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If you have dependents or other people with whom you share your life, life insurance can play a vital and valuable role at virtually every stage of your life. It’s not just for the young, nor is it only for parents or guardians of young children.

Why buy life insurance? The main reason for insuring your life is to replace an income you are generating that someone else relies on. The most common case is a one- or two-earner family with young children. If an earner dies, life insurance can enable the survivors to go on without having to make financial sacrifices.

Life insurance can also pay for one-time costs that are connected with death, such as funeral and burial costs, administration costs (e.g., for probate and transferring title to property to the heirs), estate and inheritance taxes, and outstanding debts (such as final medical expenses not covered by health insurance). There are several other reasons to buy life insurance as well.

You have to make many choices when buying life insurance: how much to buy, which type of product to buy; and which one of the hundreds of life insurance companies to choose. Even if you “shop” online, it is in your interest to work with a knowledgeable professional who can understand your needs and constraints, answer your questions, and help you find the most appropriate solutions.

Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool many situations.  Read on to understand why life insurance is so important to your financial health.

In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.  However, if you want to create an inheritance or make a charitable contribution, you should buy enough life insurance to achieve those goals.

There are two major types of life insurance—term and whole life. Whole life is sometimes called permanent life insurance, and it encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. In 2003, about 6.4 million individual life insurance policies bought were term and about 7.1 million were whole life.

How is life insurance sold? You can buy life insurance either as an “individual” or as part of a “group” plan.

A beneficiary is the person or entity you name in a life insurance policy to receive the death benefit. You can name One person, Two or more people, The trustee of a trust you’ve set up, A charity, Your estate.

If you don’t name a beneficiary, the death benefit will be paid to your estate.

Term insurance comes in two basic varieties—level term and decreasing term. These days, almost everyone buys level term insurance. The terms “level” and “decreasing” refer to the death benefit amount during the term of the policy. A level term policy pays the same benefit amount if death occurs at any point during the term.

There are several different types of permanent policies.  In order to find the one thats right for you, you need to understand the differences between the different types of term policies and how they will affect your estate.

A permanent life policy provides lifelong insurance protection. The policy pays a death benefit if you die tomorrow or if you live to be a hundred. There is also a savings element that will grow on a tax-deferred basis and may become substantial over time. Because of the savings element, premiums are generally higher for permanent than for term insurance. However, the premium in a permanent policy remains the same, while term can go up substantially every time you renew it.

Choosing the type of insurance thats right for you and your family is based on many factors.  This article goes over the factors you should consider before making your decision.

Roughly 1,000 life insurance companies sell life insurance in the U.S., but many are members of groups of companies and so aren’t really competitors with each other. Having separate companies enables a group to offer its products through separate distribution channels, to more efficiently meet the regulatory requirements of particular states, or to achieve other organizational goals. There are an estimated three hundred company groups.

Five independent agencies—A.M. Best, Fitch, Moody’s, Standard & Poor’s, and Weiss—rate the financial strength of insurance companies. Each has its own rating scale, its own rating standards, its own population of rated companies, and its own distribution of companies across its scale. Each agency uses numbers or plusses and minuses to indicate minor variations in rating from another rating class.

When you’re considering buying life insurance, it’s important to choose an agent or broker who can help you. Buying life insurance can be complicated or confusing. The key to buying the right amount and the right type of policy at a good rate is a good agent or broker.

There are ways to save money when buying life insurance, but they don’t always entail paying a lower premium immediately. As your top priority, look for a policy that meets your needs. Buying the wrong benefits for a low premium is a waste, not a saving. Beyond that, here are some ways to maximize your life insurance dollars.

Quite possibly. Here are 10 reasons to own life insurance after your kids have left home:

The last thing you want to happen after you die is for your beneficiaries to be unable to locate and submit a claim on your life insurance. To prevent this, you should have copies of your life insurance records in at least two places. This is to make it less likely that you’ll lose them (to fire, flood, accidental discarding, etc.) and more likely that, after your death, your beneficiaries will find them.

You should review all of your insurance needs at least once a year. If you have a major life change, you should contact your insurance agent or company representative. The change in your life may have a significant impact on your insurance needs. 

If unexpected expenses come up and you can’t pay your life insurance premium, you should know the possible consequences. The effect depends on the type of policy and coverage you have and the policy terms and conditions.

To begin the claims process:

• Get several copies of the death certificate.
  
  
• Call your insurance agent. He or she can help you fill out the necessary forms and act as an intermediary with the insurance company. (Don’t keep life insurance policies in your safe deposit box. In most states, safe deposit boxes are sealed temporarily upon the death of the owner, which can delay the settlement. ) If you don’t have an insurance agent, or don’t know who the deceased's agent was, contact the company directly.

If a family member dies and you are unable to locate his or her life insurance policies, there is, unfortunately, no national or statewide database of all life insurance policies that you can consult. However, you can try to determine:

• which insurance company might have issued the policy
  
• which agent or broker might have sold or serviced the policy
  
• whether the deceased might have had insurance through an employer, union or trade association, or other group to which he/she belonged.

For more information on life insurance, you can contact:

• American Council of Life Insurers
  1001 Pennsylvania Avenue
  N.W., Washington, D.C. 20004-2599
  202-624-2000
  
• Life and Health Insurance Foundation for Education