Great question this! I always thought I needed about half the amount that the agent was trying to sell me. Over the years I wished at times that I had listened to him and at other times I was pleased I hadn’t. My needs changed as I went through life. When we were busy establishing a family and 2 of the 3 had arrived, I thought I needed much more. I was worried about being wiped out in a car accident and leaving my wife with babies. At the other end of the time-scale, by time the children had grown older and left the nest, I thought I had too much and resented paying the high premiums. Looking back, perhaps I should have studied the ramifications of buying term insurance.

As the word "term" suggests, these policies are in effect for a pre-established period of time - one year or until you reach a certain age are common. Term life insurance policies are the least costly. They pay death benefits but have no cash value if you decide to stop making payments.

Whole life, universal life, and other cash value policies combine a long-term savings and investment product with life insurance. Canceling these policies after only a few years can more than double your life insurance costs. I learned early on that the most expensive mistake one can make with insurance is to cancel a policy.

Then there is the question of disability insurance. What if you aren’t killed in a road accident, but are left in a wheelchair and unable to earn a living? Disability can be more disastrous financially than death. If you are disabled, you lose your earning power, but you still have living expenses plus maybe huge expenses for medical care.

Disability insurance is ‘special’. Ask these questions:
o How is disability defined? Some policies consider you disabled if you are unable to perform the duties of any job. Better plans pay benefits if you are unable to do the usual duties of your own occupation.
o When do benefits begin? Most plans have a waiting period after an illness before payments begin.
o How long do benefits last? After the waiting period, payments are usually available till you reach age 65, though shorter or longer terms are also available.
o What is the expected dollar amount? Will benefits be reduced by Social Security disability and workers' compensation payments?