Insurance Series: Life

The paperwork is tedious. And it can be expensive to boot. But if you have children or other dependents, life insurance should be a priority.

How much life insurance you need depends on how many children (or other dependents) you have and how old they are. One guideline suggested by financial planners is to buy coverage worth about eight to ten times your annual salary.

Types of Insurance

Term insurance is the simplest and most affordable life insurance to buy if you plan to insure yourself for at least 20 years. You pay an annual premium based on your age, health, the agent's commission and how much the insurer thinks they can earn by investing your premium until you die.

Say you are 45 and in good health. A 15-year policy for $100,000 might cost you $250 a year in premiums. Term insurance pays a specific death benefit to your survivors.

The other form of life insurance is called Cash-Value Insurance, a combination of a life policy and a savings plan. There are several types of these policies. The most common are whole life, universal life and variable life.


One of the best places to land a policy is with a broker who sells low-load insurance. The commission can be as much as 50 percent cheaper. Low-load policies pay an average return of 6.7 percent after five years.

Insurance Series

Typically, it takes five years for cash-value policy holders to see any returns. The Consumer Federation of America advises consumers to steer clear of these policies unless you can hang onto it for at least 20 years. That lets the cash value portion of the policy build up.

For more information
You can have specific cash value policies analyzed by CFA's Life Insurance Rate of Return Service, which estimates "true" investment returns on any cash value life insurance policy illustration. To do so, call CFA, 202-387-0087, for more information about this service, which costs $40 for the first illustration.
  • Check out insurance firms like USAA Life (800-531-8000) or Ameritas (800-552-3553) who sell policies directly to you without going through an agent.
  • To get the best-priced policy, you might contact a quote service company who will send you the five best-priced policies to suit you. Most don't charge for the service and let you buy the policy from them.
  • Insurance Quote Services Inc.: 800-972-1104
  • SelectQuote: 800-343-1985
  • TermQuote: 800-444-8376
  • Quotesmith Corp.: 800-556-9393
Insurance Series Part Three:
Disability Insurance
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