Who Needs It Most
If you don't have any children and your spouse could support himself if something happened, you probably don't need to bother. But if you're the provider, if you guys have a lot of debt or a mortgage, or if you have (or anticipate having) kids, a policy equal to the mortgage balance plus several years' income is a good cushion to put into place now.
What to Know
There are two kinds of life insurance, term and permanent. Here's what you should know about each:
- A term policy is good for a set number of years -- if you die during that time, your spouse gets so-and-so many dollars. Once the time is up, there's no death benefit. Most employers provide some kind of term policy, but if the payout doesn't cover the mortgage, you'll want to consider supplementing your employer's plan. One very good thing about term policies is that they're relatively inexpensive, though you'll find that buying a new policy gets more expensive as you age.
- A permanent policy is effective for the rest of your life. There will always be a benefit paid, and that amount can be borrowed against or cashed out if you need it before you die. Permanent policies are like long-term investments, and they cost more per month than term ones. A permanent policy's premium stays the same no matter how long you have it.
Average Cost Term policies start at $10 to $12 a month. Permanent policies are a bit pricier -- for a healthy nonsmoker aged 40 or younger, every $1,000 of life insurance coverage costs between $25 and $50 per month.
How to Get It
Your employer: Many companies provide their employees with life insurance free of charge. This is term insurance with all its drawbacks (see above). The advantage, of course, is that there's no cost to you. Some states require that your employer let you "carry" your insurance with you if you leave the company (kind of like COBRA, which lets you continue on your company's health plan after you leave). As with COBRA, you have to pay.
Agent or broker: Traditionally insurance is sold through an agent or broker, who will generally charge a commission, which is sometimes called a "load."
Insurance company: Some companies allow you to buy insurance directly by phone, mail, or the Internet. These policies often don't incur commissions (they're called "no-load"). The downside is that they're harder to find and require more legwork than if you were to use an agent.
Savings bank: In some states, savings banks sell life-insurance policies.
How to ChooseFirst ask family members, friends, and coworkers for recommendations. Then call the usual suspects -- MetLife, Progressive, Liberty Mutual -- and get all the gory details.
by Kristen Finello
2/11/08
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insurance,
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