How to Buy Life Insurance as a Parent

There are two major types of life insurance: term life and whole life. Term is the most popular and most affordable form of life insurance. Term life insurance is established for a set time period -- which can be for as little as one year or up to 30 years. You pay a set amount (called a premium) for the term you've established with theinsurancecompany. Your premium is paid either monthly, quarterly or yearly. If you're alive when the policy expires, you may have to look for coverage again. You may be able to buy an extension on your policy, but it depends on your insurance company and your personal health and age.

Whole life insurance is much more expensive than term life insurance, and it covers you for your entire life. Whole life is a blend of insurance coverage mixed with an investment fund, where part of your premium goes toward investments made by the insurance company. You pay a certain amount of money each month (also called a premium), and part of that money accumulates into an investment account. As you build cash value within your policy, you can borrow against the value and take out a loan, which will be deducted from yourdeathpremium. Or, you can leave the money in the account, and the money will accrue until you've paid the entire value of the policy.

So, exactly how much life insurance you should buy? There's no set dollar amount. You should definitely make sure you won't be underinsured so that your family is covered for as long as they need. Insurance agents will usually tell you to buy anywhere from 10 to 20 times your annual income, and specifically determining what the monetary value of your insurance policy should be is based on a several factors -- your salary, the age of your dependents, other assets that they may use to live on and if you have an employed spouse.

Next, you need to determine how long you'll need your policy. With term life insurance, the general guideline is to purchase coverage to get your youngest child to about age 22, when mostyoung adultsbegin supporting themselves. Remember, life insurance gets more expensive as you age, so if you're buying insurance in your 30s, you'll be paying a lot less than if you try to buy a policy in your 60s. If you want to cover your spouse in your insurance plan as well, plan on having coverage until your spouse reachesretirementage.

Regardless of the policy you choose, if you don't pay your insurance premium on time, your insurance will be cancelled, and you may have to start the process over again.

An important aspect of maintaining life insurance as a parent is designating the proper beneficiary. A beneficiary is the person or entity who will receive the death benefit from your insurance policy. You have to be very careful about who you name as your beneficiary, as well as maintain the beneficiary's contact information with the insurance company, so that person can be notified in the event of your death.

Following are commonly-selected beneficiaries:

While it's important for parents to buy life insurance, there are also life insurance options for children. It seems like a logical decision -- now that you have a child, they should also be insuredin case of death, right? But is it worth investing your money for kiddie life insurance? Policies are inexpensive, and insurance companies draw you in with tearjerker commercials and fear of the unknown in case a child passes away.

Experts overwhelmingly recommend is that it's not worth buying children's life insurance. Why? Policies mature very slowly for children, and a parent is more likely to die before a child. It's much smarter and financially responsible to make sure a parent is adequately insured rather than the child.

Wading through the vast amount of information regarding insurance can be daunting. If you don't know where to begin, here are some tips to finding the best insurance rates for you and your family: