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There are two main forms of life insurance: term life insurance and permanent life insurance (also known as whole life or universal life). The main differences between these two types of life insurance are:

Term life insurance will pay a death benefit if the policyholder dies within the term of the policy. Permanent life insurance will pay a death benefit regardless of how long you live, provided the premiums are paid. For many people, the need for life insurance protection decreases dramatically once they retire, since upon retirement there is often significantly less income to protect. Thus, for many people a term life policy that extends to retirement age may be appropriate.
Term life insurance is significantly less expensive than permanent life insurance. Permanent life insurance can be used not only as an insurance policy, but also as an investment vehicle. With permanent life insurance, a portion of your premium goes to building cash value with interest. This cash value can be withdrawn before death if needed. Term life insurance cannot be used as an investment vehicle. However, the lower premiums charged to term life insurance policyholders allow them to invest the difference in whatever manner they choose (401K, stocks, bonds, savings account, etc.). Additionally, many term life policies have conversion privileges which allow them to be converted to permanent policies under some circumstances.

These are some of the main differences between term life and permanent life insurance. Deciding which is most appropriate for you is a personal decision. Shop and Compare multiple Life Insurance quotes for free.

The proceeds from a life insurance policy may serve a number of purposes:

Income Replacement - In the event of an individual's death, life insurance proceeds can provide an income stream to ensure that surviving family members are able to maintain their standard of living. (Note: If a family has more than one income-earner, it is often prudent to get a life insurance policy for each income-earner.)
Funeral expenses - Life insurance proceeds can ensure that there is enough money for a proper funeral and burial.
Debt - Credit card debt, bills, student loans, and other forms of debt can be covered by the proceeds from a life insurance policy.
Mortgage Protection - The proceeds of a life insurance policy can pay off the balance of a mortgage or provide an income stream to pay a monthly mortgage.
Rent - In the event of an insured person's death, rent payments can be made from the insurance policy proceeds.
Education - Life insurance proceeds can ensure that the current and future education costs of the insured person's children are covered.
Estate Taxes and Probate Costs - If a will or trust so instructs, life insurance proceeds can be used to pay for estate taxes and the cost of probating the estate.
Donations/Gifts - An individual can use a life insurance policy to fund a donation to a charity or leave a gift to a beneficiary.

There is no exact formula to determine how much life insurance you need, although a general rule of thumb suggests an amount equal to 6 to 8 times your annual earnings. But, everyone's life insurance needs are different. For example, an individual's needs are typically greatest from the time they start their careers or a family until they reach retirement. Exactly how much life insurance you need will depend on factors such as:

the size of your family
the age of your children (and their education needs)
how much you owe on your home
the amount of other debt you have
the amount of income that will need to be replaced (over a period of time)

These needs can be offset by savings, current life insurance, retirement funds, and other liquid assets. The difference is the amount of additional life insurance you need.