This is a question everyone should ask before purchasing a life insurance policy. There are different types of life insurance and each serves a different purpose. It would be a far too lengthy post if I fully explained them all here so I will give a basic overview and save the details for future entries.
For starters, there's permanent insurance and term insurance. Permanent insurance is intended to be there no matter how long a person lives and will be whole life (or universal life if it is designed properly). Term insurance, as its name implies, is intended to keep a person covered for a temporary period of time only.
Everyone should have a permanent policy even if they already have term insurance. This is something I can't stress enough. The reason for this is because none of us knows how long we will live and locking in a premium rate on a permanent policy now keeps us from running the risk of not being able to afford or qualify for it later on down the road. Term insurance will always become too expensive or go away altogether and most people aren't expecting or prepared for this. I have had the misfortune of witnessing this scenario on many occasions. Here's an example of what happens:
A person who never looked for life insurance outside of work because he received coverage as a benefit becomes disabled and unemployed. When he leaves his job he loses his insurance. It never occurred to him that he should have had his own permanent policy. He assumed he would be able to get it easily enough after he retired. However, considering his current age and health issues he is unable to qualify for coverage he can afford with the small disability check he now receives. Had he taken out a personal permanent policy when he was younger and healthier, he would have been covered with an affordable monthly premium (or no premium at all in the case of a paid up policy). Instead, his family is at financial risk simply because of his lack of knowledge.
Term insurance is equally important, but serves a different purpose. Our debts and responsibilities don't go away when we die. If we have a mortgage, car note, student loan, medical bills, credit card debt or any other debt it must be paid even when we're gone. Our estate will go into probate and everything we owe will come out of it before our heirs receive anything. If we want to leave our estate to our family or want to spare them from financial burden, we need to carry enough life insurance to cover these debts. In other words, if I have a combined debt of $150,000, I need that much in life insurance to cover it. If I have minor children or a spouse who depends on my income, I need to have enough life insurance to provide for them in my absence. Such a large whole life insurance policy would be far too expensive for most of us, but term insurance is much cheaper. To determine how much coverage is needed and how many years the term should last, it is best to sit down with an honest and experienced agent. Generally speaking though, if you have a 30-year mortgage of $200,000 then a 30-year term policy in that amount would make sense. Some companies even offer decreasing term policies so that as the debt is paid down, the death benefit is also reduced.
Before I wrap this up I want to encourage you to do yourself and your loved ones a huge favor and schedule a review with a qualified life insurance agent. The right agent will be willing to review your personal situation, your goals and your desires in order to come up with the best, most affordable recommendations to achieve them. Not all agents are equal, so choose one you feel actually cares about you and is willing to provide you with answers to your questions and explain her recommendations.