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The American Council of Life Insurance reports that nearly 90% of
all men and 65% of all women are covered by life insurance.
However, that doesn't mean they have the right coverage or are
paying the right price.
How much coverage a person need depends on his/her situation.
Try the Quicken InsureMarket Family Needs Planner to
find out how much life insurance you need.
Or, use this process:
First calculate your family's needs-children's education,
spouse's retirement, funeral costs, legal costs and how much your
family will need to live on each year. Then figure the future
sources of income, such as spouse's employment, certain Social
Security benefits, pension fund, company profit-sharing plan,
personal savings. If there is a gap between the expenses and the
income, you could use life insurance to cover the gap.
The two most common types of life insurance are term and whole
life insurance. Term insurance provide coverage for a year at a
time. The insurance company pays a specified amount if you die in
that time. There are two varieties: nonrenewable and renewable.
Nonrenewable can be renewed only by requalifying, usually filling
out a health questionnaire or taking a physical exam. It is
cheaper but also riskier. If you suddenly fell ill, your policy
probably won't be renewed since you are a great risk. That would
also make it very difficult to find another insurance company
willing to take the risk. You would be left without coverage just
when you needed it the most. With renewable, you will be renewed
at your request, unless you couldn't pay the premiums. Then there
are two types of renewables, decreasing face value, where you pay
the same premiums each year, but your death benefits decrease,
and fixed face-value, where you pay more as you age, but the
benefit stays the same. In most cases, the fixed face-value
policies are the right choice. Fore term life insurance, an adult
should expect to pay between $1 and $6 a year for each $1000 of
coverage, depending on your age, gender and health. The primary
disadvantage of term insurance is the rising premiums. A $100,000
policy that cost a 30 year old man $200 a year will cost a 50
year old man $530 and $2900 for a 70 year old man.
Whole life insurance is term life with an investment feature
built in. When yo pay the insurance company, a portion of that
premium pays for insurance. The rest, after deducting
administrative expenses, is invested in the insurance company's
portfolios, which is usually loaded with bonds. That invested
amount belongs to you. You can take it out in the forms of loans
or cash it in. If you die, that amount will be paid to your
beneficiary. One advantage to this method of investing is that
your investments accumulate tax-free until you start withdrawing.
Also you pay fixed premiums regardless of your age or health. But
it comes with high premiums. In our last example, a $100,000 term
policy for a 50 year old man runs from $400 to $500 a year. The
same coverage with whole life would cost about $2000 a year! The
cash value of these policies build up very slowly. If you want to
invest, put money in a mutual fund and buy term insurance
Insurance Awareness Council-A consumer watchdog organization that independently
monitors the life insurance industry and finds for you the most competitive insurance rates
in the country.