How to Buy Life Insurance
Life insurance is intended to provide for your dependents after you die. There is no federal income tax on life insurance benefits.
Evaluate the Need
To determine how much insurance you need, consider ongoing obligations (mortgage payments, school tuition, monthly bills), costs associated with your death (medical bills, burial fees, estate taxes), and your family's readjustment (moving, job hunting expenses).
Generally, you will need a life insurance policy with a face amount worth from five to seven times your gross annual income. The face amount is what is paid at your death.
The cash value of a policy is what it is worth at any given time, based on how much you have paid in premiums, how long you have had the policy, and your insurance company's financial situation. A policy may have no cash value in its early years.