The right life insurance policy can help ensure peace of mind for you and your loved ones.

Robbie Isabell used to spend his days with people in the last minutes of life. The experience gave him stunning clarity on life’s purpose. “They worry about their family,” says Isabell, a former emergency room nurse at Mercy Hospital in Des Moines, Iowa. “They worry if their kids will be all right ...  who will take care of them if they’re not there to do it.”  Few of us deal with death so dramatically day in and day out. But it’s a reckoning we will all face some day. The choice is to work through the details now, while you have time, or leave it for your grieving family to take care of.

“I don’t know anyone who’s ever really prepared for it,” says Gary Davis, a funeral director at a Midwestern funeral home. “But it certainly is much, much easier for those who are left behind if the person thinks about it first.” One of the first things to think about is money. What financial obligations would your death leave?

To answer this, ask yourself another question: Who is financially dependent upon you? If you have a spouse/domestic partner, children or an elderly parent who needs your support, you probably need life insurance. If you’re single with few debts, you probably don’t. 

Your Needs

As a rule of thumb, financial planners recommend you carry 6 to 10 times your annual income in life insurance. If you have a small mortgage and lots of savings, you can lean toward the six-times salary range. If you have a high mortgage, high credit card debt or a spouse who may have trouble finding a job, consider the ten-times income scale. According to the American Council of Life Insurance, few American families are prepared to lose a breadwinner. The average life insurance policy provides only $118,000—not nearly enough to carry on a family’s lifestyle without sacrificing things like after school activities or even a college education.

Your Options

If life insurance confuses you, take heart. There may be thousands of plans out there, but there are really only variations on two kinds: term and cash-value. Term is often called “pure insurance.” If you die while the policy is in effect, the company pays. If you are fortunate and live past the term, there are no benefits paid. Cash-value, on the other hand, builds a savings element. It's often called “permanent insurance” because it doesn’t end after a certain number of years. Most young families do best with term. The average term policy costs about 10 times less than the average cash-value one. And you can invest the difference in higher-yielding investments. 

Check It Out

Keep in mind when you buy life insurance, what you’re really buying is a promise. You want to be certain your insurance company will outlive you. Take a few moments to check out the company’s financial strength. Most industry analysts, such as Standard and Poor’s and Duff and Phelps, have information desks. With a toll-free call, you can get a free rating on the company’s claims-paying ability in about 3 minutes.

Think about what you need your life insurance to do. Buying too little can be worse than having none at all—it gives you a false sense of security. The first place many people look to for term life insurance are the quote services. They can help you find low-cost term policies. But they’re only as good as the databases they’re tied into. It pays to shop around. Remember, too, that some of the best insurance companies aren’t found on quote services because they don’t pay commissions. And always ask how often the service updates its database.

Planning ahead can help your family avoid the financial shock your death will cause. Decisions about household income and expenses will be made—and not under the best circumstances. Taking steps now to help your loved ones through it will be one of the greatest gifts you give them.