INSURE YOUR LIFE AND PROPERTY

Life insurance

How much coverage do you need?

First, figure out how much money it would take your partner and other dependents to live in their current lifestyle if you die. Calculate expenses such as the mortgage, child care and education. Also include at least three months of expenses for an emergency fund, as well as funeral costs.

Next, look at assets such as your partner’s after-tax income, your Social Security benefits and other assets available, like investments, savings and your 401(k) plan.

Different types

Term insurance covers a specific amount of time, such as 20 or 30 years. This is the simplest and cheapest option and works best for most people. Bear in mind that you want to be covered for as long as is necessary for you — whether it is until your retirement kicks in, you pay off your home or children graduate from college.

Whole life insurance stays with you until you die. In addition to a death benefit, these policies offer an alternative cash value or savings account, which allows you to borrow against, withdraw or use to pay future premiums. This option could work if you are a conservative investor and have trouble saving.

There are a couple different types of whole life insurance. Universal life combines term with a money-market type investment that pays a certain rate of return. Variable life insurance is a whole life policy with an investment fund that is tied to stock or bond mutual fund investments. However, if the investments perform poorly, the cash value of your policy could be less than the contributions you have put into it.

The purchase

The cheapest, “preferred plus” or “preferred” rates go to those in the best health. You should qualify if you have a low cholesterol count, low blood pressure and you are a healthy weight. A healthy family history helps here, too.

If you’ve figured how much you’ll need, you can buy the policy directly from the company.

If you decide to buy your insurance through a professional broker or agent, look for someone who has at least five years’ experience and has the right credentials: either a CFP (certified financial planner), CLU (chartered life underwriter), ChFC (chartered financial consultant), CPA (certified public accountant) or a law degree (JD or LLM). Check out trustedchoice.com for an independent insurance agent in your area.

Also, figure out how the agent gets paid. Some work on commission, which means they only make money if you buy a product. Others are fee-based, which means they charge a fee and receive a commission on products, or they are fee-only, which means they charge you a fee for advising but don’t sell any products.