Insuring a family takes planning; Coverage: Experts recommend that people carry between five and seven times their annual income in life insurance. But much depends on an individual's circumstances.; DOLLARS & SENSE


Like many Americans, 45-year-old Bob Meyers didn't seriously consider buying life insurance until the birth of the first of his two children a few years ago.

Meyers decided to increase his coverage recently, after he bought a new home in Columbia and moved his mother in with him.

"I started thinking 'What if something happened to me?' " said Meyers. "And my circumstances changed. So I felt I needed more."

Meyers fits the profile of a typical life insurance customer, according to agents and an industry trade group.

In 1997, the most recent year for which figures are available, Americans purchased $1.97 trillion in new life insurance coverage, a nearly 10 percent increase from 1996, according to the American Council of Life Insurance, an industry group in Washington.

The 1997 purchases brought the total life insurance coverage in the United States to $13.2 trillion, according to the council.

On average, American households carried $165,800 in life insurance at the end of 1997, a 5.4 percent gain from the year before.

Although experts say the amount of life insurance people should carry depends largely on their individual circumstances and financial goals, people are typically recommended to carry between five and seven times their annual income.

In other words, an individual making $50,000 a year should maintain life insurance policies of between $250,000 and $350,000, although many elect to carry more to ensure their families' financial viability.

"Most people are naturally concerned about their home and their family," said Dave Jones, a State Farm Insurance Cos. agent in Columbia. "I tell people that when considering how much life insurance they want to buy, they should make a list of their debts and future expenses and consider the future financial condition of their surviving spouse."

But the types of life insurance vary greatly.

"Term" life insurance, as its name implies, pays death benefits, but has no savings component. A policy is bought for a specified term, say five, 10 or 20 years. The older the insured, the higher the premium.

"It's low-cost insurance that buffers a financial crisis for one's family," said Herb Perone, a spokesman for the American Council of Life Insurance.

The other major type of insurance is often called "whole," "universal" or "permanent" life insurance. Unlike term life insurance, "whole life" pays death benefits, but it also acts as an investment, paying dividends and building value as time goes on.

Although the premiums required to keep a whole life insurance policy are generally much higher than term policies, holders of whole life insurance policies receive dividends that they are able to reinvest to raise the cash value of their policies, or pay policies off, Jones said.

Whole life insurance policy holders also are able to borrow cash against the value of their policies. And the insurance remains in force as long as they pay the premium, regardless of changes in their health.

But how much life insurance is enough?

While insurance brokers and industry experts recommend that people maintain policies that are valued at five times to seven times their annual income, the amount anyone carries should be determined by their individual goals and needs.

For instance, people buying whole life often are as interested in the investment potential of the insurance as they are in the death benefits.

Whole life insurance policies also are popular because unlike investments in mutual funds or 401(k) plans, taxes on whole life insurance policies are deferred until the benefits are paid out.

"Buying whole-life insurance is like buying a house, whereas buying term-life insurance is like renting an apartment," Jones said.

But with a wide array of financial options available today, whole life insurance often takes a back seat to stocks, mutual funds, 401(k) plans, individual retirement accounts and other kinds of investments.

"Thirty years ago people didn't have a lot of investment options," Perone said. "And today they do, but life insurance remains a good investment because it offers death and other long-term benefits."

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