Life Insurance - kcentv.com - KCEN HD - Waco, Temple, and Killeen

How much life insurance should someone have?

If you're working with an advisor, he or she might use the "needs approach" to estimate your insurance need. This is a calculation that determines how much your family would need to continue their lifestyle if you pass away prematurely. But a good rule of thumb is to have between 7 and 10 times your annual salary in life insurance coverage.

How do you go about getting a policy?

The easiest way for most people would be to get coverage through their employer; but this might not be available, and even if it is, you could lose this coverage if you switch jobs. If you want an individual policy that will stay with you even if you switch employers, you can contact an agent of a specific life insurance company, or better yet work with someone that can shop different companies to find the best policy for your needs.

What types of policies are available?

All life insurance falls into two basic categories: term and permanent. Term insurance is temporary insurance, doesn't build up any cash value, and it's the least expensive way to get insurance. Think of it like auto insurance: you pay while you have it, and when you stop paying, the coverage stops.

Permanent insurance is designed to provide coverage for the rest of your life. There are many types of permanent policies, and "whole life" and "universal life" are two of the most common. Permanent insurance will have much higher premiums than term, but a portion of the premium goes toward building the "cash value" of the policy after the cost of insurance is paid.

Can you quickly give us the pros and cons of term and permanent insurance?

The great thing about term insurance is that it's low cost, but the downside is that the coverage isn't guaranteed for life, and your life insurance needs can change over time. The nice thing about permanent insurance is that it provides lifetime coverage -- as long as you pay the required premiums -- but permanent policies are expensive, complicated, and, since most of them pay high commissions, they are often sold for the wrong reasons.

Remember that these topics are general in nature, so consult with your financial advisor about your specific situation before making any investment decisions.