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10. What sort of life insurance should I consider?
Term life insurance is best for most people. It's the cheapest and simplest insurance you can get. You pay the premium and you're insured. It's particularly effective if you follow the time-honored wisdom of investing the difference between what you pay for term insurance and what you would pay for "whole life" or cash-value insurance. If things work out, your investment program will leave you with a large cache of cash.
11. So I should never buy anything but term life insurance?
It's not quite that cut-and-dried. If you doubt you'll be able to invest the difference, cash-value programs are a form of forced savings. Some are tied to mutual funds that can offer reasonable rates of return. And, because life-insurance death benefits are exempt from taxes, they can prove an effective strategy for passing along assets to your heirs. The downside to most cash-value plans is that they're more expensive than term insurance, and you have to hold on to them for a set number of years so you're not hit with heavy "early surrender" charges.
12. Health insurance is something I can't do without, right?
Correct. According to the most recent Census data, nearly 46 million Americans lack health insurance. Make sure you're not one of them. Many employers offer health insurance to employees at group rates. Plans boil down to two options: managed care and fee for service
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Fee for service, on the other hand, carries more expensive premiums than managed care. The major advantage is that you can generally go to any doctor you want. Fee-for-service policies usually pay 80% of patient expenses after deductibles, and you are responsible for the remaining 20%. Like other forms of insurance, you can trim fee-for-service premiums by increasing your deductible.
If you're self-employed, or your employer doesn't offer health coverage, make certain you get something in place. You can start by searching for quotes online here at MSN Money.
13. What exactly is COBRA?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985. Under COBRA, if you resign from a job or are terminated for any reason other than "gross misconduct," you can continue to be covered under your former employer's health care plan for up to 18 months. In many cases, spouses and dependent children are also eligible. The downside is that the premiums are expensive -- in effect, you're paying both your and your former employer's share. The idea of COBRA is to remain covered until can you arrange for some other sort of health insurance.
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14. Does health insurance help if I'm sick or injured and laid up for a while?
Partially. Health insurance helps only to pay your medical expenses. Disability insurance is what keeps income coming in if you can't work for a time. This is one of the more commonly overlooked types of insurance, and one that most working families really need. It pays you an income if you're incapable of generating your own for any period of time. Some employers offer it, but in many cases, you'll have to get it on your own. Look for policies whose waiting periods are no longer than 90 days. This is the time you have to wait until you start getting disability payments.
15. What about long-term care?
Long-term-care insurance helps pay for nursing care and other like expenses when you get older. That's a good thing, no doubt about it. But the premiums are expensive and grow as you get older. The average premium for those younger than 65 is $1,337 per year. Older than 65, it's $2,862, according to the American Association of Homes and Services for the Aging. So you have to consider whether you can genuinely afford the increasing premiums.
Updated Sept. 15, 2009
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