Buying Life Insurance

Thing No. 1  

Life insurance is generally for people with a spouse and/or kids. 

If you're single and you just want to make sure Fifi is provided for in the event of your untimely death, you don't need life insurance for that. You'll probably be forced to buy some if you have a mortgage (they're not letting you off that easy) but that's a separate issue.  If somebody suggests that it's a way to save money; that's lame.  There are better ways to do that.  The whole point here is that there are people that will need financial assistance if they suddenly find themselves without your income because you're;well, dead.

Thing No. 2  

Choose between a broker or DIY.

We prefer the human touch.  Life insurance is less about getting the best deal and more about getting the right coverage for your specific situation without overdoing it or underdoing it.  You can use the counsel. But, you can also do some preliminary research if you're up to it intelliquote.com or selectquote.com.  Choosing one who is not restricted to representing certain companies is best but many of them are and you can make do with them as long as they represent a long list of companies.  Check Find and Advisor @ naifa.org.

Thing No. 3  

You may have some coverage with your employer. 

If you work for a big company, you'll likely have some coverage (particularly if you happen to be fortunate enough to keel over while in your cubicle) which you should acquaint yourself with as a starting point.

Thing No. 4  

Figure out what you want the post six feet under scenario to be.

For example, you may want mortgage and college tuitions fully paid and provide your family with an income for a certain period of time before they've got to quit lying around all weepy-like, get over it and get to work.  Or, you may want to make sure they have a steady income in perpetuity…your call.  Obviously, the latter is going to cost you more than the former. Grab yourself one of the many worksheets available on the web and sort out what you'd like get paid and for how long @ smartmoney.com/insurance/life/.

Thing No. 5  

Buy it in chunks.

Term life insurance gives you the most coverage for the least amount of money. We don't like “whole life” because these policies are based on investing some of your premium. They basically give you a fixed interest rate on a portion of your premium (which goes to the bottom line of your benefit) and/or a non-guaranteed return based on their “projections” for the investment.  These “projections” are aggressive (not conservative) since they want to lure you in with promises of high returns, which may not turn out to be so high after all.  You're better off investing that same money separately instead of wrapping it up with your life insurance policy because these policies have extra penalties (which come out of the payout) for early withdrawal and more restrictions than if you'd simply invested that extra money…wherever.  There are also tax implications and Byzantine structures that make us scrunch up our faces and furrow our brows in generalized disapproval.