There are substantial differences in life insurance coverage and costs, so it’s important to be an informed consumer.  To help consumers understand what they are buying, the American Council of Life Insurers, in cooperation with the U.S. Office of Consumer Affairs, has published a booklet called What You Should Know About Buying Life Insurance.  It will help you answer such questions as: How much life insurance do I need? What are the different kinds of policies? How do I choose a company and an agent? What can I expect my agent to do for me?

There are two basic kinds of life insurance: term and permanent.

Term insurance covers you for a specified length of time. It pays a benefit only if you die during the term. Term policies are attractive to some people because, initially, premiums are generally lower than those for permanent insurance. This allows you to buy higher levels of coverage at a younger age when the need for protection is often greatest.

Permanent insurance -- including whole, ordinary, universal, adjustable and variable life -- is protection that can be kept in force for as long as you live. Premiums for this type of insurance can be more costly than term insurance. So if you don't intend to keep the policy over the long haul, it's probably the wrong type of insurance for you. But as long as you pay the necessary premiums, the death benefits will always be there.

One important feature of permanent insurance, which is not found in most term insurance policies, is a "cash value". This increasing sum offers some options. You can cancel the policy and receive the cash value as a lump sum. If you need to stop paying premiums, you can use the cash value to continue your current policy for a specific time. You can also withdraw part of the cash value in the form of a policy loan.

LIFE INSURANCE FUNDAMENTALS:

Life and Health Insurance Foundation for Education (LIFE)  
The Life and Health Insurance Foundation for Education (LIFE) is a non-profit organization designed to address the public's growing need for information and education on life, health, and disability insurance.

LIFE provides information about the types of life insurance, choosing a policy, and offers help with estate planning.

American Council of Life Insurers
ACLI represents 435 life insurance companies operating in the United States.  The council advocates the interests of life insurers and their millions of policyholders before federal and state legislators, state insurance departments, administration officials, federal regulatory agencies, and the courts. There are a number of helpful links in their Consumer Information Section.

Insure.com - The Consumer Insurance Guide
Insure.com – The Consumer Insurance Guide has a life insurance section that explains the basics about life insurance policies. 

InsWeb Learning Center on Life Insurance
This website contains a number of articles, FAQs, and a glossary of insurance terms that explain fundamental principles of life insurance policies.

MetLife - Life Insurance Section
MetLife provides a number of tips about life insurance, such as, “Do I need life insurance?”, “What are my options?”, and “How can I choose the policy that’s right for me?”.

GE Center for Financial Learning - Life Insurance Section
The GE Center for Financial Learning’s website explains fundamental principles of life insurance and provides listings of relevant articles and books.

LIFE INSURANCE CALCUALTORS

The first step in finding the best policy for you is to review your family's financial needs.    The following calculators can help you decide upon your policy needs.

Money.com - Solving the Mysteries of Life Insurance
This site uses seven different calculators to get the answers to your insurance questions.  The site also provides valuable information about the types of life insurance, shopping tips, understanding the bill, and where to shop online.

GE Center for Financial Learning - Life Insurance Calculator
Use this calculator to determine how much life insurance your family needs.

Life and Health Insurance Foundation for Education (LIFE) - Insurance Calculators
The Life and Health Insurance Foundation for Education (LIFE) is a non-profit organization designed to address the public's growing need for information and education on life, health, and disability insurance.

Their website provides two life insurance calculators that help you determine your policy needs.

SHOPPING FOR INSURANCE

Once you've decided upon your policy needs, you should choose a company and an agent who can help you look for ways to get the right type and amount of insurance at an affordable price. While you should deal only with agents and companies that are licensed by the state, the personal experiences of neighbors and friends are also a good place to start.

Carefully go over your agent's recommendation and ask for a point-by-point explanation of the policy. Also, ask your agent for a buyer's guide that explains life insurance terms, benefits and costs. Guides are required by most state insurance departments.  The American Council of Life Insurers provides contact information for state insurance departments, which oversee the activities of insurers operating within their state. Most state insurance departments have consumer affairs divisions to help consumers and answer questions. 

After you buy a policy, be sure to inform your beneficiaries about the kinds and amounts of life insurance you own and where the policies are kept.

Online Shopping

There are a number of websites that provide online shopping for life insurance policies.   Before you shop online, you may want to read the following publications from the American Council of Life Insurers:  “Buying Life Insurance Online” and “Commonly Asked Questions about Life Insurers and the Internet”.

If you’re interested in online comparison-shopping, the websites listed below provide online insurance quotes, website addresses for insurance carriers, and competitive bid-referral services. 

InsWeb
InsWeb is a free service that lets you compare insurance quotes from leading insurance companies to find the best rates available.  They can provide online quotes for term life insurance.

Insurance News Net dot Com
Insurance News Net dot Com, an online resource for the insurance industry, provides an alphabetized listing of links to life and health insurance carriers quotes.

LifeInsurance.Net
LifeInsurance.Net a competitive-bid referral service that delivers your quote requests to local agents.   This site is independent of any insurance company or agency, and is dedicated to providing an interactive, online marketplace that features useful industry resources, educational tools, agencies and consultants

Ratings

It’s crucial that you choose an insurance company that’s financially strong.  One indicator of financial strength is it’s rating from a major rating company.  Check out the below websites to find out the financial strength of your insurer.

Insure.com - Ratings Section
Insure.com provides free ratings from Standard & Poor's and Duff & Phelps Credit Rating Co.

A.M. Best Company
A.M. Best's Rating is an independent third-party evaluation that subjects all insurers to the same rigorous criteria, providing a valuable benchmark for comparing insurers, regardless of their country of domicile.  Visitors can access A.M. Best's database of nearly 6,000 insurers and health maintenance organizations - free of charge-to obtain financial strength ratings (a letter designation from A++ to F) and informative insurer profile reports.

Sources: 

"What You Should Know About Buying Life Insurance" Press Release Federal Consumer Information Center, May 1995