1. Determine how much life insurance you need. To decide, consider:

• What lifestyle do you want to provide for your spouse and other dependents?

• How much will that lifestyle cost?

• Are there any special circumstances you should consider, such as paying for a child's college education, paying off a mortgage, taking care of elderly parents, or providing for your spouse's retirement?

• What other sources of income are available to pay for that lifestyle?

2. Decide what type of policy you need. Although there are a wide variety of policy types, the two broad categories are term and cash value:

• Term insurance -- With term insurance, you purchase insurance protection only, with none of the premium set aside to build cash value. Your beneficiary receives the policy proceeds if you die during the policy's term, but you get nothing if the policy is canceled.

• Cash-value insurance -- Cash-value insurance accumulates, from premiums paid and from investment earnings, a cash surrender value that is your property. If you surrender the policy, you receive that value. Furthermore, you can borrow against the cash value through a policy loan, but any outstanding loans are subtracted from the insurance proceeds when you die. A wide variety of cash-value insurance policies exist, with numerous riders available to meet specific needs.

3. Review insurance policies. Since life insurance companies offer so many different options, it can be difficult to compare several different policies. Try following these steps:

• Compare only the same type of policy. For instance, don't compare a term policy to a variable life or whole life policy.

• Make sure the policies contain the same options and riders.

• If considering permanent insurance policies, review the assumptions used in the policy illustration, which shows the policy's projected value at some time in the future. Keep in mind that these illustrations are hypothetical and your value will depend on the policy's actual performance. Obtain illustrations based on three alternatives -- the original illustration, one with an interest rate 1% lower than anticipated, and one with the minimum guaranteed rate.

4. Take the time to understand what you are purchasing. Life insurance policies are complex documents. Make sure to read the entire contract, and get answers to any of your questions. Don't sign the policy if you don't understand its terms.

5. Periodically reassess your policies. Your life insurance needs will typically change over your lifetime. If you've married or divorced, had a baby, or your spouse died or became disabled, you'll likely need to change your life insurance coverage. Make time each year to reassess your current life insurance policy.