Q: How much life insurance should an individual own?

A: "Rule of thumb" suggests an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account when determining the right amount of life insurance for you and your family.

Important factors include:

• Income sources (and amounts) other than salary/earnings
• Whether or not you are married and, if so, what is your spouse's earning capacity
• The number of individuals who are financially dependant upon you
• The amount of death benefits payable from an employer-sponsored life insurance plan
• Whether any special life insurance needs exist (e.g. mortgage repayment, education fund, estate planning need, etc.)

Q: What about purchasing life insurance on a spouse and on children?

A: In certain circumstances, it may be advisable to purchase life insurance on children, generally, however, such purchases should not be made in lieu of purchasing appropriate amounts of life insurance on the family breadwinner(s).

It is of utmost importance that the income-earning capacity of the primary breadwinner be fully protected, if possible, through the purchase of the required amount of life insurance. Life insurance on a non-wage earning spouse is often recommended for the purpose of paying for household services lost due to this individual's death. In a dual-earning household, it is important to protect the income earning capacity of both spouses.

Q: Should term insurance or cash value life insurance be purchased?

A: This is a difficult question - one whose answer will vary depending on your personal circumstances.

First, recognize that in any life insurance purchasing decision, two questions must be answered:

"How much life insurance should I buy"?
"What does my budget allow me to spend for the coverage"?

Q: Can an existing life insurance policy be used to provide for the repayment of an outstanding mortgage loan?

A: Yes. An existing policy, either term or cash-value life insurance, can be used for many purposes, including paying off an outstanding mortgage loan balance in the event of the insured's death. You can even assure your lender of coverage by completing an assignment of life insurance proceeds form which names the bank as beneficiary for a specific policy value.

Q: Credit life insurance is frequently recommended in conjunction with the taking out of an installment loan when purchasing expensive appliances or a new car, or for debt consolidation. Is credit life a good buy?

A: Credit life insurance is frequently more expensive than traditional term life insurance. Further, if you already own a sufficient amount of life insurance to cover your financial needs, including debt repayment, the purchase of credit life insurance is normally not advisable due to its relatively high cost.

Q: Why would I want to buy renters insurance?

A: If you live in an apartment or a rented house, renters insurance provides important coverage for both you and your possessions. A standard renters policy protects your personal property in many cases of theft or damage and may pay for temporary living expenses if your rental is damaged. It can also shield you from personal liability. Anyone who leases a house or apartment should consider this type of coverage.

Q: How does a renter's policy protect my personal property?

A: A renter's policy provides named perils coverage similar to the contents coverage on a homeowner's policy. This means that the policy only pays when your personal property is damaged or destroyed by any of the perils specifically described in the policy. These usually include:

• Fire or lightning
• Windstorm or hail
• Explosions
• Riots
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam
• Freezing
• Sudden and accidental damage from artificially generated electrical current
• Volcanic eruptions (but this doesn't include earthquake or tremors)

Q: Why do some apartment complexes require renters to have renter's insurance?

A: Owners of apartment complexes buy insurance policies for their liability and to cover their buildings and their personal property. However, these policies do not cover any of the tenant's property or liability. By requiring their tenants to have renters insurance, the apartment owner is assured that the tenants will not mistakenly believe the apartment complex owner's policy will provide coverage for a tenant's property or personal liability. Although this type of requirement benefits that apartment complex owner, there are benefits to the renter as well. We recommend that you purchase renters insurance regardless of what your landlord requires.

Q: Why would I want to buy renters insurance?

A: If you live in an apartment or a rented house, renters insurance provides important coverage for both you and your possessions. A standard renters policy protects your personal property in many cases of theft or damage and may pay for temporary living expenses if your rental is damaged. It can also shield you from personal liability. Anyone who leases a house or apartment should consider this type of coverage, as the property owner/landlord does not insure or cover your property.

Q: What if I share my apartment with a roommate? Do we both need to have renters insurance?

A: Standard renter's policies cover only you and relatives that live with you. If your roommate is not a relative, each of you will need your own renter's policy to cover your own property and to provide you liability coverage for your own actions.

Q: What is a personal umbrella liability policy?

A: The personal umbrella liability policy is designed to increase your liability protection. This single policy acts as an "umbrella" over all of your other personal liabilities policies - home, auto, boat, RV, etc. - so you have a higher personal liability limit than would otherwise be available. In certain circumstances, an umbrella policy may provide personal liability coverage that is otherwise excluded from your other policies. For example, an umbrella policy provides coverage anywhere in the world, whereas your auto policy usually provides coverage in the U.S. and Canada only.

Q: How do I know if I need a personal umbrella liability policy?

A: It used to be that the only people who needed personal umbrella liability policies were wealthy individuals who had sizable amounts of personal assets that would be at risk in a lawsuit.

However, in our very litigious society, even individuals with modest incomes and assets are often subjects of large lawsuits. Since they are even less able than a wealthy individual to pay large damage awards, they recognize the need to have coverage limits greater than what can be obtained from their homeowners or auto policies.