Life insurance is a versatile and effective way of handling the problems your family may face after your death, including:

Mortgage repayments

Replacing a primary earner's salary

Covering childcare problems

Covering education expenses

Which policy should I choose?

Choosing a life insurance policy can seem overwhelming. There are a huge amount of different types of cover available. The good news is, rather than price competition, the insurance industry tends to focus on providing a greater range of policies - meaning you'll have less trouble identifying the one which suits you best.

While there are two main types of life insurance 'term' and 'whole of life', the choices you have within those categories may be more expansive than you think. Types of life insurance available to you include:

Whole of life insurance: guaranteed to pay out when you die. While a financial return is assured, this type of insurance tends to be the most expensive, since the outcome is certain - as opposed to level term insurance.

Level term insurance: guaranteed to pay out in the event of your death within a predetermined time. This type of life insurance offers the security of unchanging premiums and return amounts over the term of the policy. If the policy expires before your death, however, no payment will be made.

Decreasing term life insurance: used to protect mortgage repayments, this policy involves a decreasing assured sum over the lifetime of the policy.

Renewable term insurance: simply offers an option to renew the policy upon its expiry, sometimes without a new health review.

Convertible term insurance: includes the option to convert level term insurance into whole of life insurance.

Increasing term insurance: deals with inflation by offering an escalating assured sum over the lifetime of the policy.

Index linked term insurance: some insurers offer a policy in which premiums increase each year in relation to the Retail Price Index.

What will I pay?

Age, sex and occupation play a large part in how much your premiums will be - as does anything which may affect the likelihood of an insurer having to pay out. Other factors which will affect rates include smoking, general health and lifestyle. Policies tend to include all associated expenses.

You may want to consider taking out a critical illness cover as part of your policy. This covers the costs and burdens of an unexpected and serious illness which can put a huge strain on your finances.

It's probably more important to consider what is actually covered by the policy you choose, as opposed to the price. A cheap policy may not offer you the protection you require.