Ask Kim
Pick the Right Life Policy
I'm a 35-year-old single parent of two kids. How much life insurance do I need and what type of insurance should I be looking for?
By Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance
August 18, 2005
I'm a 35-year-old single federal employee with 15 years of service. I have two kids and own one house. How much life insurance do I need and what type of insurance should I be looking for?
A basic rule of thumb is to buy eight to ten times your income. But because you're a single parent, you'll probably need a bit more. And if all you're looking for is coverage to care for your children, then I would recommend a term policy.
For a more specific figure on how much coverage you should buy, check out the life insurance needs calculator at Kiplinger.com, which will help you add up your family's expenses, subtract income they'll have after you die, and figure out how much insurance you need to fill in that gap.
It's probably less than you think, especially if have life insurance through your job. But it's still a good idea to purchase additional coverage that doesn't depend on your employment. And the premiums probably will be much less than you'd expect, too. A healthy 35-year-old woman would pay less than $400 per year for a $500,000 term insurance policy with a guarantee that rates won't rise for 20 years. She'd pay about $450 to $500 per year for a policy with a 30-year rate guarantee.
The length of term you should get depends on the age of your children, the length of your mortgage and other financial obligations.
If your kids are young and you have close to 30 years left on your mortgage, you might want to pay extra for the 30-year term policy. It would last until about the time you retire, well past the kids' college graduation and doesn't cost that much extra.
If your kids are older and your mortgage term is shorter, then 20 years may be enough. Even if you decide that you need the insurance for only ten years or so, it doesn't hurt to get at least a 20-year policy -- you'll only pay about $100 extra per year to lock in an additional decade of coverage.
It's quick and easy to get price quotes from several companies at Web sites such as AccuQuote, Insure.com and InsWeb.
If you have any medical conditions, it's better to call the agents at the site -- or an agent in your area -- rather than just submitting your information online. That way, they can immediately lead you towards companies that are likely to offer the best rate for people with your type of health history and are more likely to give you accurate quotes from the beginning.