Determine How Much You Need

• Before you speak with an advisor or representative, make sure you understand how much life insurance your family will need. Take into consideration your mortgage, your child's education, funeral costs and daycare costs, if you have small children. If you have small children, ask yourself what it would take to ensure your spouse could stay home with the children until they were of school age. The younger your children are, the more life insurance you may need. If single, you may only need enough to cover any debts and funeral costs. Take advantage of online calculators such as those offered by the Life and Health Insurance Foundation for Education to determine how much life insurance you need (see Resources).
  
  

Find the Right Type of Policy

• Determine whether to purchase term life insurance or permanent insurance, such as whole, universal or variable. Term life insurance is a policy that covers a period of time, such as 10 or 20 years, and may be ideal for young people or those who know they will need extra coverage for a period of time. In particular, a term insurance policy may be a good idea if you want a certain amount of coverage until your children are grown (such as a 20-year policy), or your mortgage is paid off. Once your children move out of the house, and your life insurance needs decrease, you may consider investing in permanent insurance, which covers you until the day you die. Term insurance should be eligible to be converted to a permanent policy. Permanent policies are also able to receive dividends.
  
  

Find the Right Company

• Be sure the company you purchase your policy from will be around as long as your policy. Look for insurance companies with high ratings from ratings agencies, such as A.M. Best, Standard & Poor's, Weiss, Moody's and Fitch (see Resources for a list of top rated insurance companies). Your bank may also provide or connect you with a life insurance company or plan. Consider getting online quotes from a number of companies.
  
  

Be Wary of Insurance Agents

• When speaking with a representative, make sure you understand everything she has laid out in your policy. Be cautious of agents who suggest that they know more than a ratings agency. Know if your agent is paid by commission, fee plus commission or fee only (which means they charge a fee for their guidance versus a commission on a product sold). While not all agents who operate on commission are bad, some may push you towards purchasing a higher dollar package. An honest agent won't be offended if you inquire as to how their paid.