SAVE MONEY ON YOUR SAFETY NET BY BUYING LIFE INSURANCE ONLINE
By ERIC TYSON

(MONEY Magazine) – Mix fear of death with a distaste of salesmen, and you can see why many people procrastinate about buying life insurance. Well, your computer can't stave off the Grim Reaper. But it can free you from having to rely on outdated rules of thumb (coverage should equal seven times your income)--and your Mac or PC can help you save upwards of 40% on annual premiums when you shop for policies online.

Here's a rundown of the three main ways you can use your computer to become a savvier life insurance shopper:

CALCULATING THE RIGHT AMOUNT OF COVERAGE FOR YOU. Over the past few years, a half-dozen or more Websites and software packages have provided access to sophisticated calculators--essentially electronic worksheets--that let you determine the amount of insurance your family would need to replace your income or your spouse's should one of you die.

My favorite is the QuickQuote Insurance Agency's easy-to-use Term Life Estimator (http://quickquote.com). You spend about 15 minutes online tapping in such information as your age, annual income, the size of your investment portfolio and your living expenses. Once you're done, the estimator instantly displays the amount of insurance you need.

Other calculators--such as those included in software packages like Managing Your Money--can perform the same basic calculation. But they tend to make some inflexible assumptions--for example, that all your assets will be sold after your death to generate income for your family. QuickQuote, on the other hand, asks if you want to exclude from the analysis assets such as investments earmarked for your spouse's retirement.

CHOOSING THE RIGHT TYPE OF POLICY. Plenty of sites purport to outline the pros and cons of the confusing array of life insurance policies being peddled these days. But beware--the explanations are often biased. Visit Prudential Insurance Co.'s site (www.prudential.com), for example, and you'll find cash-value policies (those that combine insurance with a savings account and generate the juiciest commissions) described glowingly as offering "lifelong protection" and assuring that "the death benefit will always be there." Conversely, the sites of agencies that specialize in term insurance--which offers basic insurance protection at an initial cost of as much as 85% below that of cash-value policies--extol the virtues of term.

Overall, I felt the term agencies such as InstantQuote (www.instantquote.com), QuickQuote and Quotesmith (quotesmith .com) offered the most useful information, although even they lacked advice on some important topics. One example: whether to choose an annual renewable term policy whose premium rises as you age or to go for a level-premium policy whose cost remains fixed for a set number of years. (Short answer: Opt for level premium if you need the policy for more than five years.)

BUYING LOW-COST POLICIES ONLINE. When it comes to shopping online, you're pretty much limited to term policies. I don't see that as a problem, though, since with few exceptions the vast majority of people are better off with term insurance. For the best deals, I recommend the three agencies I mentioned earlier--InstantQuote, QuickQuote or Quotesmith--since each carries policies of dozens of insurers that earn high grades for financial security from insurance ratings firm A.M. Best.

To get price quotes, you enter such information as your date of birth and the amount of coverage you'd like and say how long you would like to lock in the policy's premium. QuickQuote and InstantQuote will immediately give you a listing of at least five inexpensive term policies from different companies. I recently asked for quotes on a $500,000 10-year level-premium term policy from QuickQuote for a 35-year-old nonsmoking man in excellent health and got five choices ranging from $290 annually from Old Republic Life Insurance to $415 from AIG. Quotesmith, on the other hand, displays quotes for all the policies meeting your criteria that are offered by the 175 companies in its database. So the list you get can seem overwhelming, although I found it easy enough to sort through because the policies are ranked from the lowest to highest cost.

If you decide to buy, you can fill in an application online, though the actual contract will come via snail mail. Within a week or two, a medical technician will drop by your home to give you a brief physical--at least until some computer genius devises a way for you to give a blood sample online.

Author of Personal Finance for Dummies (IDG Books, $16.99), Eric Tyson is a financial counselor who teaches personal finance at the University of California-Berkeley.