have been called a euphemism for death insurance, but who wants to think about it that way? The important thing is that you think about it, and get insured, if needed.
A primer on life insurance was posted last week by the Boston branch of the Better Business Bureau. The post has simple explanations of the many kinds of life insurance policies, most of which are variations on two types: whole life (policies that build cash value), and term life (policies that are cheaper than whole life, offer protection only for a set number of years, and have no cash value if the term ends while you're still alive). The guide explains the different kinds of insurance companies, and notes that you must read the actual policy - not just the advertising - before buying insurance.
"Let's talk about death." That's the "body under the sheet" when the subject of life insurance comes up, says Bankrate.com writer Jay MacDonald. In this post on "myths about buying life insurance," MacDonald talks to experts. "Insurance is insurance; it's not an investment vehicle," Tony Steuer, the director of financial preparedness for the insurance consumer group United Policyholders, tells MacDonald. James Hunt, with the Consumer Federation of America, recommends term-life insurance and 401(k) investments as an alternative to whole-life policies, saying, "The problem is, 40 [percent] or 50 percent of the buyers drop out within 10 years and never get a good return on their money."
Tips at Forbes.com explain more about term insurance. "If you are in a situation [where] your dependents will not rely on you financially forever, your best bet is probably a term-life policy," writes contributor Jessica Bosari. "For example, many parents choose term-life policies that are in effect until their children move out and become financially independent. Once kids are, there is no reason to continue paying for life insurance."
If you get life insurance and then you die, how likely is it that your beneficiaries can collect on the policy? That's an important question to ask before you buy. You can look up Standard & Poor's ratings for insurance companies from this tool page at Insure.com, an independent insurance website.
ConsumerReports.org advises caution even with a well-rated company. This article, posted early in the recent financial crisis, gives guidelines for deciding if ratings are trustworthy and how to evaluate the financial health of an insurance company. It also outlines the role of state "guaranty associations" in paying benefits - though sometimes just fractions - if an insurance company has gone under.