Now is a good time to shop for life insurance

NEW YORK -- Most people don't like to think about life insurance -- it's such a reminder of their own mortality.

But life insurance can be a critically important purchase, especially for those who have children, a spouse or parents to support. Now is a good time to review both term and permanent life policies because premiums have come down sharply in the last few years.

"People are living longer, and that reduces costs because there are fewer claims," said Kristi Matus, vice president of actuarial solutions at USAA Life Insurance Co. in San Antonio, Texas. In addition, insurance companies have gotten better at calculating risk, she said.

That can translate to hefty savings for those seeking life insurance, especially term insurance. Term insurance provides protection for a specified period of time, generally up to 20 years. Permanent insurance typically is priced to keep for a lifetime, and generally has a cash value as well as a death benefit.

Comparing prices

Rates also have come down because the industry has become more competitive. In addition to dealing with the sales agents of insurance companies and with independent insurance agents, consumers can compare prices on a variety of Web sites, including www.term4sale.com, www. insweb.com, www.selectquote. com and www.accuquote. com.

"Ten years ago, if you wanted a comparison of 200 life insurance companies you had to sit down with 200 agents, each with a different rate card in their pockets. It was very cumbersome," said Byron Udell, chief executive of AccuQuote, which is based in Northbrook, Ill. "Now the information is out there on the Web and anyone can compare everyone else's rate."

A decade ago, a 40-year-old nonsmoker who wanted a 20-year term life policy with a face value of $500,000 would have paid at least $995 a year, Udell said. Today, he could get that policy for about $380 a year, he said.

Not everyone needs life insurance. A young single person, for example, usually has no dependents and little concern about what happens financially to others if he or she dies.

"The need for life insurance generally is triggered by an event -- the birth of a baby, the purchase of a house, having a friend die in an auto accident," Udell said. He added that the terrorist attack on Sept. 11, 2001, "was a classic event."

Besides prompting more people to seek coverage, Udell said, the attack also encouraged them to increase the amount they bought. Policies now average about $445,000 in value, compared with about $380,000 before the attack, he said.

Charan Singh, chairman and chief executive of SelectQuote Insurance Services in San Francisco, said most people aim at buying insurance equivalent to five to 10 times their annual income, but that for some people, that won't be enough.

If a family is used to living on $50,000 a year, they need to figure out how much they need in insurance to generate that kind of income, Singh said. He added that couples with children should consider not only buying coverage for a working husband but also a nonworking wife to cover child care and educational costs for children if she should die.

"The key question is, if something happens, will the family be taken care of?" Singh said. "I'd argue that putting $250 a month into a savings account won't do that for you, but investing $250 a year in a (term) life insurance policy will."

While term life policies are generally more affordable, there's no reason that families shouldn't also consider permanent life, which generally is more expensive than term life.

Richard L. Hall, a senior vice president at Northwestern Mutual Life Insurance Co. in Milwaukee, Wis., said "the debate is too often focused on price."

Permanent life, because it has a cash value in addition to a death benefit, gives policy holders something they can borrow against in emergencies. Or they can tap it to supplement retirement income, or use it for charitable giving through their estates. And monthly or quarterly premiums can be guaranteed for life.

"Most people probably need a blend" of term and permanent insurance, Hall said. That's what he suggested that his son and daughter-in-law consider after the recent birth of their first child.

"I helped him get a lot of term insurance -- and a small permanent policy beside it," Hall said, adding that eventually his son can buy more permanent insurance if he wants.

Basic information about buying life insurance can be found at www.naic.org, the Web site of the National Association of Insurance Commissioners, which represents state insurance officials. The American Council of Life Insurers, a Washington, D.C.-based trade group, has a free publication titled "What You Should Know About Buying Life Insurance" on its site, www.acli.com.