Family First: Life Insurance
By Jodi Lipson
April/May 2006
Simplify the maze of information on life insurance. Ask yourself, “How can I best take care of my family?”
Life insurance isn’t for you—it’s for the people who rely on your income and who will continue to need your help when you’re gone. If you don’t have an adequate nest egg, you may need life insurance.
“If you die, you need a pool of money that will replace your ongoing support,” says Julie Stav, who hosts television and radio shows on money and personal finances.
What life insurance is: In exchange for monthly premiums, life insurance policies pay designated beneficiaries upon the death of the policyholder.
What it’s not: A substitute for disciplined retirement investing. Life insurance policies—even those that let you take out loans or earn income—can charge hefty fees. Don’t get scammed. If an agent tries to sell you life insurance as an investment with a high return, insist that you be shown a guarantee in your contract.
Who needs it: The most likely candidates support school-age children, nonworking spouses, or elderly or ill relatives. “I realized we needed the security life insurance offers,” says Maritza Del Toro, 49. After losing significant investments in manufacturing in the Dominican Republic, she and her husband took out life insurance policies benefiting the surviving spouse and their children.
Who does not need it: People who are single or whose spouses or dependents have adequate sources of income.
How much you need: Consult an expert and use an online calculator to calculate funeral and ongoing living expenses, taking into account inflation, savings, rates of return on investments, and other factors.
Where to get help: Check the agents’ or companies’ status through your state insurance department and their financial rating through Moody’s (free registration is required).
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