Life insurance is probably the most important and yet the least understood insurance policy you will ever buy.  

There are a number of ‘types’ of life insurance policy and each has its benefits and challenges depending upon the needs of the individual the policy will cover and the family or beneficiaries it is meant to protect. 

There is no one RIGHT answer for everyone and perhaps that is what confuses most people. 

The more agents and advisors they ask, the more confused they become with conflicting opinions and advice. 

Because this is a complex issue, and one that is important to most people, we will spend a bit more time talking about life insurance policies and the various considerations that will help you make a decision and buy a policy that is right for you. 

The first step is to decide whether you NEED life insurance! 

That statement may seem as if we are advising you to spit into the wind, but consider this:  A single person with no dependents and no siblings or family younger than herself/himself, would be foolish to spend a lot of money on life insurance premiums. 

Who is the coverage meant to protect?

Remember that life insurance is protection against lost income through loss of life.  That is all a life insurance policy is meant to do – plain and simple. 

If you have no dependents or people who look to you for income and support, or if you are independently wealthy and do not need to provide additional financial support for your family after you die, then you don’t need life insurance!

Another myth:  Everyone has to have life insurance! 

Life insurance is meant to support your dependants in the event of your death. 

If you have NO dependants, why pay premiums for a life insurance policy?  

That said, most of us do have to consider a life insurance policy – at least enough to pay for funeral fees and support our family. 

While we may not insure our lives for hundreds of millions of dollars, we do want to adequately cover the needs of our loved ones after we are gone. 

That may mean living expenses, income (if a spouse cannot or does not work), higher education for our children, etc.

You don’t want to OVERINSURE your family, but you want to have ENOUGH.  So, calculating total life insurance coverage is critical.  

First you have to decide whether your loved ones will need support only for a transition period of two to five years, while your spouse gets a job and perhaps some training or additional skills with which to support the family.

Or perhaps your family will need support for the rest of their lives, or at least until the children are grown and on their own.

Next myth:  Only the person making the most money in the household needs to have life insurance. 

If your spouse is working part time or perhaps even staying home to take care of the kids, you may not see the hidden costs of childcare or the other tasks your spouse performs for no pay. 

When your spouse dies, you will have a real shock as expenses mount to cover the cost of what your spouse did at home (cleaning, cooking, shopping, child care, elder care, etc.). 

When you calculate the cost of life insurance policies, be sure to include policies for anyone in the house whose contribution (either in dollars or in workload) must be replaced. 

And, remember to buy policies large enough for funeral expenses for your children or elders living in your home – unless you think you can cover those expenses on your own. 

The cost of the average funeral today is somewhere between $8,000 and $12,000 depending on where you live and the type of service you want.

If you keep track of household expenses, that is a good place to start to figure out what you will need to cover lost income and how large your life insurance policy must be to cover that annual income over the period of years you believe your family will require support.

Look at your average expenses on a monthly basis and figure out whether your family can stay in the family home and live comfortably on what you leave in the way of insurance proceeds.

That number must include food, clothing, mortgage payments, education, emergency funds for car repairs, etc.  Figure in any income your spouse or others earn, and see where you end up.

Next, you have to consider the TYPE of insurance policy you want to buy.  There are a number of choices.