quick clicks

article archive

expert q & a

community & groups

research baby names

prepare a birth plan

content channels

ip channel rss feeds

read birth stories

read parenting stories

recommended books

e-newsletters

safety recalls

ip diaries

ip store

mom of the month

dad of the month

editor's letter

letters to the editor

Life Insurance

What Is It, and How Much Do You Need?

By Megan Fowler

Be realistic when looking at the different options says Dan Brown, brokerage manager of Key Partners, an insurance company representative organization in Chicago, Ill. People make the mistake of thinking that because they have never been really sick they don't need anything specific. "Medical exams take a look at everything, even things you would least expect, so try not to leave anything out when doing your research," Brown says.

There are two basic types of life insurance policies you can purchase: permanent and term. A permanent policy is designed to provide lifelong financial protection. As long as you continue to pay the premiums (or make the payments) the death benefit will be paid. Permanent policies are what most people begin once their term expires or if they plan to stay with the same employer for more than 10 years.

Most permanent policies have a cash value feature that builds up, tax-deferred, over the life of the policy and can be used to help fund financial goals, such as retirement or education expenses. This option to cash in on a policy can certainly fall in line with what you need, but be aware of hidden surrender charge. "Make sure you know the regulations of your company before you change anything," says Reyna. Some agencies charge you to change things or to withdraw from policies you currently have.

A term policy covers the insured for a certain period of time known as the "term." Terms can be anywhere from one to 30 years. This kind of policy pays death benefits only if the insured dies during the term. This can also be used as a future savings plan for large expenses like a child's college tuition, says Reyna. When he was a child his parents took out a $25,000 policy for him that he later used to pay for his wedding. "It's a great idea to do a term policy because the more money you put in per year, the faster your policy will grow – almost like a savings account," says Brown.

Want to see more?

• Talking About Life Insurance: The First Step to Protect Your Family
• Life Insurance: Are You Covered? When and How to Refinance Your Life Insurance
• Buying Life Insurance: Where to Start and What to Look For
• Talk about it!