At some point in your life, you'll probably be faced with the question of whether you need life insurance. Life insurance is a way to protect your loved ones financially after you die (and your income stops). The answer to whether you need life insurance depends on your personal and financial circumstances.

Should you buy life insurance?
You should probably consider buying life insurance if any one of the following is true:

• You are married and your spouse depends on your income
• You have children
• You have an aging parent or disabled relative who depends on you for support
• Your retirement savings and pension won't be enough for your spouse to live on
• You have a large estate and expect to owe estate taxes
• You own a business, especially if you have a partner
• You have a substantial joint financial obligation such as a personal loan for which another person would be legally responsible after your death

In all of these cases, the proceeds from an insurance policy can help your loved ones continue to manage financially during the difficult weeks, months, and years after your death. The proceeds can also be used to meet funeral and other final expenses, which can run into thousands of dollars.

If you're still unsure about whether you should buy life insurance, a good question to ask yourself is: If I died today with no life insurance, would my family need to make substantial financial sacrifices and give up the lifestyle to which they've become accustomed in order to meet their financial obligations (e.g., car payments, mortgage, college tuition)?

If you need life insurance, don't delay
Once you decide you need life insurance, don't put off buying it. Although no one wants to think about and plan for his or her own death, you don't want to make the mistake of waiting until it's too late.

Periodically review your coverage
Once you purchase a life insurance policy, make sure to periodically review your coverage--especially when you have a significant life event (e.g., birth of a child, death of a family member)--and make sure that it adequately meets your insurance needs. The most common mistake that people make is to be under-insured. For example, if a portion of your life insurance proceeds are to be earmarked for your child's college education, the more children you have, the more life insurance you'll need. But it's also possible to be over-insured, and that's a mistake, too--the extra money you spend on premiums could be used for other things. If you need help reviewing your coverage, contact your insurance agent or broker.

What about life insurance for my child?
As described above, life insurance is intended to provide a safety net for the policyholder's dependents. In other words, you must ask yourself, "Is anyone dependent upon my child for their financial well being?" Probably not. And although some companies (insurance agencies, no doubt) will tell you differently, there is no financial basis for purchasing a life insurance policy for a healthy child. The money you would otherwise spend on premiums are better served in a college fund such as a 529 Plan or Coverdell Savings Account.

Similarly, don't let the insurance agent convince you that your newborn baby deserves a policy of his/her own either. The same principle applies here. In the unfortunate event that something does happen to your infant, it will not materially affect any dependents of the child (because there are none). So once again, baby life insurance is not a prudent financial move.