Life insurance policies pay a certain amount of money to a designated person, such as a spouse, parent or child when you die. When you're in your late teens and early twenties, the end of life appears – and often is -- a long way away. On top of that, you may not have a husband, wife or children who would benefit from a life insurance policy if you do die unexpectedly. So does that mean life insurance isn't for you? Not necessarily.

Why Insure?

Young people need to ask themselves "who would be responsible for my financial obligations – car loans, school loans? Typically it's the parents," said Sherri Lagana, a chartered life underwriter and chartered financial consultant at Boston-based Liberty Mutual Insurance Group, Inc. "If something happens to them, do they want to make sure their parents have money to take care of their obligations?"

While you're in school and possibly for a few years after graduation, your parents may have life insurance policies taken out on your behalf. If you're considering buying insurance for yourself, it may be good to ask your parents what, if any, kind of coverage they have on you and how long it will last?

Still, even if you are covered by a parent's policy, there are other reasons to get insured, said Michael Brazzell, a chartered life underwriter with State Farm Insurance Cos. in Bakersfield, California.

"You're not always going to be young, and you're not always going to be healthy," Brazzell said. "Life insurance is never going to be as inexpensive as it will be for college students."

The younger you are when you buy life insurance, the cheaper it will usually be in the long run. Also, health examinations are usually less involved for people under age 30, Brazzell said. As you get older, your risk of death from medical conditions such as diabetes or cancer increases and could impair your ability to get coverage at all.

Buying the Best Insurance for You

Permanent or Whole Life

Specific terms may vary by company or policy, but whole life policies usually allow you to take out a policy loan. Any loan and interest on the loan that you do not pay back will be deducted from the benefits if you die, or the cash value if you stop paying premiums, according to Topp.

"It's similar to a mortgage," said Lagana of Liberty Mutual. "It doesn't accumulate all at once. Some of the money goes towards the (death benefit) and some toward the cash value."

Some permanent policies also pay dividends once a year. Other policies such as variable life insurance are set up similarly to mutual funds. The cash value portion is invested in stocks and other investment accounts. The cash value is then dependent on how well the investments perform, which provides an opportunity for the policyholder to accumulate even more money, but like any money that is put into the financial markets, it does add some risk to the cash value portion. The death benefit is usually guaranteed.

Term Life

While insurers compare permanent life insurance to a mortgage or buying a house, they characterize term insurance as being similar to renting. When you buy a house, each payment gives you equity in the property. When you decide to sell it, you can get that money back, or borrow against it in the form of a home equity using the house as collateral to guarantee that you'll repay the loan. Buying term life insurance is more like  renting -- you pay a landlord money to use their space on a temporary basis.

Term insurance premiums (or payments) are often lower than a permanent insurance policy, but you don't accumulate cash value and when you stop paying premiums, your coverage is completely gone. When you buy a whole life policy, it's possible to pay the entire cost of the policy and still have a death benefit as well as some cash value.

Sometimes having a mix of term and permanent policies for a certain number of years fits an individual's financial needs best. The best way to determine this is to talk to your insurance agent or financial planner.

The policies that are offered at work are almost always term policies and usually are not enough, said Topp of MetLife. Usually the amount is one to two times your annual salary, and for a family, this is usually not enough coverage, he said. For example, if you make $40,000 a year, a company that offers one times your annual salary would pay your beneficiaries just $40,000.

Another reason not to depend solely on policies offered at work is that in the majority of cases, when you leave the company, the insurance is gone.

"The average person changes jobs three times in a seven-year period," said Brazell of State Farm. "Employer plans are term insurance. You don't own the plan and you don't build cash value. You want to have some control."

If you are laid-off or fired, you may be without insurance, and therefore unprotected, for a long period. When you do get a new job, your new benefits may not kick-in right away, extending the time that you're at risk of having something happen while not being covered.

Universal Life

Cost

At Liberty Mutual, a 23-year-old can buy a permanent policy that provides cash value and a $50,000 death benefit for $27.69 a month. A term policy with a $120,000 death benefit bought at age 25, that would expire at age 70, can be purchased for $17.50 a month.

Key Considerations

The insurance policy you buy is important because it can provide peace of mind to your loved ones if you die. Depending on the type of insurance you buy, you can also accumulate a nest egg to use as a down payment for a house, medical expenses or anything else you may need. To make sure you're spending your money wisely, do some research and don't be afraid to ask questions. Some key considerations include:

1. Will this company be around for me, and my loved ones, in the long-term?
   What is their track record? Is the company financially sound?

2. Make sure the death benefit doesn't have a lot of restraints attached to it.

3. Read the policy – even the fine print and make sure you understand it – especially if you buy a policy online or through a television or mail offer.

4. If it sounds too good to be true, it probably is.

5. Schedule periodic reviews of your insurance coverage with your agent to make sure your coverage is still adequate.