Life Insurance: Protect What You've Got

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Life Insurance
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Life Insurance Protect What You've Got
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• While insurance isn't an investment, it's an
  important part of sound, savvy personal financial
  management. Insurance is protection. It protects
  everything you've worked so hard to earn. It
  protects your spouse in the event of premature
  death. It sends the kids to college. It holds
  together a family at a time when money shouldn't
  be a concern.
• You need insurance but shopping for the right
  coverage to protect your family and your assets
  is like learning a new language. Term life, whole
  life, universal life, actual cash value,
  dividends, loans against policy - it's a maze of
  insurance products out there and finding the
  right coverage for your needs may take a little
  research.
• Here's a starter course on getting the most for
  the least in life insurance and still have the
  protection you and your family need.
• Types of Life Insurance
• There are two basic types of life insurance with
  numerous variations on a theme.
• Term life insurance is the simplest to
  understand. It's also the most economical
  protection you can buy.

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• Term life insurance is paid when the insured
  (you) pass on within a defined term - a defined
  length of time your life insurance coverage is in
  effect. Term life comes with a variety of time
  frames five-, ten- even thirty-year terms are
  available.
• The younger you are, the lower the cost of the
  monthly premium - the dollar amount you pay for
  protection each month.
• With term life, you keep things simple. The
  insurance company pays X amount of dollars to the
  beneficiaries when the insured individual passes
  on, as long as the policy is in effect, that is,
  the death occurs during the term of the policy,
  thus the name term life insurance.
• Term life policies don't accumulate value, you
  can't borrow against them and, if you choose a
  short term and your health changes, you could end
  up paying more for your term life insurance than
  you would if you buy a long-term policy - one
  that covers you for the long term.

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• To determine how much term life you need, add up
  funeral costs, outstanding personal debt,
  mortgage debt, the prospect of paying tuition and
  other large expenses that would drain family
  resources. Figure what it would cost your family
  for a single year.
• Then multiply by a factor between 5 and 10. Use
  the lower factor if you don't have a lot of debt
  and the higher factor if you're carrying a couple
  of mortgages and you have three kids to put
  through school. That's how much term life you
  need to protect your family and all their
  expectations.
• The other class of insurance is whole life
  insurance, also called permanent insurance,
  universal insurance, variable universal insurance
  and other product names, but all fall into the
  general class of coverage called whole life
  insurance.
• The first difference between term and whole life
  is that whole life covers you from the day you
  buy the policy until you die. Of course, this
  assumes that you pay your whole life insurance
  premium each month. There is no term (length of
  time coverage is in effect) to whole life. Buy it
  when you're young and your premiums will be low
  and you'll start building cash value.

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• That's the other main difference between term and
  whole life insurance coverage. Whole life pays
  dividends. Not a lot, but dividends that can be
  used to lower monthly premiums, or they can be
  allowed to accumulate earning interest.
• Once the whole life policy has accumulated enough
  cash value you can borrow against that cash value
  to buy a house or cover some tuition bills. The
  downside to taking loans against the value of a
  whole life policy is that it lowers the payout to
  family in the event of the insured individual's
  death.
• Calculate your coverage needs using the criteria
  listed above. Don't think of whole life as a
  money-maker. It's not intended to increase your
  wealth. That's a side benefit. An important side
  benefit, but the primary reason for purchasing
  whole life is to protect your family in the event
  of your pre-mature death.
• Life Insurance Sources
• There are hundreds of insurance companies and
  even more life insurance products so talking to a
  knowledgeable professional is a good first step.
• An insurance broker can advise you but, keep in
  mind, each insurance broker carries a "line" of
  products from a limited number of insurance
  providers so each broker will tell you her
  products are the best value.

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• If you do the math yourself, you know going in,
  how much coverage you want to buy, at which
  point, it's just a matter of finding a reputable
  insurance company offering competitive rates and
  the benefits you're looking for.
• Another resource is your local bank - often the
  best place to start researching your life
  insurance needs. Banks sell a broad range of life
  insurance products and, because insurance isn't
  the primary business of a bank, you're more
  likely to get straightforward answers to your
  questions.
• Another reason to visit your bank's insurance rep
  is that your bank knows the financial you - how
  much you have in accounts, how much comes in and
  goes out on a month to month basis, your tax
  status and other personal finance information
  needed to get the right kind of life insurance at
  the right price.
• Talk to your employer. Life insurance may be a
  benefit along with health care and two weeks
  vacation, but you may also be able to increase
  the dollar amount of coverage with money deducted
  from your paycheck painlessly.
• Unions, associations, your local Chamber of
  Commerce and other organizations are also sources
  for low-cost term or whole life coverage.
  Purchasing life insurance coverage through an
  industry association, for example, gets you group
  rates that translate into more coverage at a
  lower monthly premium.

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• On the other hand, when you purchase term or
  whole life through your union you usually don't
  have a choice of insurers and that's an important
  point to consider.
• Go with an insurance company that's ranked highly
  by Standard and Poor or some other rating
  organization. Your broker or banker will steer
  you toward quality of coverage so you get more
  for your money.
• Life insurance sounds complicated but, when you
  break it down into simple terms, it's something
  you can do with a trusted advisor to point you
  down the right path.
• Get life insurance. Get term life if you want
  lower premiums get whole life if you want your
  insurance to build cash value against which you
  can take loans.
• It's your choice. Making the right one saves
  money and delivers the peace of mind that only
  quality life insurance protection delivers.
• No one likes to think about buying life
  insurance. It's depressing. It's also essential
  to protect your family and your assets. What kind
  of life insurance is right for you? Here's what
  you need to know before talking to an insurance
  agent or company.

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