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Life Insurance

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 instead.

Online Resources

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.