Why do you need life insurance? Often, for one of these two reasons:

* Income replacement. If your untimely death will cause a severe drop in family income, your heirs may have a need for increased cash flow. Insurance proceeds, invested prudently, can make up for the lost spending power. Insurance to provide such family protection may be crucial while you have minor children or dependents with special needs.

* Estate liquidity. At your death, final expenses ranging from funeral costs to executor’s fees may be steep. You might leave an estate that is subject to tax, as well.

Liquidating assets to raise the necessary cash might not be desirable. Therefore, you may prefer to rely upon life insurance proceeds for such purposes.

If your death would cause no financial hardship and you have ample liquid assets to cover all final expenses, you might not need any life insurance. Consider canceling term life policies. A cash value policy might be exchanged for an annuity, tax-free, to generate income and defer the tax bill.

If you do decide you need buy life insurance, your choice is between more expensive cash value policies and less expensive term insurance.

Assuming you decide to buy term insurance, you need to make some other choices. Some term insurance is “annual renewable term,” meaning that you buy your insurance one year at a time. Each year, the price goes up. If your insurer hikes your premium too much, you can shop around for a better deal. (But you might not get a better deal if your health has deteriorated.)

Alternatively, you can buy “level-premium term” insurance, locking in the same term rate for five, 10, even 20 years. Such insurance will initially cost more than annual renewable term but you avoid the risk of sharp premium increases during that time frame. After the five or 10 or 20 years are up, if you want to maintain the term insurance, you’ll have to take another physical exam.

Thus, you run the risk of becoming uninsurable (or insurable only at high prices) due to a medical problem that has developed. However, this may be a risk worth taking if you think you won’t need much life insurance in 20 years.