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How much life insurance do you need?

Few ministers are independently wealthy. But ministers who have dependents still need life insurance. The difficult question is how much?

Before the Internet, consumers had to rely on agents to determine insurance needs and quote prices from several companies - and then had to pay hefty commissions of 50% to 140% of the first year's policy premium.

Now consumers can buy insurance commission-free by phone or even online. But those who have special considerations, such as chronic health problems or complex financial needs, are still better off using an agent.

How much is enough? It can take several hours to gather the financial information needed for these calculations. Calculate insurance needs for each spouse - assuming loss of each spouse's income and benefits/services to the household.

* Add up present and future debts and expenses, such as mortgages, car payments, and costs of children's college tuitions and weddings up to retirement. Don't forget less obvious costs such as possible future loss of income.

* Sum up invested assets - savings, including 403(b)s, other investments, and future social security.

* Subtract assets from long- and shortterm debts to arrive at how much insurance you will need. Plug the required figures into one of the online calculators at www.insweb.com or www.insurance.com to determine how much insurance you should buy.

The medical exam. Once you've chosen a policy, the insurer will require a 10to 30-minute physical exam and typically reply to you in four to six weeks.

If you're in good health, you will probably pay the same premium rate you had been quoted online or by an agent. If you have had certain diseases or chronic conditions - such as cancer, diabetes, high blood pressure, history of heart attacks or severe depression - ask an agent to help you find an insurance that is willing to accept you.

Types of insurance

* Term insurance is structured to provide up to 20 years of coverage for financial needs that will end at a foreseeable point, such as mortgage payments and childrens' future college tuition costs. The typical minister needs between $100,000 and $1 million of term insurance.

* Permanent insurance. These policies last at least 20 years and insure longterm needs - future estate taxes, costs of caring for a disabled child, etc. There are three main types of permanent insurance:

* Whole life. You pay a fixed, lifelong premium. Money placed in the side fund pays a fixed dividend.

* Universal life. The most popular form of permanent insurance, it offers high flexibility with moderate risk. Side finds are invested in long-term bonds. If interest rates remain stable or rise, the bond returns can off-set the policy cost, making it less expensive than whole life. If rates drop significandy, the premium will rise.

* Variable universal life. This type of policy has the highest risk and the greatest possible gain. Its side fund is invested in mutual fund-like accounts offered by the insurer, so the premium is flexible. It will fall if the funds do well - and rise if they don't. Investors need to choose and monitor their own funds. Unlike most variable annuities, variable life insurance has a death benefit that exceeds its cash value.

Important features

Guaranteed renewability. Offered with all term and permanent policies, this feature allows for renewals at a guaranteed premium without a physical exam.

Convertibility. This is the option to convert a term policy to a permanent life policy up to a specified age without another medical exam. This is important to have in case you become ill later on.

* Waiver of premium. This feature is available with term and permanent life insurance. The fee for this option can be substantial. But it lets you keep your life insurance without paying a premium if you became disabled. Insurance Option. An insurance option lets you increase your coverage at a guaranteed premium without a medical exam.

* No-load insurance. Buyers incur no surrender charges if they cash out of this type of policy within the first few years. Buyers of fully loaded products pay high surrender charges if they cash out during the first 15 to 20 years. (The phrase no-load insurance applies to permanent insurance. Term insurance has no cash value and thus no surrender charges.)

SHREWD INSURANCE SHOPPING

* Great-West Life. 800-435-4000, www.schwab.com.

* John Hancock Life. 888-742-622, www.johnhancock.com.

* Paragon Life. 800-685-0124, www.paragonlife.com.

* Zurich Kemper Life. 800-983-3279, www.zurichdirect.com.

www.reliaquote.com and wwwinsure.com provide free price quotes on insurance from hundreds of companies, including low-loan insurance products, which cost 10% to 25% less than agent-sold policies.

Tax Benefits from LIFE INSURANCE

Life insurance confers several major tax benefits:

* Tax-deferred investment accumulation. Permanent life policies (whole life, universal life, variable life) include an investment account - the policy's cash value. Investment income isn't taxed inside these policies.

* Tax-free withdrawals and loans. Again, this benefit applies to permanent life insurance. However, modified endowment contracts (policies bought with a single premium or a few premiums) don't qualify

* Income-tax-free death benefit. Term as well as permanent life insurance usually qualifies for this break.