Whether you’re young or old, married or single, have children or don’t, take a moment to consider how life insurance might fit into your financial plans.

To decide whether you need life insurance, just think through the worst case scenario. If you were to pass away tomorrow, how would your loved ones fare financially? Would they have the money at hand to pay for the funeral? Would they be able to meet on-going living expenses?

Just because you don’t earn a salary doesn’t mean you don’t make a financial contribution to the family that needs to be covered. Childcare, education, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often underestimated. Could your spouse afford to pay someone for these services if you were no longer there?

Whether or not you have a family, just consider what would happen to your finances if you were suddenly struck with a serious illness like cancer, stroke or heart attack?

If you wait until you are unwell, the cost of life insurance could substantially increase, and may also be difficult to obtain.

So once you have your policy in place you want to make sure that it’s going to provide the protection you need, when you (or your family) need it.

Check to see if your policy is guaranteed renewable – that means that the insurance company cannot cancel your plan due to changes in your health, and it will stay in force until the expiry date, or until you decide to cancel it, or if you do not continue to pay your premiums.

Check limits on benefits payable or waiting periods which could be imposed in certain circumstances.

Of course, if you’re going to buy life insurance it’s important to make sure you’ve got enough.

But, how much cover is enough? Some financial planners say you need enough insurance to replace five to seven years of your salary. They also say that If you have young children or significant debt, you should bump up your coverage so you have enough to replace as much as 10 years of your salary. That means a person making $50,000 a year should have anywhere from $250,000 to $500,000 worth of cover or more.

Whilst that may sound like a lot of money, remember, most people want enough life insurance to make sure their family can continue to live their current lifestyle even if a breadwinner passes away. To calculate what exactly that figure would be, we take into account both your spouse's and your children's annual expenses, as well as funeral costs.

Factors to consider include whether your surviving partner will have childcare expenses or school fees to take care of. Do you have other assets on which to draw? Will your children be out of the nest soon? You may also like to include the mortgage payments in your calculations when determining how much cover you need.

Many people also believe that they are covered through their Superannuation, but the fact is in most cases it’s simply not enough. So check your cover under your Super, and make sure you’re adequately covered.

How long you need to keep your insurance in place is another important consideration.

The policy you choose, and the purpose of that policy are important considerations when you take out life insurance. If you are taking out cover for funeral expenses, naturally you want to be able to keep the policy for life. So make sure your funeral expenses policy doesn’t end at a particular age and is guaranteed renewable for life. On the other hand, life insurance can be purchased to make sure an asset (such as your home) is secured if you were to die. In this case you may only want to keep your policy until your mortgage is repaid.

You may also consider when your children will no longer be in need of your financial support.

So if your children are 3 and 5 now, you'd probably want a policy that covers you at least until the youngest is 22, so that's about 20-years. But this could depend on your age as well.

The cost of life insurance is often based on the age of the life insured – which means that the cost increases as you get older. So for those who perhaps reduce their work hours and earn less income in later years, it may be worth considering a policy where you can lock in your premium, such as Silver Life Cover.

So called because it covers policyholders for a fixed span of time, this is pure life insurance with no fancy frills. There are two types of premiums: level term and annual renewable.

Trauma insurance provides a nominated lump sum payment in the event of a defined critical illness – such as cancer, stroke or heart attack.

The number and types of critical trauma conditions covered can vary, depending on the policy and insurer.

Trauma insurance should not be viewed as a replacement for Income Protection, rather as additional insurance to pay off debts and for rehabilitation. Some trauma insurance policies also include the option to insure your children against serious medical conditions.

Total and Permanent Disability insurance will provide a lump sum payment in the event you are totally and permanently disabled.

Like most insurance policies, conditions vary from policy to policy so it is important to read the "fine" print. Some definitions of disability are more restrictive than others and sometimes the payment is not made in a lump sum but rather in instalments over a defined period of time.

You should also look out for differences in definition between "own occupation" and "any occupation". "Own occupation" considers you are totally and permanently disabled if you have become incapacitated to such an extent that you are unlikely ever to be able to work again in your own occupation.

With "any occupation" cover you are totally and permanently disabled if you have become incapacitated to such an extent that you are unlikely ever to be able to work again in any occupation for which you are reasonably suited.

In this instance you should consider your specific skills. If your employment requires extremely specialised skills, you should consider "own occupation" cover.

Life insurance is no place to skimp, especially when it is now so easy to obtain, and affordable.

You want the policy to last as long as it takes for your dependents to leave the nest - or for your retirement income to kick in.

Older people and those not in the best of health pay steeply higher rates for life insurance - so buy as early as you can.

The question to ask yourself is, Would my death leave anyone in a financial bind? Once you become a parent, any adult in your house earning income should have life insurance coverage that will last until your youngest child finishes their studies. And in a family without a lot of money saved, a stay-at-home parent may need a small policy to cover child care costs that would be created by that parent's absence.

Even if you belong to the dual-income, no-kids crowd, you may need life insurance to cover large shared financial obligations such as a mortgage. For older empty-nesters, with no major financial obligations or dependants you may just need cover for your funeral or other unexpected expenses, so that your spouse or family don’t have to struggle to find cash for your funeral.

With some policies the price you pay for life insurance will depend on your age, your health and your habits.

Stop smoking for 12 months and most insurers will upgrade you from "smoker" rates to non-smoker rates – which can mean significant savings on your premium – in some cases as much as 50%.

Before you sign up, ask a simple question: What's this going to cost me? Make sure there are no hidden fees that are added to your premium.

In some cases adding benefits to your main Policy (for example adding Serious Illness to Life Insurance) can be more cost effective than having two Policies.