Q: We are in our early 30s, and my wife stays at home with our 4-year-old twins. I work for a company that provides life insurance worth twice my annual salary, which gives me about a $150,000 death benefit.

Should we buy more coverage and if so, should I buy it through my employer or an outside agent? A buddy of mine says I should have more coverage and should buy investment-oriented insurance, which will help save for the future and provide coverage at the same time.

He sells the stuff, so I'm not sure his opinion is totally objective. He also thinks we should buy coverage for my wife, which we don't think make sense because she doesn't have any income. He has come up with a plan that will cost us around $150 a month.

We don't have a lot of extra cash, but we could afford to put that amount toward life insurance if necessary. I've read that term insurance is the way to go, but I don't know much about it.

A: Those buddies are always looking out for you!

Most life insurance policies are sold through agents and generate a very high commission compared with other financial products. The higher the premium, the larger the commission, and "investment" oriented life insurance always has a higher premium than term insurance.

Investment-oriented life insurance has a place in your portfolio only if you have already bought less expensive life insurance for protection and have accumulated sufficient funds through your stock and bond investment program to meet your financial goals.

At your ages, you should buy term insurance and get the largest death benefit for the least amount of money. Your buddy is correct about the amount of coverage: You need more insurance on yourself and you need to buy coverage for your wife.

If your wife should die, who will take care of your home and children? And if you travel or work late hours, your ability to do so may change, and that could hurt your earnings.

The free coverage through your employer is nice, but it is not sufficient, and most employer-sponsored life insurance ends when you leave the company.

The two main types of insurance are term and permanent, such as whole, variable or universal life.

Straight term insurance is pure protection; there is no cash buildup. It's inexpensive because statistics show you are less likely to die while you own it.

Most term policies end at age 65 or 70. As you get older, life insurance needs should decrease. Paying for college is no longer an issue (unless you have a large outstanding debt), your mortgage will be reduced or nonexistent, and as you approach retirement, income-replacement needs decrease.

Term insurance provides the protection you need at the lowest cost.

The two main types of term insurance are "decreasing term" and "annual renewable term." Annual renewable term comes with level premiums and death benefits, with term lengths of five, 10, 15, 20 or 30 years. I prefer level-premium term policies. There is no worry about future medical underwriting and you know what to budget.

The best coverage period depends on the situation. In your case, a 15- or 20-year level term policy will provide the protection you need while your children are completing their education.

Search online or work with an agent for a low-cost term policy from a well-known, reputable, highly rated insurance company. Limit your search to companies with a rating from A. M. Best of A- or higher. In A. M. Best's opinion, those companies have a superior to excellent ability to meet their continuing obligations.

How much do you need? Determine the amount yourself or pay for an objective insurance analysis by a fee-paid financial adviser. As a rule of thumb, ensure the death benefit will allow the surviving spouse to pay off debts, pay for college, invest for retirement and meet expenses for a number of years.

Correction

Last week's column about paying off credit cards contained incorrect material. I should have stated that most credit cards will offer the low teaser rates for transferred balances. But once you make a new purchase, the interest rate on that amount is very high.

Any payments made will first be applied to the transferred balance at the lower interest rate. The high interest rate on any new purchases continues to accrue until the transferred balance is completely paid off.