for you to take money out and still have adequate coverage.

"You have to be 100 percent sure you're happy with the policy indefinitely," Hunt warns.

Here's more on cash value life insurance.

12. Term life insurance policies are always the best choice.

"Most people die without insurance," notes Modell. "If you're in your 50s or 60s and you want a burial policy, don't buy term insurance. That's not the purpose of term insurance." If, on the other hand, you have young kids and a mortgage on your house, buying term insurance makes sense.

If you've purchased term insurance and now wish you had a permanent policy, you can usually convert some or all of it to a permanent policy. Here's how to convert a term life policy to permanent life insurance.

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