Choose an amount The first step is to decide how much money you will need to cover. If you don't have any children but do have other dependents, five times your annual income is a good rule of thumb. If you do have kids, increase it to eight times. If you don't work outside the home, you should check local want ads for the going rate for child care and use it in your calculation.
Pick a policy type There are two basic types of life insurance: term and permanent.
Term insurance
Term insurance is similar to a lease for an apartment: You pay each month, and eventually the lease, or policy, is up. You chose the amount of time the policy will stay in effect when you buy it -- 5, 10, 15 or 30 years. If you die during the term of your policy, your beneficiary will receive a check. The longer the term, the higher the monthly payments are.
If you have the option to buy life insurance at work, it's usually a term policy. Employers often provide coverage equal to one, two or four times your annual salary. That may or may not be enough for you though. Be aware that coverage is effective only as long as you work there.
Permanent insurance
With permanent insurance on the other hand, as long as you pay the monthly premiums, the policy will not expire. Permanent insurance has another benefit worth considering: The policy has a cash value. This means that a portion of the monthly payments that you make is held in an account in your name. You can think of that money as an emergency savings fund, as a nest egg for retirement or as collateral for a loan. Premiums for permanent policies are higher than those for term policies.