Whole vs. Term?

Which is better for you, whole-life or term insurance? The answer could be neither. If you're not married, have no children or are living off your investment income, you may not even need life insurance. But if you do need life insurance, we want you to get the best coverage at the lowest price. In most cases, that means buying "guaranteed, renewable term insurance with level premiums." We prefer term-life insurance for anyone under 50, and a plain vanilla whole-life policy for those of us (gulp, that's us!) 50 and over.

(Our rule of thumb: Buy enough insurance to at least equal 8-10 times the breadwinner's annual gross salary. If you're a two-income family, insure each spouse for six to eight times his or her annual gross salary. It's that simple.) "Guaranteed renewable" means that no matter what happens to you during the "term" of your policy, you are guaranteed to be able to renew the policy. With level premiums, your premium will stay steady for the duration of the term.

Eliminate Duplicate Coverage

Now it's time to reclaim the money you're paying as premiums for duplicate life insurance coverage, and eliminate duplicate coverage once and for all. Drop these types of insurance:

• Credit card life insurance. Basically you're paying premiums so that your card will be paid off when you die. Chances are your balance on the card at your death will never be as high as the amount of premiums you pay out.
• Mortgage life insurance. If something should happen to you, the cash proceeds of your term policy can be invested and your spouse can make mortgage payments out of those proceeds. The tax deduction for the mortgage interest remains intact, and you earn interest on your investment instead of letting the bank earn the interest.

Some mortgage companies require you to carry mortgage insurance until you've built up a certain amount of equity in your home (usually 20%). Call your mortgage holder and ask them when you'll have enough equity built up to drop your mortgage insurance.

Ready to get rid of the extra insurance and put the money back into your pocket? Okay. Write your mortgage company and/or credit card company a letter using our sample letter for guidance:

Dear Sir/Madam:

Upon receipt of this letter, please cancel any and all forms of (credit card/mortgage) life insurance I may currently be carrying on my account, cancel any premiums I am being charged, and refund any overpayment I may be entitled to.

Sincerely,
Your name

Page « Previous 1 2 3 Next »