Insurance 101: Check Background of Both Company and Insurance Agent

Scout for financially stable company that will still be in existence when your child enters college, for example. Due to downtrend in investment yields, most companies recently became hard pressed to meet future obligations, leading to a local pre-need crisis that happened in 2005.

Also, avoid agent who is more concerned with making a sale rather than looking after your benefits and needs. if an agent comes to you pushing a product without even knowing what you really need, stay away from him.

TIP: Compare products and companies to get good value, but premium cost should not be your sole barometer. A more stable insurer will usually charge a higher premium.

To know the financial strength of a company, check independent rating agencies like Moody's Standard and Poor's at standardandpoors.com.

To know if your agent carries certain distinctions earned through classes or examinations, ask if they are registered financial planners or under Life Underwriting Training Council Fellow. Go also for those who have excellent record on after sales service.

On choosing between pre-need firms or insurance companies. Pre-need companies owned by large insurance companies would be very stable, as they are usually run by the same management teams and follow strict internal guidelines.

Insurance 101: Calculate Your Family's need and Paying Capacity

Know first how much insurance coverage your family needs and can afford. Rather than looking for a product first, determining your need should be the priority. Buy something you can afford so paying modes and options can be aligned with budgetary concerns, because a lapsed insurance policy is a waste of good money. In short, if you don't pay the premium on time, you stand to forfeit your policy.

Ideally, coverage is the amount that will allow your dependents to still live the same lifestyle without touching the principal of your investment.

TIP: Get a calculator and compute your current annual household expenses, assets, debts and other sources of income. It's handy to have your checkbook, credit card statements, and last year's tax return around. You can also check with a financial advisor to assess your family's need and paying capacity.