Life Insurance Quiz
Which Should You Buy, and How Much Do You Need?
By Teri Brown

Life insurance is a mark of adulthood. It's not something you really think about until you have children and have to confront the unthinkable – what if? What if something happened to me or my spouse? How would we cope with loss of income? With burial expenses? With the whole process of picking up the financial pieces.

Richard McGrath, president and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass., believes life insurance is something all families should consider. "Life Insurance is important, because it provides financial protection for your family and peace of mind," says McGrath. "If you are properly insured, your family will have the financial means to continue its current lifestyle if something happens to you. Life insurance can also be an important tool for estate planning, business succession planning and other financial challenges."

The ability for your family to continue its current lifestyle while going through the grieving process is crucial. Losing a parent is hard enough on a child. Losing their home and their way of life on top of it is devastating. The following quiz will help you answer these questions: Why should I get life insurance and how much life insurance do I need to get?
1. I should get life insurance because:
a. You're starting a family and having your first child.
b. You're having more children and want to make sure they have educational funds in the event you die unexpectedly.
c. You are accumulating more debt and want to make sure your spouse does not have to worry about this in the event that you pass away unexpectedly.
d. You purchased a home and want to make sure the mortgage will be paid off in case something happens to either one of you.

2. The amount of life insurance a person buys should depend on:
a. Whether the individual is married and has a family.
b. Whether, in the event of an untimely death, the remaining spouse would be able to sustain herself or himself without the other's income.
c. Planning appropriately for the cost of your children's care and for funding college education.
d. The amount of outstanding financial debt you have, such as the balance of an unpaid mortgage.

3. I don't have to worry about life insurance right now because I am young and healthy.
True or False?

4. There is only one kind of life insurance – the kind you get when you die.
True or False?

5. When deciding the amount of life insurance I need, I should only consider my income.
True or False?

6. I don't need to buy my own life insurance because my company covers me at work equal to one year of salary.
True or False?

7. I've got some health problems that I'm not going to disclose so I keep my premiums nice and low. They aren't going to check my health history if I say I am healthy.
True or False?

How did you do?
1. All of the above
"Life insurance provides financial security for your family and peace of mind from knowing that they will be provided for should an untimely death occur," says McGrath. "Average end-of-life expenses can total anywhere from $5,000 to $20,000. It's a large financial obligation to be shouldered by a client's loved ones."

McGrath also says that in addition to providing financial protection, various types of life insurance can also be used as a savings vehicle to assist in paying anticipated inheritance tax, and in preserving wealth and transferring it to your loved ones. Life insurance can also be used in a business to fund a buy/sell agreement between partners of a business.

2. All of the above.
Frank M. Darras is a managing partner for Shernoff, Bidart and Darras, LLP and one of the nation's leading disability, long-term care and life insurance litigators. He says there are many things you should take into consideration when contemplating the amount of your life insurance policy.

"It depends on the size of your family, what it will take to zero out your mortgage, three to five years of income so your spouse doesn't have to work and college tuition money banked for your children," says Darras. "With that in mind, you should have a clear idea of how much you need. Some say 20 times your salary, but your budget will dictate how much premium your family can spend."

3. This one is both true and false.
True: If you are young, healthy, single and no one depends on you for financial support.

False: If you are married and want to provide for your spouse after your death and really false if you are married with children.

"Life insurance is cheapest when we are young and healthy, so waiting to buy only increases the premium!" says Darras.

4. False. There are two kinds of life insurance:

* Term insurance, which pays a specified amount for death if we die within the term coverage
* Permanent life insurance (whole life, universal life, variable life), which provides a death benefit plus cash buildup.

5. False.
How much life insurance you get is determined by:

* How much you need for your children's education.
* How much money you need so your spouse will not have to work for three to five years.
* How much the balance is on your mortgage.

6. False.
"One year of salary doesn't equate to financial security and risking that your health will remain as perfect as you age or that you won't be fired or your company won't go out of business, [it] is a gamble your family doesn't deserve," says Darras.

7. False.
"Your life insurance company will take away your policy, pay no life insurance benefit and refund your premiums if you materially misrepresent your health status on your application if you die within two years of the application date," says Darras.

Original article on iparenting.com