The best deal in life
insurance--a term policy--is better than ever because
premiums have fallen to historically low levels. You can
buy a lot of coverage without paying a fortune in
premiums. And the policies are simple enough that you
don't need an M.B.A. to decipher the fine print. As the
name implies, term life covers a specific term, say 10 or
20 years. If you die during that time, your beneficiary
gets a death benefit. Here's how to find a good cheap
policy:
- Figure out how much coverage you need.
Depending on your needs, you'll probably want to buy a
death benefit that's 5 to 10 times your annual salary if
you're the sole breadwinner in a family of four. For
just a few hundred dollars a year--depending on your age
and health and whether you smoke--you can get a death
benefit of $500,000, which your spouse can use to pay
off the mortgage, a child's college-tuition bills, and
any debts. Two big reasons not to buy term or any life
insurance, for that matter: Either you have no
dependents or you've got enough money to cover all your
family's financial needs and obligations. And, as your
kids grow up and your need for insurance declines, you
may not need a life policy, although many 60-plussers
buy coverage as an estate-planning tool.
- Pick your policy. Once you've decided how
much coverage you want and how long you think you'll
need it, you have some options: "Renewable term" gives
you the right to renew (usually at a higher rate) for
another period when a term ends, regardless of your
health. "Level term" means your premium stays the same
over the life of the term policy, whether rates rise or
fall.
- Shop for the best deal. Finding the cheapest
term policy is easy thanks to the Web--but only if you
know where to go. According to a study by the Consumer
Federation of America, many of the sites that have
popped up offering to find the cheapest term-life rates
don't always deliver. Many simply sic agents on you. The
five sites the CFA recommends are . Compare the deals,
and check the financial rating of any insurer you are
considering. You can find free ratings at . You can also
get ratings reports for $14.99 at If you choose
renewable term, check periodically to see if premium
prices have fallen. If you're still healthy, you may be
able to switch to a lower rate. But beware of switching
insurers too often, says Dick Bellmer, a financial
planner with Deerfield Financial Advisors in
Indianapolis. You might have trouble finding one willing
to take on such a fickle customer.
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