While nothing can replace a life, life insurance is designed to reduce the financial burden on your family in case of your untimely death. Here are some important considerations for life insurance:

• Replacing lost income until the end of your normal working life in order to take care of those who depend on it.
• Paying off debts (loans, mortgage, consumer debt).
• Providing financial support to your spouse in retirement, above and beyond Social Security and Medicare benefits.
• Paying for medical and funeral expenses.
• Paying for your children's education.

How do I determine the amount of life insurance that I need? Broadly speaking, there are two ways: the first is based on replacing your current income (income replacement) and the second is based on meeting the expense needs of your dependent family (needs based). ...

There are three basic types of life insurance, namely term life, whole life, and universal life. There are also a few flavors of these three basic types. Here is a brief description:

Term Life Insurance
As the name indicates, Term Life insurance is for a fixed term and to fulfill temporary insurance needs. It is the simplest form of life insurance. The premium is low at a younger age and it increases with your age. ...

Whole Life Insurance
The Whole life insurance contract pertains to the whole or entire life (from now until the age of 100). It provides permanent protection and carries a cash component that builds up over a period of time and can be withdrawn at any time. As long as the insurance premiums are paid as agreed, the face value of the whole life policy will be paid upon insured's death no matter when it occurs. When the insured turns 100, the face value of the policy equals the cash value of the policy. The real advantage here is that it carries a level premium unlike most types of term life insurance where the premium can increase with your age as you purchase new policies. A simple form of whole life insurance is also called Ordinary Life. Here you pay the premium annually until  age 100 or death, whichever occurs first. ...

Universal Life Insurance
Universal life insurance may be used for the same purposes as whole life insurance and other cash value policies.  It differs from whole life in the sense that the premium payment is more flexible.  The owner of a universal policy can change the premium amount or timing without negotiating with the insurer.  As a result, the death benefit may be more or less than the face value of the policy.  Universal life is ideal for people who have fluctuating salaries.  Universal life policies are invested in money market accounts ane are, therefore, low risk.

Variable Universal Life Insurance
Variable universal life insurance is a flavor of universal life insurance as its investment component is invested in the stock or bond market.  A policy holder receives a set choice of investments. As a result, the risk of the cash value lies with the policy owner. It still offers a flexible premium, but usually there are no minimum guarantees on the death benefit.

• The general rule of thumb is if you pay the premium from after tax dollars, the proceeds paid from the life insurance in the event of insured's death are tax free. In some cases, employers pay the life insurance premium for the employees. In such cases, the insurance amount received by the survivors may not be tax free. If the life insurance policy has an investment component, the earnings on this investment are tax free as well.
• Dividends earned on the cash surrender value are not taxable until withdrawn. However, if the insured dies without withdrawing dividends, then they pass tax free.

• You should periodically (say once every two years) review your situation to adjust your life insurance coverage.
• It is important to note that life insurance does not appreciate after the age of 100 years. Even if you have a whole life policy, your beneficiaries will only receive the face value if you die after the age of 100.
• If you choose to pay the premium more frequently (monthly or weekly instead of yearly), the cost to you will be higher because of the additional administrative cost to the insurance company.
• If your employer offers a group life insurance benefit, you should consider purchasing it as group policies have lower premiums because of the number of participants. And in many cases, employers also contribute some amount towards the premium.
• Look carefully the forfeiture provisions of the policy you intend to choose. Different insurance companies have different types of penalties for cancelling a contract before it expires.

1. Calculate and decide on the appropriate amount of life insurance you need.
2. Decide on the type of policy or policies you need such as a term, whole life, universal life or variable universal life.
3. If you currently have an insurance policy you may need to make an appropriate adjustment to its face value based on a change in your situation (birth, death or divorce).  As you build your nest edd and your children advance in age the need for insurance decreases.
4. Decide on an established insurance provider. An established insurance provider is very important because ultimately the financial strength of the insurance company determines whether or not your beneficiaries get paid.