Life insurance not an antiquated idea

Life insurance is as important today for the modern family as it was years ago for the more traditional family. Yet life insurance is among the last things that people buy.

There are so many different types of insurance that the average person is confused as to which type of policy to buy and just how much is needed.

There are lots of formulas for computing the amount necessary. A good starting point is to take 10 years of income and subtract whatever savings are available for the family to live on. Again, this is just a starting point. Other concerns that need to be considered when determining the amount or face value of the policy are educational needs for the children, whether it is for college, vocational or trade school, or perhaps just to supply the funds necessary above and beyond the norm for things like piano lessons, band expenses or dance classes.

The choice as to the type of insurance can also be a confusing issue, but it all comes down to one "rule." Buy as much insurance as you can possibly afford. Since term insurance is the least expensive, the bulk of a family's insurance needs could be supplied by a good, level-premium term policy. Term insurance should be obtained from a quality insurance company, one with a good history of being around through good times and bad.

Look for established companies that have a good reputation and solid principles. Level-premium term policies have a fixed premium for a specific period of time — 10, 20 or 30 years. Thereafter, the policy becomes a yearly renewable term policy with annually increasing premiums. It is important to note, that within a few years of the end of the "level term" period the premiums will become quite expensive and usually the insured can no longer keep paying the premiums. It is expected that by that point in time, the family has been able to save significant sums through alternative savings programs — retirement accounts, mutual funds, or personally owned stocks and bonds. It is also expected that the needs for cash at that point in time can be supplied by the above mentioned savings accounts and the insurance is not as important — the children are grown and the house is paid off.