Life insurance is a contract or agreement between an insurer and a policyholder in which the insurer agrees to pay a specified amount of cash in the event that the insured dies while the contract is in force. The insurance company promises the death benefit in consideration of the payment of premium by the policy owner. The death benefit is payable to the beneficiary, which is a person, trust or corporation that has been named ahead of time by the policy owner. The most common use of life insurance is to replace lost earnings of a family breadwinner. Example: John, a 45-year-old husband and father of three, makes $95,000 per year as a salesman. John has elected to carry a $1,000,000 policy on his life, which costs only $49 per month. His wife is his named beneficiary.

Recognizing that each person's situation is different depending upon their age, income, net worth, debt, lifestyle, desire to leave an inheritance, the number and age of dependents and amount of life insurance provided by an employer (typically not more than 2x annual earnings), here are some basic guidelines:

• For people who work, have children or a mortgage: 10-15 times your annual income
• For home caregivers with little or no earned income: $300,000
• For burial coverage and final expenses only: $10,000 - $25,000
• For children up to age 18: up to $25,000

For a quick, easy, and confidential way to estimate your life insurance needs, try our Life Happens Needs Calculator. Do not rely solely upon employer-provided life insurance because it's probably not enough, and it's probably not portable if you leave or change jobs. Ownership of that kind of policy resides with your employer, not you, and that might not be the best situation for your long-term family needs.

If you are working and have children or a mortgage, we recommend buying cheap term life insurance to cover you until your youngest child has graduated from college or until your mortgage debt is paid off, whichever is longer. This conservative approach means that you'll have coverage through the critical period of family life. Make sure to also review quotes for those life insurance plans that now offer early payouts for long term care expenses or a critical medical event such as heart attack or cancer. Those plans are soaring in popularity because that extra protection often costs no more or only a small amount more.

Let's say that you estimate that your youngest will be out of college in 14 years and that your mortgage has 20 years to go. We'd then recommend that you buy a 20-year initial rate guarantee policy. Once the children are on their own and the mortgage is paid off, you may or may not have a need for life insurance.

However, during the formative, "high risk" years in which you have dependents and debt, we recommend loading up on cheap term life. Families with special needs children should discuss with us their needs because we'll often recommend a lifetime policy in that case.

If you're looking to have insurance for funeral costs and other final expenses, however, you should consider what's called "final expense" whole life insurance that is available with no exam required and often with no health questions asked.

Modern life insurance policies generally cover death by any cause, at any time, in any place, except death by suicide within the first two years of a policy (one year in some states). An exception to this is a single-peril policy such as an accidental death policy that pays when the death was caused by a covered accident. Accident-only life policies are popular because there is no underwriting and no exam required. Accident is today the #1 leading cause of death for Americans age 1-45.

Term Life insurance is designed for people who want coverage for a set number of years, normally 10-30 years. Premiums stay level during the initial rate guarantee period. Term life is designed to replace lost earnings of a family breadwinner and is thus very popular among parents. Term Life is economically priced because it pays only if the insured dies; there is no cash value buildup.

Whole Life (and Universal Life) insurance are generally designed to provide a level amount of coverage at a guaranteed rate for the entire life of the insured. Whole Life accumulates cash value over time while Universal Life can be setup to have cash values or no cash values. Right now, a version of Universal Life that offers level premiums and coverage for life with no cash value is very popular with life insurance buyers.

"Final Expense" insurance is a popular form of whole life coverage that is sold in amounts up to $25,000. This kind of policy is designed to pay for burial and other final expenses. Final Expense coverage typically does not require medical underwriting; some policies require medical questions while others have no medical questions and are known as guaranteed-issue.

'Guaranteed Issue' means there are no health questions or exams to obtain a policy.

'Accidental Death' is a type of life insurance that pays only if you die as a direct result of an accident.

Life insurers compete through underwriting strategies based on factors related to the health and lifestyle of applicants.

So, a customer with certain characteristics might find that one company to be the least expensive option, while another customer with different characteristics would find a different company to be the least expensive.

Waiver of premium means that, if you are unable to pay your premiums due to permanent or total disability, the premiums are waived for a certain period of time. Each company has their own standards for waiver of premium.

Today, 108 million Americans are covered under employer-provided life insurance vs. 102 million who own personal life insurance policies. What's wrong with this picture?

Four major pitfalls of relying upon employer-provided life insurance include:

• Dangerous Underinsurance. Most employer life insurance plans provide 1 or 2 times a person's annual salary in benefit, yet most financial planners recommend a minimum of 10x your earnings in life insurance coverage. Leaving your loved ones with only one year of earnings seems almost cruel.
• No Portability. If you leave your job, as most people do at some point, your life insurance melts away and stays with your former employer. In most cases you cannot take it with you or convert the group policy to an individual policy.
• Lack of Convertibility. The ability to convert a personal term insurance policy into a permanent life insurance policy without medical exam or medical questions is a Godsend for insureds who become ill and uninsurable on the open market. Convertibility is a key feature of term life insurance and may not exist at all in an employer-provided life insurance policy.
• Loss of Control. An employer-provided life insurance policy is just that i.e. it's owned and controlled by your employer and can be taken away or modified at any time. You can choose your beneficiary but that's about it.