Buying Life Insurance in a Bad Economy

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Life insurance is important protection no matter what the economic environment, especially if you have people who depend on your income. When money is tight, many people may talk themselves out of getting life insurance. However, this coverage is more important than ever to protect your assets and loved ones. Of course you don't want to pay more than you need to, so here are some tips to help you when shopping for a life insurance quote.

Decide what type of life insurance is best for your situation: Term or permanent. Term gives you coverage for a set length of time -- say 10 years -- at a set rate. Permanent, or whole life, comes in various types but basically it is coverage for life and often features a savings component. Term is typically less expensive and is often used to protect your family and assets in case of your death and subsequent loss of income.

Decide how much coverage you think you need. This is an important exercise to go through because you don't want to get more coverage than you need if you are trying to watch your money.

There are various life insurance estimate calculators on the Web. Some financial planners have simplified the estimate by saying multiply 10 times your annual salary as a starting point. Another way is to estimate what your family's monthly expenses would be, and add in your mortgage balance and other debts plus future expenses such as funeral costs and tuition. Then, subtract out Social Security benefits, other life policies, your spouse's income, and retirement plan benefits and use the difference as a starting point.

Get some comparison quotes. Life insurance rates will vary from company to company so get at least three different quotes to compare, using the same coverage amounts and other information (smoker, non-smoker) for each quote. Getting quotes online is really easy these days, especially if you use a quote comparison site.

Only buy from a reputable company. Life insurance is usually a future need and you want to be sure the company who insures you will be around. You can check the financial stability of a company you're interested in through A.M. Best, Weiss, Standard & Poor's and other independent rating companies. For example, an A or A+ rating from A.M. Best is good. Also, check with your state's department of insurance to see if there have been any complaints against the company.

Also before you purchase your policy, make sure you understand everything about it, including claims, and ask questions if you have them.

And last, but not least, if you smoke now's the time to quit. Smoking can double your rate so now you have another financial incentive to quit. You may have to pay a higher rate now, but if you quit you can often get re-rated at a non-smoker's rate a year later.

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