Making sure your insurance will cover the most for the least

Any list of a family's necessities would likely include food, clothing, shelter, a car, savings, and education. Insurance, however, would probably not be very high on that list, if it was remembered at all. Yet just as shelter is necessary for protection from the elements, insurance is a necessary protection for that shelter and all the other items on the list.

For many people, there are two basic problems with buying insurance: It's unpleasant to think about having to have it, and there are so many types of coverage that it's hard to know which ones to buy.

Making things even harder is the fact that policy provisions and premiums have changed dramatically in recent years; new policies have been invented; and regulations by some states have changed the kinds of products that are available and the premiums that can be charged. Because of this, you should review your insurance needs every two or three years, whether or not your family's size or home changes.

Life insurance. Of all the types of insurance, life insurance is usually the one people have the longest - beginning when they are small children. Many parents buy small life insurance policies for their children as soon as they are eligible, usually when they are a few months old, but sometimes earlier.

But it is adults who have the best chance to benefit from the improvements in insurance. Competition has pushed premium rates down sharply over the past few years, and even some whole-life policies are paying a respectable return, in the 11 to 12 percent range, compared with a 5 or 6 percent standard just a couple of years ago.

The competition has been fiercest in the term-insurance arena. The ''buy term , invest the difference'' strategy has spread rapidly, and the insurance industry has responded with rates that make this route more attractive. A man in his mid-30s who does not smoke, for instance, should have little trouble finding might cost 10 times as much.

Depending on your income, $100,000 might seem like a lot of insurance, but that is the most common level of term insurance available. Besides, even that may not be enough. Experts' opinions about how much insurance is enough vary widely.

One rule - most often heard from insurance companies - is that the main breadwinner should have five times their gross annual salary in life insurance.

This may be true for a man who is the sole support for his wife and children and who doesn't have much of an estate to pass on. But if you do have an estate, particularly a house - with mortgage insurance, if there is a mortgage on it - you may not need as much insurance. Also, if both the husband and wife have full-time jobs and both have group term insurance from their employers - typically two times salary - then very little insurance will be needed.

Of the three main types of life insurance - term, whole, and universal (which combines some features of the other two) - term is still considered the most efficient, particularly for young families. This is the time when maximum coverage is needed, and with term, that coverage can be purchased cheaply, freeing money for the other things a young family needs, like the down paymment on a home, a new car, or child-care expenses.

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