There are two types of major polices:

1. Term insurance is a form of life insurance that pays out only if the death occurs during the “term” of the policy, which is usually anywhere from one to 30 years. Term insurance is a good option if you need coverage until a specific point in time. For example, you may only need coverage to pay off a particular debt such as a mortgage or a your child’s college education.
2. Permanent life (whole life, universal life, variable life, etc.) provides lifelong protection. Unlike term life, permanent policies remain in force as long as the premium is paid, and some policies accumulate a cash value.

How much life insurance do you need?

Questions to ask yourself:

• How much money will my family need after my death for immediate expenses (funeral costs, outstanding debts, mortgage balance, college costs)?
• How much money will my family need to maintain their standard of living over the long run?

Life Happens, a non-profit organization, has a great tool to help you figure out how much you may need.

Tips Before You Buy

• Consider the quality of the company: An insurance policy is only as good as the company that backs it.  You should make sure that the company that issues your policy will be around to service it and eventually to pay the death claim.
• Look into group insurance through your employer: Even if you have to contribute financially, policies through the workplace often have the advantage of group rates and limited medical underwriting.  Employers may subsidize their group insurance costs as well.  It is worth exploring what is available to you through the workplace and comparing it to coverage available to you as an individual.
• Buy when you’re healthy: Find out which rate class you will be grouped into and, if necessary, consider making some lifestyle changes—not smoking, maintaining a healthy weight and exercising regularly—to qualify for a more favorable rate class. Buy when you are younger and healthier, if possible.
•  Remember, price is not the only factor: It is important to consider the additional features that a policy may have. The guaranteed cash value component of a higher-premium life insurance policy, for instance, may justify the additional expenditure on the policyholder’s part.
•  Look for premium discounts: Most companies offer a discount when you purchase higher insurance amounts. For example, you might actually pay a lower rate per dollar of coverage for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000.
•  Beware of higher premiums for paying in installments: Insurance companies typically offer the choice to pay your annual life insurance premium in a single payment, or in smaller amounts more frequently during the year. Although the latter method might seem easier, some companies add steep charges for paying premiums in installments.