LIFE INSURANCE

DEFINING YOUR NEEDS

Life insurance is simply protection to ensure that your family will have financial security when you die. If something should happen to you, how will they be able to continue doing the things they take for granted, like live in a nice home, continue their education, or create a retirement nest egg without you?    Life insurance can help provide the answer.

There are many reasons for purchasing life insurance among which are the following:

• Family protection to provide financial security to surviving family members upon the death of the insured person.

• To pay for childrens' education.

• Insurance to cover a particular need such as paying off a mortgage or consumer debt upon the insured's death.

• Business insurance to compensate a company on the death of a key employee or to provide a surviving partner the resources to buy out the deceased partner's share of the business.

• To provide funds to pay estate taxes or other final
  obligations necessary to settle a deceased person's estate.

• To provide the funds necessary for the deceased person's burial expenses.

• Accumulation of funds to supplement retirement income.

If you are going to make a good choice when you buy life insurance, you need to understand which kinds are available. If one kind does not seem to fit your needs, ask us about the other types of policies we offer.

For most people, one of the biggest unknowns about Life insurance is how to answer the question of "how much." This question can seem as puzzling as one of those intentionally confusing word problems that we all struggled with in high school math.

Choosing The Amount

It turns out that for life insurance, the solution to the puzzle of "how much" can be found with some basic calculations. The reason for purchasing life insurance, of course, is to provide your family with long-term financial security. To come up with a dollar figure that will provide that security, you should begin with a careful review of your financial situation.

Essentially, there are two categories that you should consider—what your family's immediate needs will be if something happens to you, and what their ongoing needs will be.

• Immediate needs can include the final expenses associated with a terminal illness, burial costs, estate taxes, the balance of an unpaid mortgage and even relocation expenses.

• Ongoing needs might include monthly bills and expenses, mortgage payments, daycare costs, education, income replacement and retirement.

Most people aren't so anxious to figure out how their family will replace the income lost if they die, or even to tackle such details as how much their own funeral will cost, or if the family will have to sell their home should such an event occur, and what the marketplace will be like if selling the home is neccesary.  One way to start the process is to consider this basic rule of thumb for life insurance:

• In general, most people should have life insurance that is equal to five to seven times their annual gross income.

Life insurance comes in two basic forms. There is:

• Term life insurance and

• Permanent life insurance (also known as Cash-Value). Knowing which one is appropriate for you means understanding what your needs are and what you are protecting.

You should elect an amount necessary to meet the needs you are trying to satisfy.

CHOOSING THE TYPE OF LIFE INSURANCE

There are two basic types of life insurance, term insurance and cash value insurance. There are many variations on these two basic types. Term Policies provide life insurance for a specified period of time. These policies provide benefits in the event of death, but they generate no "cash value". If you have a limited amount to spend, and only need the additional coverage insurance for a finite period of time (for instance.. until the children graduate from college), you may be able to get more coverage by acquiring term insurance than by with cash value insurance.   Today's term policies usually have two sets of premiums - guaranteed maximum premiums, and "current premiums", which are usually much lower. The company cannot increase current premium above the guaranteed maximum premiums shown in the policy.

When you buy term insurance you need to make a choice as to how long you want the protection. You may renew the policy without a physical examination for the period of years specified in the policy. Some term insurance can be converted to cash value insurance up to a specified age with no physical examination. Premiums for the converted insurance will initially be higher than the premiums you would be paying for the term insurance. Cash-Value Insurance combines death benefits with a cash accumulation feature. The buyer of a cash value policy pays more in the early years than for term insurance, but the money not needed to pay for the cost of the death benefit accumulates as interest. If the policy is surrendered before the insured dies, there may be a cash value paid to the owner. In addition you can make loans from your policies cash value.  This interest rate for most policies decreases after a specified number of years, and if the loan is never paid back then the amount is deducted from the policy's benefit.  As a general rule, it is not a good idea to buy cash value life if you plan to surrender early.

If all premiums are paid, cash value insurance usually lasts for the whole life of a person, and pays death benefits to the beneficiaries named in the policy upon the death of the insured. The cash value can be used as loan collateral for borrowing funds at the interest rate specified in the policy. Any outstanding loans are deducted from policy proceeds at death or surrender. Some of these products may enjoy tax advantages.

Some of the most popular types of cash value insurance are described below:

• Whole Life Insurance (also known as straight life, ordinary life and traditional permanent insurance) has guaranteed premiums and death benefits, and a guaranteed minimum interest rate which will be credited to the funds accumulated in the policy. On some whole
  life policies higher interest rates may be credited to those funds depending on the future performance of the company's investments.

• Universal Life differs from whole life insurance in that it allows the policy owner to vary, with limitations, the amount and timing of premium payments and the death benefit. Cash
  values are accumulated by crediting premium payments and interest to a fund from which deductions are made for expenses and cost of insurance. The rates at which the interest is credited are declared by the company or may be specified in the contract.  Like term insurance, universal life insurance policies usually have two sets of premiums - guaranteed maximum premiums, and "current premiums", which may be lower, but which can be changed
  by the company, up to the maximum. They also include a minimum interest guarantee. Because of its flexibility, a universal life policy can also be structured to operate like term insurance.

• Variable Life differs from whole life insurance and universal life insurance in that policy owners direct the distribution of their premium payments among several different accounts rather
  than that of the company. Typical account choices are: common stock, bond, mortgage, money-market accounts. With this type of policy, the death benefit and cash value benefits vary in relation to the value of the investments underlying the policy.  If the value of the accounts increases, so will the benefits; if the value of the account decreases, so will the benefits, subject to a minimum guarantee. Variable life insurance is more risky to the policy owner than the other forms of cash value insurance, but there is a possibility of much greater returns for your dollar.

• Variable Universal Life Insurance combines the flexibility of universal life insurance with the investment account features of variable life insurance.

• Joint and Last Survivor Life Insurance is designed to pay death benefits only after the second of two people has died. It is usually used in fairly complex estate tax situations, and you should discuss the purchase of this type of insurance with a tax advisor.

AVAILABILITY OF LIFE INSURANCE

We are a professional independent agency.  We assess your needs, answer your insurance questions and help you to establish your goals.

IMPORTANT THINGS TO REMEMBER

Identify your need.

Select the type of policy and amount that best fills your need.

Review all illustrations and other presentations carefully.    We are always available to answer your questions and give you solid advice.