If you're the breadwinner in your household, if you and your spouse have a lot of debt or amortgage, or you're planning to have kids, a policy equal to the mortgage balance plus several years' income is a good cushion to put into place now.
The Two Types of Life Insurance
- Term: This policy covers a set number of years -- if you die during that time, your spouse gets a specific amount. Once the time is up, there's no death benefit.
- Permanent: Also known as "whole life" insurance, this policy is effective for the rest of your life.
Average Cost
Your premium is tied to your age, health status, and policy length. Term policies for young people in good health start at $12 a month and get pricier as you age. Permanent policies are more expensive (as much as 10 times more), but the premium is fixed no matter how long you have it, and you can borrow against it if you need to.
How to Get It- Your employer: Many companies provide their employees with life insurance free of charge. Some states require that your employer let you "carry" your insurance with you if you leave the company (for an additional fee).
- Agent or broker: Traditionally insurance is sold through an agent or broker, who will generally charge a commission, which is sometimes called a "load."
- Insurance company: Some companies allow you to buy insurance directly by phone, mail, or the Internet. These policies often don't incur commissions (they're called "no-load"). The downside is that they're harder to find and require more legwork than if you were to use an agent.
- Savings bank: In some states, savings banks sell life insurance policies.
How to Choose
Compare quotes from major companies, such as MetLife, Progressive, Liberty Mutual, MassMutual, Northwestern Mutual, New York Life, and Prudential Financial. For more information on life insurance, check out the Insurance Information Institute.
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