New York, NY (PRWEB) October 19, 2004
In my opinion, deciding if you need life insurance (and if you do, what type to get) should be among the most straightforward financial decisions you ever make. However, thanks to an army of insurance salespeople out there that is bent on making a buck off your policy, it has instead become a source of confusion for many people.
Before I offer you my own rules for life insurance, let's get some perspectives on the topic from members of the Armchair Millionaire community:
"I don't have life insurance because I have no children to support and the equity in my home would be enough to pay any debt and funeral/burial expenses. I'd rather have disability insurance instead - something that will help me if I'm hurt and still living!" --Kathy
"My wife and I both have term life insurance. We both make enough to live on and even support children with one of the incomes so we would have enough to pay off the house and car loans. As the mortgage is paid down the extra money would go to education." --Tim
"My husband and I have term insurance for $500,000 for 15 years for each of us. We selected the amount and the time to take care of our now four-year-old twins. We didn't want either of us to have financial stress should one of us die." --Mary
My approach to life insurance is simple:
1. If you have dependents, you need it. If you don't have dependents, you don't need it.
2. If you do need it, buy term life insurance, period.
If you think that sounds easy enough, you're absolutely right. Term life insurance is a very simple financial product: You pay the insurance company an annual premium for a particular level of coverage. In return, should you die while covered by the policy, the insurance company will pay your survivors a fixed sum. That's it.
Should you agree that term life is the way to go, my guide will provide the steps you need to buy the right policy for you.
The Armchair Millionaire's Guide to Buying Term Life Insurance
Decide on your coverage. You need enough coverage to replace the income your family would lose if you weren't around earning a living, plus to take care of any additional large costs, such as funding your kids' college educations, paying for a daughter's wedding or paying off significant debts. One general rule of thumb is that you need six to ten times your annual income, though I recommend that you do your own calculations to be sure. There are a number of good free calculators available online, including one at Bankrate.com.
Choose your term. This is simply the number of years your family would need the coverage, should you die. It could be the number of years until your children finish college or until your spouse retires. Typical term life policies range from ten to 30 years.
Go shopping. Premiums for similar term life policies can vary widely, so it definitely pays to do comparison shopping. There are many Web sites that offer instant quotes from major insurance companies nationwide, making finding the best policy a snap. Just a few of these sites include Insure.com, Intelliquote.com and ReliaQuote.com, and an Internet search will turn up many more. In addition to cost, you will also want to check out the financial stability of any company you consider buying a policy from--many of the Web sites that offer quotes also provide company ratings, as well.
Seal the deal. Once you've decided on a policy, you'll fill out a simple application. You will then generally need to take a medical exam (at the insurance company's expense), which the company will use to determine the final cost of your policy. Pay your first premium and that's it--you're covered.
THE BOTTOM LINE: Term life insurance is a relatively inexpensive, no-frills way to ensure that your family is able to maintain its standard of living after you're gone. If you have a spouse or children who are dependent on your income, take the steps to take care of them--today.
THE ARMCHAIR MILLIONAIRE WEEKLY SURVEY: Who had it better when it comes to money: you or your grandparent's generation? Log on to http://www.armchairmillionaire.com and let us know.
Lewis Schiff founded the Armchair Millionaire Web site in 1997. His first book, The Armchair Millionaire, was published in 2001. Schiff's newest report, "How to Know When You Are Rich," is now available at http://www.armchairmillionaire.com.
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