Finding the right life insurance policy can be so time-consuming and confusing that many working moms skip getting this coverage. But should something happen, you don’t want to leave your family unprotected. Here’s a primer on putting this safeguard in place. 

When Gail Quinn was 12 years old, her uncle died suddenly at age 42, leaving behind a stay-at-home wife and six children. “I remember their life changing drastically overnight. My aunt had to go back to work, and their lifestyle was forever different,” says Gail, a single mom to sons Patrick, 12, and Ross, 10. “It made such an impression on me that I vowed to get a college education so I could provide adequately for my family either through my salary or through life insurance benefits.” 

Gail learned about life insurance the hard way, but she learned a lesson many working moms resist. If you have loved ones counting on your financial support—and most working mothers do, from their kids to elderly parents—you probably want to give life insurance some serious consideration. 

Today, half of all families depend on both partners’ incomes to make ends meet, yet just over one third of women are protected with group life insurance at work. And fewer than half have their own individual policies, according to LIMRA, an association of financial services companies. Women who do own life insurance have much less coverage, on average, than men, LIMRA finds. “There are too many underinsured couples putting their families at risk,” says Bethany Wood, assistant VP for women and business owner advocacy at MassMutual U.S. Insurance Group. “Many women are uninsured or underinsured because it can be difficult for them to talk about such scenarios.” But talking about the “what ifs” with your partner and family is a good place to start. Then follow these five steps so you can evaluate your needs and get the coverage that makes the most sense for you and your family.

Understand your choices
The basic purpose of life insurance, of course, is to protect those who depend on your financial support. Dependents include children who still live at home or have yet to graduate from college. But a dependent could also be anyone who’s financially dependent on you, like a spouse, a sibling or an aging parent. The insurance is meant to replace your “value” to your family once you’re gone. For a working parent, a big part of that value is your salary. If you die prematurely, life insurance is designed to step in for you and cover your family’s financial needs. As Jim Avery, president of individual life insurance at Prudential Financial, puts it, “Life insurance is a way to protect the hopes, dreams and financial future of your loved ones.” Anytime someone—such as your kids—depends on your income to pay for his or her living expenses, you need insurance.
Two major types of life insurance are term and whole (or permanent). Term insurance, which is generally less expensive, is often a good choice for busy working families, says Jack Hungelmann, an insurance agent in Minnesota and author of Insurance for Dummies.

Term insurance covers a specific amount for only a specific period of time, such as ten, 20 or 0 years. It can be used for family protection until children reach a certain age or to pay off your mortgage or other bills if you die within a specific time frame. Whole (or permanent) life insurance offers a specific value at the end, such as a cash value of $90,000 at age 90. “The biggest mistakes I’ve seen are people who buy life insurance before they need it, such as when they’re single or have no kids and no debt, or who buy permanent insurance when they really need term insurance,” says Hungelmann. “Everyone I’ve met in my career who bought permanent was underinsured, because it’s so expensive to buy.” 

Of course, your personal needs and goals must be considered. However, many experts agree that term life is typically the lower cost and the simpler option. You pay the premium and get covered for the term. Term life policies can also be easily compared on the basis of price. This has led to a competitive market. As a result, term life insurance is not only more economical but also convenient since you can buy it directly without paying a middle party. 

Whole life insurance is basically an insurance policy bundled with an investment product. “It’s a combination of a savings plan and a death benefit,” says Sue Fenimore, senior advisor for the Financial Consulate in Hunt Valley, MD, and a certified financial planner. Yet a by-product of this purchase may be high commissions and fees. 

While some experts recommend looking at whole life or cash-value insurance as a way to get a secure guaranteed return on your premiums, others say most working moms should avoid it. It may not be worth the extra money: The insurer invests your cash, but there are better ways to do that. They advise buying insurance as insurance (term life) and investment as investment (such as mutual funds, stocks or bonds). “We usually recommend term insurance,” Fenimore says. “Whole insurance is not an efficient or cost-effective savings plan.”

Decide how much you need
The amount of coverage you need is related to several factors, including your income, lifestyle and dependents. “In the many studies in which financial experts look at Social Security tables, interest rates and other variables, they generally favor about seven times annual income,” says Hungelmann. “But I favor coverage of ten times annual income. My attitude is, it’s an act of love, and is this something worth cutting corners on?” Roughly speaking, if you earn $100,000 a year, you should have $1 million in life insurance coverage, he says.

Of course, there are some variables with this one, so stick with us. Special circumstances, such as preexisting medical conditions, can significantly complicate the question of how much life insurance you need. The insurance industry itself throws out many different formulas. But to start, let’s boil life insurance down to its most basic purpose: replacing your financial support for those who depend on it. Figuring out needs from this angle will do the trick for most people. There are several online calculators you can use to help you determine how much life insurance is appropriate for your needs. Most life insurance companies have calculators on their websites. A good calculator can also be found at lifehappens.org, the website of the Life and Health Insurance Foundation for Education (LIFE), a nonprofit organization dedicated to educating people about life insurance. Basically, you’ll estimate the expenses your family would face (obligations like the mortgage, outstanding debts, college funding and costs related to your death), project how much income they’ll need, for how many years, and factor in your assets.

The ballpark figure you get here is a good starting point. For a more detailed analysis, you can opt to contact a licensed insurance rep in your state, says Avery: “Work with someone you’re comfortable with. A good way to find someone is to ask friends and family for recommendations.” 

You’ll also want to find out if your employer offers a subsidized life insurance benefit. The amount is usually $50,000 or one year’s salary. But according to Hungelmann, this should be viewed as an extra cushion. “People change jobs so frequently today, and there’s no guarantee an employee will be around in ten years,” he says. “If you’re healthy and your employer offers the right to buy additional group coverage, be aware that it can be at rates 50 to 100 percent higher than the open market. Employees often mistakenly assume it’s cheaper because it’s a group rate. It’s just the opposite.” 

Shop around
Since life insurance is essentially a long-term promise made by the issuing company to you, you want to consider several factors, says Mary Dean, VP in charge of the women’s market division at New York Life Insurance Company. “A demonstrated history of stability is vitally important,” she says. “Ratings are important. But consumers should also ask questions such as whether the company has sufficient excess capital and liquidity to ride out tough economic times.” Start comparing prices at places like wholesaleinsurance.net and intelliquote.com. These sites will list carrier ratings for you. Request applications from several top-ranked companies with the lowest prices. “Life insurance is difficult to understand,” says Fenimore. “You may want to work with a fee-only [noncommissioned] financial advisor to decipher the terms of the policy. And shop around!” It’s important to understand how insurance agents get paid: They don’t make money unless they sell insurance products. Agents make lower commissions on term life policies, so look out for efforts to get you to buy something else.
 
Keep premiums low
The cost of life insurance varies depending on your individual circumstances. Factors that affect the price of premiums are those that impact your life expectancy—such as being overweight, having high cholesterol or smoking. “If you have chronic health issues, poor longevity or health issues in your immediate family, that can raise premiums,” says Fenimore. “So can a poor driving record or engaging in risky behavior, like skydiving.”

Of course, the most dramatic way to reduce premiums is by quitting smoking and losing weight, experts say, which can cut rates significantly. You also want to watch for hidden fees, including those for paying premiums in installments or by direct withdrawal from your checking account. 

Share the wealth
Conversations about death are never pleasant, but after you’ve done your homework and chosen your coverage, make sure you tell your family what company holds your life insurance policy. If they don’t have all the facts, they won’t be able to get the money—and the security—you want them to have.