Being Smart About Life Insurance

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Alex Chadwick talks to personal finance contributor Michelle Singletary about life insurance. A recent poll indicates most Americans don't know how much life insurance they need, or if they need any coverage at all. The truth, Singletary says, can surprise you.

ALEX CHADWICK, host:

Here is something to ponder, dear listeners: Do superheroes need life insurance, Spider-Man and Batman and Superman? What about cartoon characters like Marge Simpson or Fred Flintstone? This is the subject of a recent survey about life insurance where people chose among fictional characters and decided who needed life insurance the most. The superheroes beat out the cartoon parents, suggesting many people don't really understand who should get life insurance. Here with us is our personal finance contributor Michelle Singletary.

Michelle, what about this survey? This is a joke. Whose joke?

MICHELLE SINGLETARY (Personal Finance Contributor): It was commissioned by the Life & Health Insurance Foundation for Education--LIFE for short--and they wanted to just highlight some of the issues that people face when it comes time to get life insurance. And one of them is lots of people don't know who should have life insurance. So they gave them these fictional characters--Spider-Man and then Batman and Marge Simpson and Fred Flintstone--and I thought it was funny that people picked the superheroes, and I understand why, because they have dangerous jobs. They're out there fighting crime and, you know, they're more likely to be offed.

(Soundbite of laughter)

SINGLETARY: But the fact of the matter is Fred Flintstone and Marge are--you know, they've got dependents. They need life insurance. You know, Spider-Man, the one they're talking about, didn't have a dependent, and Batman is a wealthy businessman who doesn't need life insurance.

If you're married and you have a spouse that's depending on your income and needs it if you pass away, you need life insurance. If you are married and you've got children, you need life insurance. If you're single and you have dependents, children or some elderly relative who's depending on your income, you need life insurance.

CHADWICK: You know, aren't there a lot of commercials on TV suggesting that parents should get life insurance on minor children? Is that really a good idea?

SINGLETARY: You know, every time I say this, I get tons of letters from--Guess who?--insurance agents who say children should have insurance. But the fact of the matter is in terms of the hierarchy of who needs insurance, you don't need to insure a child's life if you're not dependent on any income. If you are going to be faced with paying for a funeral for them, you may want to get a really, really tiny small-term policy that would just cover, say, funeral costs. But if you've got money saved up and you can cover that, you do not need to have life insurance on your child.

CHADWICK: Is there a general rule on how much life insurance you should have?

SINGLETARY: The best way to determine how much is to run the numbers. You want to have enough insurance, or have a large enough policy so that they can live off the interest that may be earned on that policy. And think about what it is that your family or your dependants will need to have once you're gone. If you've got children and you wanted to send them to college, you know, paying the mortgage and other necessities, that's how you gauge how much you have. Far too many people don't have enough life insurance, only like 50 or $60,000 for some single parents. That's just not going to be enough in today's society, you know, so think about that and run the numbers. And LIFE has a calculator on their Web site that I encourage people to go and plug in the numbers, and you can see how much you need.

CHADWICK: Thank you, Michelle Singletary. She writes the syndicated column "The Color of Money" for The Washington Post. She's personal finance contributor to DAY TO DAY.

Michelle, thank you again.

SINGLETARY: You're so welcome.

CHADWICK: And if you have your own financial questions for Michelle, please go to the contact page at npr.org. Be sure to include `Michelle' in the subject line.

DAY TO DAY is a production of NPR News, with contributions from slate.com. I'm Alex Chadwick.

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