Dan Lawrence watched the Sept. 11 terrorist strikes on TV at Los Angeles International Airport as he and fellow passengers waited to learn they'd be grounded for days.
While he waited, Lawrence called his insurance agent back home to talk about buying more life insurance - just in case.
"I'm a frequent business flier who never thought much about death until I watched the unthinkable happen, but now I realize I should be prepared if the unthinkable happens to me, " said Lawrence, a businessman, husband, and father of two.
Lawrence is in good company: The Sept. 11 attacks, anthrax scares and subsequent events set more than a few families fretting about their life insurance coverage: In October alone, 1.4 million life insurance applications were filed, up 26 percent from September 2001, according to a Massachusetts database that tracks American insurance carriers, and the American Council of Life Insurers reports that life insurance inquiries are up 40 percent.
"Everyone's mortality flashed before their eyes when they saw replay after replay of Sept. 11 attacks," said Robert Hartwig, chief economist of the Insurance Information Institute in New York.
Anyone concerned with financial security should be asking: "How comfortable are you with the amount of life insurance you own?" said certified financial planner Steve Garrett of A.G. Edwards in St. Louis.
Traditionally, people figured their life insurance needs based on current income multiplied by the number of years you think it will take for a stay-at-home spouse to get training and land a job. But most families today fit a different model.
For them, the first step is to figure out if you need life insurance by answering these five questions:
- Do your children depend on you for financial support?
- Do you plan to help pay toward your children's college education?
- Are you or your spouse a stay-at-home parent?
- Could your family survive financially without you?
- Will your parents need your financial support?
If you answered, "yes" to any of these questions, you probably need some life insurance; how much and what kind are another matter.
Most employers provide term-life coverage of the sort Lawrence already had that will pay an amount equal to a year's salary to his wife and children.
But he knew he should have supplemental coverage to keep up with mortgage payments and their kids' college tuition even though his wife, Jane, makes a good salary.
He could buy more insurance through his employer by paying the supplemental premiums himself, but it was cheaper to buy a supplemental term-life policy through the insurance broker who handles the family's home and car insurance.
Term life is the simplest insurance there is: You buy a policy for a fixed period of time for a fixed premium. And thanks to increased competition and the Internet, the cost of term-life coverage has come down.
Term life is for life insurance alone and doesn't come with a savings component that's part of cash-value policies that go by the names whole life, universal life, variable life and variable universal life.
If you're young and in good health, it won't cost much to get supplemental term-life coverage. A healthy 30-year-old man can buy a 20-year, $1 million policy for $460.00 a year, according to www.term4sale.com on the Net.
Other Web sites include www.quickquote.com and www.masterquote.com, but remember online premiums aren't guaranteed, and rates can change even in the three to six weeks it takes to get your medical exam and qualify for coverage.
When you buy life insurance:
- Get the names of several agents from family, friends and colleagues if you decide to buy through an agent. Ask the agent which insurers he or she represents and the kinds of coverage sold.
- Make sure the agent is licensed to sell insurance, which is required in all 50 states, the District of Columbia and U.S. territories.