Life insurance protects individuals and families from losses associated with a death. Those who receive payments from an insurance policy are called beneficiaries. In the past, the husband, as the bread-winner, carried the largest amount of insurance, and insurance on the wife was often limited to cover funeral costs. Now more women work and are heads of households and so need to examine their life insurance needs carefully.

Almost one-third of all female heads of households are not insured at all. If you are a working mother with small children, insurance could maintain your family's standard of living and pay for child care in the event of your death. If you are married but childless, life insurance can help your spouse continue to make payments for things toward which you both were contributing, such as a mortgage. If you are single, your life insurance could benefit your parents and pay for your burial expenses or debts.

All life insurance policies require you to make payments, called premiums, for a specific amount of time. In return, the company promises to pay your beneficiaries a death benefit when you die.

Some basic questions often asked about life insurance are:

Does everyone need life insurance? If you have a family, a mortgage, plan to send your children to college, or have others who depend upon you for support, life insurance can protect them by making up for the loss of your income should you die. Try not to let your life insurance lapse if others are dependent on your income or wage-earning capacity. Your policy could be expensive or impossible to replace later. Talk to your agent, because some policies allow flexibility in paying premiums.

If you are uninsurable elsewhere, you may want to convert your employer's group plan into an individual policy. Check with your employer about converting the policy. To get the most for your insurance dollars, contact your local Cooperative Extension Service office for publications on selecting life insurance.

It is important to review your beneficiary and contingent beneficiary designations on life insurance policies periodically. If you no longer have dependents, you may want to stop paying for your term insurance or cash in your whole life policy when your income decreases, convert it to an annuity to supplement your income, or invest your money elsewhere for a higher rate. Wives will want to be cautious about dropping their husbands' life insurance unless survivor's benefits from their pension and Social Security will provide sufficient income including cost of living adjustments.

If your estate is large (more than $600,000) you may need insurance to cover taxes and estate expenses upon your death.

How much do I need? There is no rule that experts agree on. It depends upon your stage of life, the number of dependents you have, whether you still have a mortgage or are planning for college expenses for your children, your lifestyle, and what other sources of income you have. Depending upon your needs, insurance can also be planned to cover burial expenses, repay debts such as your mortgage, and pay for a college education for your children. Your insurance needs and amount of coverage should be reviewed every few years to be sure you are adequately insured but not over-insured.

How much does insurance cost? The cost will vary, depending upon the company you choose, your age and state of health when you purchase the policy, your life expectancy, the amount and type of insurance you select, and the size of commission the agent receives.

Life insurance is tax-advantaged in two ways. The cash value portion earns interest tax-deferred, and beneficiaries receive the death benefits as tax-free income.

Types of life insurance

There are two broad categories of life insurance policies. Term insurance provides only death benefits. Cash value insurance accumulates investment income benefits in addition to the death benefit.

Term insurance appeals to those who are looking only for protection in case of the insured's death. It is usually low-cost, with the premium increasing as the insured ages. If you are healthy, insurable, and need coverage, you may benefit from purchasing individual term life insurance. This insurance provides the maximum protection for the least cost. It insures your life for a fixed period -- usually 5, 10 or 15 years -- and benefits are paid only if you die within that period. If you drop the policy before you die, your beneficiaries receive nothing. Some policies are renewable for an additional number of years, and some are convertible to whole or cash value life insurance policies. Shop around; there is a big difference in term policy prices.

You may have group term life insurance through your employer. This is pure protection without a cash value or savings feature. Many experts feel this is the best type of policy because premiums are low, coverage is high, and the lower cost allows you to save and invest your money somewhere else at a higher rate of return than is possible with cash value life insurance policies.

Cash value life insurance provides a death benefit and also accumulates funds from investments that can be borrowed in an emergency, used as collateral for a loan, or used as a supplemental income at retirement. Life insurance should be selected primarily for protection, rather than as a method of saving or investing. Historically, the tax-deferred investment income from insurance policies has been inferior. Most cash value policies are issued for a lifetime, and the premium usually remains the same throughout the policy. Although there are several variations, the main types of cash value life insurance are:

• Whole life (or straight or ordinary life) is the most traditional type of policy. This policy requires payments to be made during your entire lifetime. It has a guaranteed death benefit, cash value, and an unchanging premium, but you have no say about how the money is invested.

• Universal life provides the protection of low-cost term insurance combined with the cash-value build-up of whole life. It features flexible premium payments, adjustable benefits, and a cash value that accumulates tax-deferred. You have more flexibility but pay more in administration costs. It does not give the most complete insurance coverage nor the most competitive savings.

• Variable life has a term insurance death benefit, and investments are chosen by the insured to be used for cash accumulation through tax-deferred investment growth. The cash value of the policy depends on how well your investments are doing. Variable life can be combined with universal life, thus creating variable universal life.

How can I choose the type that is best for me?

If you have questions about selecting insurance for your situation, a fee-only financial planner can tell you if the policy is appropriate, negotiate lower commissions from your agent, help you choose options and riders, and tell you if the company you are considering is highly rated. Because a fee-only adviser does not sell insurance, she or he will be able to give you an informed, unbiased opinion.

Should I buy life insurance for my children?

Most experts agree you would be financially farther ahead to put the money in some type of investment for your child rather than purchase life insurance.