What's Life Worth?

Lawrence Singer always figured life insurance was a bad bet. "Statistically it doesn't pay off," says the 33-year-old dentist. "You're better off socking the money away in the stock market." But since September 11, Singer has had a change of heart. He works near the White House and Pentagon--daily reminders, he says, that life feels more risky now. So he recently purchased a $3 million policy. He's glad his fiancee and 3-year-old son are protected, but he laments the price. Because of his medical history, his monthly premium is a hefty $559. "It's a big expense," he says.

His reluctance is part of a litany of excuses too many people use to avoid buying life insurance. Long before 401(k)s, life insurance held a central place in Americans' financial lives. During the early 20th century, millions of people bought coverage from door-to-door salesmen. After World War II, life insurance became a fixture of employees' benefit plans. But lately interest has waned: only 76 percent of households now own life insurance, down from 83 percent in the 1960s. Even among families that have insurance, many don't have enough--a fact brought into high relief by the September 11 tragedies. Among the 658 Cantor Fitzgerald victims, for instance, just 6 percent had purchased more than the company's $100,000 standard policy. (Some may have held individual policies on their own.)

At a time when people are managing their own retirement funds and Quickening their expenses, why would they skimp on insurance? The reasons are complex. Some experts refer to an old industry saying--"Life insurance is sold, not bought"--to blame the decline on the dwindling number of agents. In surveys by LIMRA International, an industry research group, people have become far more concerned with medical insurance and retirement savings than with life insurance. Another driver: widespread group coverage has spawned complacency. "A lot of people feel they are adequately covered through their employer, so why go out and get something on their own?" says Philip Reyna, life-product manager at USAA, a large insurer.

Even if you have coverage at work, it may not be enough. Most experts say primary breadwinners should have coverage equal to six to 10 times income. (Younger adults with, say, a big mortgage and lots of kids fall higher on that range.) Financial planners can give more precise estimates, or check out an Internet life-insurance calculator (life-line.org has one example). Once you've determined your needs, review your benefits. Many companies offer employees a free policy worth one or two times salary, with the option to buy supplemental coverage. Buying insurance at work (often with pretax dollars) is hassle-free, so many experts suggest maxing out employee coverage before buying individual policies. But if you're a young nonsmoker, then shop around, says actuary Jim Hunt of the Consumer Federation of America, because you may find lower rates. (Web sites like term4sale.com or quotesmith.com make it easy to compare prices.) If you need more coverage, most experts suggest buying "term" insurance because it's cheaper and simpler than "whole" life, which often doubles as a savings vehicle. Stick to well-known, highly rated providers; the CFA points to USAA and Ameritas as good companies to consider. For people with complicated insurance needs who want expert handholding, the CFA or a fee-only consultant can help.

Anecdotal evidence suggests that life-insurance applications have been rising since the terrorist attacks. But there are limits to that phenomenon: in a November survey by LIMRA, just 11 percent of consumers said they were more willing to meet with an insurance agent than before the attacks. As the terrorism threat recedes, the industry's future will lie with people like Robert Grover of Churchville, Pa., who sees life insurance as a basic part of parenthood. The father of two recently applied for a $1 million policy. As a hospice nurse, "I see people who don't plan," he says. Now is a good time to make sure you're not among them.

GOOD POLICY

Calculate Your Need: Most breadwinners need coverage worth six to 10 times their income. Check with an agent or planner to make sure you have enough.

Check Your Benefits: Many employers provide some free insurance. Paying for extra coverage through your job is often the easiest and cheapest way to get more.

Shop Around: The Net makes it easy to compare pricing for term policies. Stick to well-known, financially strong providers.