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Cash-value coverage, also referred to as whole life insurance, combines life insurance protection with an investment account. For a given level of coverage, cash-value coverage costs substantially more than term coverage, and some of this extra money goes into a low-interest investment account for you. This coverage appeals to people who don’t like to feel that they’re wasting money on an insurance policy they hope to never use.

Agents usually sell cash-value life insurance as permanent protection. The reality is that people who buy term insurance generally hold it as long as they have people financially dependent on them (which usually isn’t a permanent situation). People who buy cash-value insurance are more likely to hold onto their coverage until they die.

Insurance agents often pitch cash-value life insurance over term life insurance. Cash-value life insurance costs much more and provides fatter profits for insurance companies and commissions to the agents who sell it. So, don’t be swayed to purchase this type unless you really need it.

Cash-value life insurance can serve a purpose if you have a substantial net worth that would cause you to be subject to estate taxes. Under current tax law (which could, of course, change), you can leave up to $11.7 million — free of federal estate taxes — to your heirs. Buying a cash-value policy and placing it in an irrevocable life insurance trust allows the policy’s death benefits to pass to your heirs free of federal estate taxes.