Industry works to get out the word

Insurance agent Clif Rosenberry knows firsthand what can happen when a family's breadwinner dies without life insurance: His brother was killed at the age of 39 in a work accident, and he didn't have his own policy.

"He had a wife, two kids, a brand-new house ... and not one speck of life insurance," Rosenberry said. "The family wound up having to sell the house, having to move. It was an absolute mess."

It is scenarios like this that have led the insurance industry to sponsor National Life Insurance Awareness Month each September to encourage Americans to take a hard look at life coverage.

LIMRA International, a research and consulting organization for the insurance industry, said its most recent consumer survey found that nearly one-third of adults in the United States have no life insurance. The lack of coverage is especially true for young men and women, it found.

Rosenberry, co-owner of the McCartney & Rosenberry Group in Ardsley, N.Y., and a past president of the Independent Insurance Agents and Brokers of New York, said many young people "are more worried about getting tickets to the Yankees game or buying a BMW" than about investing in insurance.

"The issue is, death can wreck lives around you from an emotional standpoint," he said. "Do you want to wreck it from a financial standpoint, too?"

The people who need insurance are those who have others depending on them financially, including couples with children or individuals supporting their aging parents, he said.

One way to try to determine how much insurance to buy is to look at the family's total income.

"In most cases, you're looking to replace a stream of income," Rosenberry said. "Say you're earning $100,000 a year. If something happens, you need to replace that income."

So a family that gets a $1 million policy "is talking about 10 years of replacing income," he said.

That gives the surviving spouse time to get his or her life back in order.

The Life and Health Insurance Foundation for Education is a non-profit organization funded by the insurance industry that coordinates the national awareness campaign. It has a calculator on its site at www.life-line.org that consumers can use to determine their insurance needs.

"The calculator adds up what your obligations are in the event of your death, such as a mortgage that may need to be paid off and funds for a college education for your kids and special funds, say for a disabled child," to help families determine how much insurance they need, said the foundation's president, David Woods.

He added that as a general rule, industry experts typically recommend having 10 to 20 times gross annual income as a family's insurance target, "but this can vary greatly so we suggest people run their own calculations."

The next question is, should the family buy term insurance or permanent insurance?

Term life insurance provides protection for a specific period of time, say 10 years, and pays a benefit if you die during that period. It's generally much less expensive than permanent life insurance, which promises a death benefit as long as the consumer pays the premiums. Permanent life insurance also accumulates a cash value, which can be tapped in emergencies.

"If you can afford to buy as much as you need, the preferred way is permanent life insurance," Woods said.

"But if you can't afford to buy permanent life, then because the most important thing is to get enough coverage, you definitely should buy term," he said.

Eventually, Woods said, even a younger person who starts with term eventually "can consider a combination of the two that fits your budget."

Some American workers get life insurance coverage as a benefit from their companies.

But industry experts point out that it generally doesn't exceed more than three times a worker's annual salary -- in other words, not enough to keep a family going more than a couple of years if the breadwinner dies.

And workers don't get to take the coverage with them if they change jobs.

"It's group life insurance, and it should be considered part of your overall life insurance planning, but only a part," Wood said.

_______________________________

By EILEEN ALT POWELL
THE ASSOCIATED PRESS

© 1998-2006 Seattle Post-Intelligencer