Money Moves for Your Growing Family

Buy Life and Disability Insurance

Life insurance protects your family if a primary wage earner dies. You may have coverage through work, but it may not be enough. How much do you need? In general, experts recommend anywhere from five to 12 times your annual salary, depending on how many children you have, their age, and your goals (if you want to fully fund their college education, or be a stay-at-home mom, for example). You pay a monthly or yearly premium, depending on your age, health, and other factors, for as long as you hold the policy.

"When you're young and healthy, term life insurance is relatively cheap," says Steve Lerner, director of financial services for Oswald Trippe and Company in Weston, Florida. The only decision should be which kind of plan to buy. There are two general types: term and whole life (also known as universal). Term life insurance is usually sold in 10-, 20-, or 30-year increments. If you die during that time, your family gets the amount of money you're covered for; otherwise you won't get back any of the money you paid in premiums.

With whole life or universal insurance, a portion of your premium is invested and builds up a cash value. "Your premiums will be considerably higher, but you can withdraw from your account whenever you want -- on a favorable tax basis," says Lerner. However, it may take up to 10 years for the policy to build any significant cash value, and the premiums may be too high for you to afford the amount of insurance coverage you need.

Insurance companies are rated by the same watchdogs that monitor government bonds -- Standard & Poor's and Moody's. To see how your insurer stacks up, visit www.standardandpoors.com or www.moodys.com.

In addition to making sure you have adequate life insurance, you also need disability insurance, which will pay you monthly benefits when you're unable to work for an extended period of time because of an injury or illness. Indeed, you're more likely to become disabled than you are to die. If you're employed, you may have coverage as part of your benefits package -- with the option to buy more. "You should buy as much disability insurance as you can," Lerner says.

If you can't get disability insurance through work, most experts recommend purchasing a policy that pays at least 60 percent of your salary.

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