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Posted: 1:08 p.m. Thursday, Oct. 2, 2014

How To Shop for Term Life Insurance

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By Clark Howard

ClarkHoward.com


It's distressing to me how few people with young kids have life insurance. The problem is the insurance that's best for people with dependents is not touted by the industry as a general rule.

Stay-at-home spouses have a special need for life insurance. A new survey from Salary.com finds the "salary" such parents earn by dealing with laundry, kids, cooking, etc. is more than $121,000! That's more of an attention-getting number than anything else because stay-at-home parents don't actually "earn" that, but you get the idea.

Should a stay-at-home spouse pass away, the remaining parent would have to suddenly pay for childcare and everything else a stay-at-home parent does on a day to day basis. That's why it's essential the parent at home have a policy.

Term life insurance is the way to go

Too often, we're sold insurance products with massive commissions and a high cost. That's a formula for failure when you have to pay the premium, and it sets too much of us up for a lapse in coverage.

SmartMoney magazine reports 25% of people who buy life insurance stop paying on the policy in the first three years. By the 10-year mark, it's almost 50% of us who quit paying. So you pay all that money to wind up with a big, fat goose egg.

What you need is a policy that's easy to buy, easy to own and cheap!

Buying what's called "term life insurance" is simple and costs practically no money at all. SmartMoney  reports a  45-year old man can get a  $500,000 level term policy with a coverage period of 20 years and only pay about $50 a month.

Women's coverage is even cheaper because they generally go to the doctor and take care of themselves! If a stay-at-home spouse is a woman, you generally want to buy a level term policy for 15 or 20 years, depending on the age of your children.

Make this one of your 3 simple money moves to make this year.

Remember these pointers when shopping for a policy

Shopping for term life insurance is easy on the Internet. You can comparison shop for quotes at any of a number of sites like PolicyGenius.com, 1stOptionInsurance.comInsure.com, AccuQuote.com, or QualityTermLife.com.

If you're not into the Internet, that's fine too. Go buy a money magazine and you'll see ad after ad of companies selling life insurance. Some respected ones I like include Amica Mutual, TIAA Cref, and even USAA. The latter is for military, but will write life insurance for civilians at last check.

Certain health conditions make insurance more expensive or even unavailable. If you have such a condition, you're what's known as "rated" in the industry, which means you will pay more money than the example SmartMoney  gave for a 45-year-old guy.

Here are some pointers to keep in mind as you look around for level term coverage:

  • How much life insurance do you need? The simplest rule is 10 times your income.
  • Only buy life insurance where you work if you have health problems. Otherwise, I prefer you to qualify and go through medical underwriting so you can buy a policy on your own. Most of us don't stay at the same place forever and you may not have a right to take that insurance with you.
  • Stay-at-home spouses who care for children should have insurance too. They have an "insurable need" because you'd have to pay someone to care for your children in the event a spouse or partner dies.
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