There are many types of life insurance to fit individual needs and circumstance. The following are some of the basic types of life insurance available.

Term Insurance - The simplest form of insurance. You purchase coverage for a specific price for a specified period. If you die during that time, your beneficiary receives the value of the policy. There is no investment component.

Whole Life - Similar to term, but you purchase the policy to cover your "whole life" not just a set period. Premiums remain level throughout the life of the policy, and the company invests at least a portion of your premiums. Some firms share investment proceeds with policyholders in the form of a dividend. Many companies will offer "a relatively low guaranteed rate of return," but in reality pay at a rate in excess of the guarantee.

Universal Life - You decide how much you want to put in over and above a minimum premium. The company chooses the investment vehicle, which is generally restricted to bonds and mortgages. The investment and the returns go into a cash-value account, which you can use against premiums or allow to build. With some policies, sometimes called Type I or Type A, the cash account goes toward the face value of the policy on the death of the policyholder. With a second variety, sometimes called Type II or Type B, the beneficiary receives the face value of the policy plus all or most of the cash account. While Type II is meant to provide a partial hedge against inflation, it demands higher premiums as you get older than Type I.

Life Insurance Needs Calculator

How much life insurance do you need? Well, the answer isn't really how much life insurance you need... it's how much investment capital your family will need at the time of your death. Their need for capital -- on a gross basis -- is really a function of two variables:

1. How much will be needed at death to meet immediate obligations?

2. How much future income is needed to sustain the household?

The first category is fairly easy to estimate. It's the sum of final expenses (including uncovered medical costs, funeral expenses and final estate-settlement costs) and other lump-sum obligations (such as outstanding debts, mortgage balance, and college costs).

 The second variable is a bit trickier. It involves calculating the "present value" of future needed cash-flow streams. By answering a few simple questions below, you can get a rough sense of the needs for capital that might exist at your death.

Click on the calculator to determine the amount of life insurance you need.