There is a leak from somewhere. Coolant expands and fills the overflow tank when the engine warms up. When the engine cools off and coolant contracts, coolant is pulled via vacuum back in to the radiator. The low coolant light works from the sensor in the cap on the overflow tank. So, yes the coolant is circulating. If you did NOT fill the overflow tank, your radiator would eventually run dry. You shouldn't just change the water pump because that may not be where the leak is from. If you don't mind filling the tank regularly, it's not hurting anything (other than the environment). The easiest thing to remove is the coolant overflow tank (two 5/16" bolts I think), take that off and thoroughly check it for leaks. If that's not leaking, than you'll have to move on to something else. Hoses, radiator, head or intake gaskets, etc. If it was your heater core you would probably notice problems with your windshield fogging up and you would smell coolant inside the car. Obviously, you could also thoroughly check under the car after you drive to see if you can find coolant leaking. Also, white smoke out the exhaust is a tell-tale sign of coolant/water getting burned in the combustion chamber and would likely mean a head gasket leak.
