Dec. 08--No one is going to live forever, but life insurance is something many people don't want to think about, can't afford, or perhaps don't need.
It doesn't help that dealing with it can be confusing and a little daunting.
Whatever the reason, less than half of U.S. households have individual life insurance, according to LIMRA, a research and consulting firm. Among those households with life insurance, the average has enough to replace 3.5 years of income.
Purchasing it isn't much fun. It's something people buy for when they die to give their loved ones a way to pay bills, final expenses, replace a wage earner's income or cover estate taxes.
"Life insurance is a bet that you will die. You want to lose that bet," said Robert Hunter, director of insurance for Consumer Federation of America. "Life insurance is to protect against the economic consequences of premature death."
Whether you need it can depend on your stage of life.
"You need a lot when you have babies. As the babies get older and are out on their own, you don't need any," Hunter said.
Once people retire. their spouse will usually inherit their retirement income if they die.
Deciphering insurance terms and policies can be so complex, even experts turn to computer programs to figure out whether a policy makes sense, Hunter said.
Most people should buy term insurance, which provides coverage for one to 30 years as long as the premiums are paid, Hunter said. Permanent life insurance, also called cash-value insurance, is a lot more complex and comes in four types. They are whole life, universal life, variable life and variable universal.
"Term is simple. Either you die within the term, or you don't," Hunter said.
Mostly importantly, go online once in a while and check rates at term4sale.com, Hunter advises.
"First of all, you should probably only have term. Every couple of years go on term4sale and see if a new policy will beat your current one. Due to competition, prices are going down," Hunter said.
Term4sale does not sell life insurance. It's a software company that collects information. You fill out a form on its website, then are advised to print the information to compare the quotes from various companies.
Richard Newman, a Boca Raton-based CPA and life insurance professional, said whole life is not only for the wealthy. It's also for the middle-income person who wants cash accumulation and a death benefit.
No matter what type of life insurance policy you purchase, it should be monitored, said Newman, whose company My Life Audit, specializes in reviewing policies.
More than 65 percent of life insurance policies are either underperforming, are at risk of lapsing, or could be replaced at a lower cost with the same or better benefits, Newman said.
A policy could lapse because it ends when the insured reaches a certain age. Even in the case of term insurance, it's possible to cancel it and find a better rate.
It's also important, Newman said, to see if any changes are needed, such as updating the beneficiaries.
The insured could have improved health that enables him or her to qualify for a lower rate. For example, a man who was a smoker when he took out the policy, can get a better rate after he stops smoking.
"We are also finding that life insurance today is much less expensive than it was 10, 15 or 20 yeas ago. People are living longer. The longer people live, the cheaper it is, because the longer you will pay that premium," Newman said.
Anyone who is considering purchasing cash-value insurance needs to consult a licensed insurance agent.
But most people can research term insurance rates on their own, which then must be purchased through a licensed insurance agent, whether it's online, over the phone, or in person.
Whatever type you choose, check the insurer's financial-strength rating. One source is Standard & Poors at standardandpoors.com.
Companies can also be researched at The National Association of Insurance Commissioners website at naic.org.
If you're buying life insurance through your employer, you may discover you can get a better deal elsewhere. This is because most employers do not require a health exam. Typically, the insurance pool the employer is covering includes an unknown number of employees, spouses and children who may be at risk, due to obesity, smoking or other health-related issues.
Once you venture into buying the life insurance on your own, it's easy to compare rates, but be prepared for a barrage of emails and phone calls from those you contact. Hunter advises looking for rates from USAA and Ameritas because they don't pay agents commissions.
For more information about the basics of life insurance, go to lifehappens.org, a website operated by the Life and Health Insurance Foundation for Education.
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