Based on ensuring power quality, the evaluation of a scheme about reactive power optimization compensation should be focused on net investment income in the life cycle of a project, in other words, a scheme about reactive power compensation should consider not only the benefits brought by loss reduction, but also the increased cost of construction, operation and maintenance in life cycle of the reactive power compensation equipment. In this paper, the reactive power optimization model of distribution network is established with the minimum active network loss and the best voltage quality, the reactive power compensation point is determined depending on reactive secondary resistance moment, and the capacity of reactive power compensation is decided by using the improved genetic algorithm. By introducing the concept of Life Cycle Cost (LCC), the calculation of life cycle cost for different compensation schemes is carried out to select compensation scheme according to the net income during the life cycle. The IEEE33 node distribution system is taken as an example to simulate the calculation in Matlab. The results show that the reactive power optimization considering the life cycle cost is more reasonable and effective. This work is supported by National Natural Science Foundation of China (No. 51307060) and State Key Laboratory of Alternate Electrical Power System with Renewable Energy Sources (No. LAPS14011).