Putting a Price On Your Life

Did you know September is Life Insurance Awareness Month?

I know. These campaigns sound totally contrived. Still, this one, coordinated by the Life and Health Insurance Foundation for Education, can be used as a reminder to give yourself an insurance checkup.

When was the last time you reviewed your life insurance policy? If you have insurance, is it enough? Do you even know what enough is?

The fact is, 44 percent of all U.S. households either don't own life insurance or think they should own more, according to a study by LIMRA International Inc. Those who think they don't have enough generally think they need enough insurance to replace six years of income but own only enough to replace 2.8 years.

I understand it's no fun shopping for a product that can't be used until you're dead. But for the sake of your next of kin, it's important to know what you're buying and how much you should buy. So let's start with the basics.

According to the National Association of Insurance Commissioners, before you buy life insurance, you need to understand its purpose. Life insurance is meant to replace income. If you have no dependents -- a spouse, children, parents -- chances are you don't need life insurance. So start the analysis by simply asking yourself this question: "Who is financially dependent on me?" Then ask: "What major living expenses will these folks have to pay if I die?"

For a good, independent source of information on life insurance, go to http://www.insureuonline.org , a Web site created by the NAIC.

Next, you need to decide which type of insurance best suits your situation. There are two main types of insurance -- term and permanent. Just as it sounds, term life insurance provides insurance for a certain period of time, typically one to 20 years. Term policies pay a death benefit only if you die during the period of coverage. Some policies can be automatically renewed, and some can be converted to permanent insurance without the need for a medical exam.

Then there is permanent life insurance, also known as a "whole life" or "universal and variable life" policy. Permanent life insurance includes a death benefit as well as a way to build up cash value, which you can borrow against or use to pay your premiums.

For most people, term is the best option because it's much more affordable. To find the best rates, shop around.

Since I'm talking about affordability, let me tell you about a free program for people who can't afford life insurance.

Under its LifeBridge program, MassMutual, one of the nation's largest life insurance companies, is offering term life policies with a $50,000 death benefit at no cost for families earning between $10,000 and $40,000.