So, why on earth would you want to run out now and buy life insurance - essentially, making a "bet" that you would die within 20 to 30 years? That's simple: If ANYONE depends on you for financial help - spuse, kids, parents - then even if you pass away, chances are that one of them will live the many years predicted by today's statistics. Even if you are older, you may need some coverage to protect your husband or wife should he or she need long-term health care if you pass away. And, for a relatively modest monthly premium (in most cases), life insurance could mean a healthy financial start to the rest of their lives.
Why Buy At All?
While I've talked a lot (and will undoubtedly continue to do so) about making your savings last through what should be a lengthy retirement, perhaps the most important thing you should do this year - aside from having a short-term emergency savings account handy - is to buy life insurance is you don't have any already, AND you have folks who depend on you financially in some way.
Sure, you may have some life insurance offered through your workplace, and of course you should take advantage of what is likely to be a cheaper product than when purchased on your own.
Still, most companies do not provide the amount suggested, which is anywhere from five to 10 times your annual salary. (If your firm is this generous, congratulations, and go read something else.) This makes sense, considering that funeral expenses, college tuition, credit cards bills, mortgages, day-care costs, and housekeeping expenses may await your beneficiaries.
What to Buy
Term insurance is the most basic, and generally least expensive, form of life insurance for people under age 50. A term policy is written for one to 10 years (in general), and may be renewable at the end of each term. As you get older, the premiums tend to increase each time you renew. A level term policy locks in the annual premium up to 20 years. Benefits are paid only if you die during the policy's term. After the term ends, your coverage expires unless you choose to renew.
