Monday, May 07, 2007 1:58 PM
Q. Life insurance?
Q: Life Insurance: Do I really need it? What do I need?
A: You cling to a job for health benefits. You wouldn’t think about driving without being covered. You insure your house against every possible calamity. And that sparkly diamond ring -- you bet it’s covered. But life insurance, not so much. See how crazy that sounds?
Your life is your most basic and valuable asset, so it should definitely be on your list of priorities. If you don’t have kids and both spouses are self-supporting, you don’t necessarily need to rush off to the insurance agent to sign up. But if one of you doesn’t make enough to live on, or if you plan to have kids, you should put this task at the top of your list. The rule of thumb is that you should have life insurance worth six to 10 times your income, with the policy priority going to the bigger breadwinner in the family.
Most families choose term life insurance, which has monthly premiums that can be as low as $10 to $12 per month for your starting block of time, but which may rise as you renew for additional terms as you get older. Many employers offer term life as part of their benefits package, and you can pay extra directly out of your paycheck to meet the coverage level you’d like. Or, you can comparison shop or go to an insurance broker who can find you the best deal.
Your other alternative is permanent life insurance, which is like a hybrid investment and life insurance plan. Part of your monthly premium, which is five to ten times larger than term, goes into a savings account. This "cash value" part of the account is yours to take out at any time. And as long as you keep making the payments, the policy stays in place and there are no terms to renew.