Life insurance policies offer essential financial protection for families, especially those with children, against a rare but potentially devastating event: the death of a household’s primary wage-earner. Yet a recent study found that the number of households covered by individual life insurance has decreased, according to the Insurance Information Institute.

There are two types of major polices:

1. Term insurance is a form of life insurance that pays out only if the death occurs during the “term” of the policy, which is usually anywhere from one to 30 years. The premium rates for term policies are comparatively less expensive than they used to be, as Americans as a whole live longer and healthier lives.
   
   If you are buying a short-term life insurance policy (under 10 years), look for renewal guarantees. A renewal guarantee gives you the right to start a new term after the current one ends. You will pay a higher premium based on your current age, but will not be required to undergo a new health exam nor submit any other “evidence of insurability.” Without the renewal guarantee, you would have to start from scratch when applying for a policy and, if your health has deteriorated in the interim, you might end up paying significantly higher premiums or not getting coverage at all. 
2. Permanent life insurance encompasses several subcategories, including traditional whole life, universal life, variable life and variable universal life. Unlike term life, permanent policies remain in force as long as the premium is paid, and some policies accumulate a cash value. The premium rates for whole life policies have generally remained stable in recent years. 

Before You Buy 

• Assess the quality of the company: An insurance policy is only as good as the company that backs it.  You should make sure that the company that issues your policy will be arround to service it and eventually to pay the death claim.

• Look into group insurance: Consider participating in your employer-sponsored group life insurance program, even if you have to contribute to it financially.  Policies available through the workplace often have the advantage of group rates and limited medical underwriting.  Employers may subsidize their group insurance costs as well.  It is worth exploring what is available to you through the workplace and comparing it to coverage available to you as an individual.

• Buy when you're healthy: Find out which rate class you will be grouped into and, if necessary, consider making some lifestyle changes—not smoking, maintaining a healthy weight and exercising regularly—to qualify for a more favorable rate class. Buy when you are younger and healthier, if possible.

When You're Ready to Buy

• Don’t Shop Around on the Basis of Price Alone
  You may find differences of hundreds of dollars in annual premiums among similar companies for the same face-value policy, but it is important to consider the additional features that a policy may have. The guaranteed cash value component of a higher-premium life insurance policy, for instance, may justify the additional expenditure on the policyholder’s part.
• Look for premium discounts
  Most companies offer rate discounts for specified insurance amounts. For example, you might actually pay a lower rate per dollar of coverage for $250,000 of life insurance than for $200,000, or for $500,000 of life insurance than for $450,000, because a discount kicks in at the higher insurance amount.
• Beware of “fractional premiums”
  Typically, you can pay your annual life insurance premium in a single payment, or in smaller amounts more frequently during the year. Although the latter method might seem easier, some companies add steep charges for paying premiums in installments.

Information from the Insurance Information Institute.