Insurance Tip #3: The type of policy you buy may be as important as determining the amount of coverage you need

This post is part of a series where personal finance expert Dan Solin provides 10 insurance tips no one else will tell you. See all 10, plus one bonus tip!

Almost one-third of all Americans have no life insurance. The average amount of life insurance held by those that have it is $146,000 -- far below what would likely be needed.

The focus of the insurance industry has been to persuade people that they need to purchase more life insurance. Unfortunately, the analysis is very complicated, confusing and fact intensive.

Among the various formulas used are multiples of your income, a "capital needs analysis" (which determines the income required to meet the needs of survivors) and a model that projects consumption and savings. The software to compute this model was written by famed economist Laurence Kotlikoff and financial columnist Scott Burns.

The amount of life insurance you should purchase may seem staggering. In your younger years (up to age 30), you may need insurance covering almost thirteen years of income.

An even more critical issue may relate to the kind of policy you buy.