When do you need insurance: If you have no dependents, you probably don't need life insurance. If you don't generate a significant percentage of your family's income, you may not need life insurance. Life insurance is important when you want to ensure that certain financial obligations as mortgage, kid’s college fee, etc. can be covered in the event of your death.

How Much Life Insurance is needed: this will depend upon factors such as your other sources of income, how many dependents you have, your debts, and your lifestyle. The general guideline is between five and ten times your annual salary.

The Type of Policy to buy: The debate over term versus whole life insurance goes on.

Term life: Some experts recommend that if you're under 40 years old and don't have a family disposition for a life threatening illness, go for term insurance, which offers a death benefit but no cash value. Unless you're a very savvy investor and understand all the implications of the various types of life insurance policies, its is recommended to go in for term life insurance

Whole Life: the premiums stay the same over the life of the policy, which stays in effect until your death, even after you've paid all the premiums. Whole life offers both a death benefit and cash value, but is much more expensive. Half of all cash value policies are surrendered within the first seven years, making the coverage very expensive because huge commissions (thousands of dollars the first year) and fees limit the cash value in the early years. Since these fees are built into the complex investment formulas, most people don't realize just how much of their money is going into their insurance agent's pockets. A cash reserve is built up, but you have no control over how it's invested.

Variable Life: Variable life polices build up a cash reserve that you can invest in any of the choices offered by the insurance company. The value of your cash reserve depends on how well those investments are doing.

Universal Life: You can vary the amount of your premium with Universal life insurance policies by using part of your accumulated earnings to cover part of the premium cost. You can also vary the amount of the death benefit. For this flexibility, you'll pay higher administrative fees.

Its Cost: The least expensive life insurance is likely to be from your employer's group life insurance plan. These policies are typically term policies, which means you're covered as long as you work for that employer. Some policies can be converted upon termination.

The cost of other types of life insurance varies greatly, depending on how much you buy, the type of policy you choose, the underwriter's practices, how much commission the company pays your agent, etc. The underlying costs are based on actuarial tables that project your life expectancy. High-risk individuals, such as those who smoke, are overweight, or have a dangerous occupation or hobby (for example, flying), pay more.

There are often hidden costs in life insurance policies, such as fees and large commissions that you may not find out about until after you purchase the policy. There are so many different kinds of life insurance, and so many companies that offer these policies, that its usually recommended use a fee-only insurance advisor who, for a fixed fee, will research the various policies available to you and recommend the one that best suits your needs. To ensure objectivity, your advisor should not be affiliated with any particular insurance company and should not receive a commission from any policy.

A healthy 30 year-old man could expect to pay approximately $300 a year for $300,000 of term life insurance. To receive the same amount of coverage under cash value policy would cost over $3,000.