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
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
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
To provide funds to pay estate taxes or other
obligations necessary to settle a deceased person's
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
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 comes in two basic forms.
You should elect an amount necessary to meet the needs you are
trying to satisfy.
CHOOSING THE TYPE OF LIFE
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
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
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
life policies higher interest rates may be
credited to those funds depending on the future performance of
the company's investments.
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
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.
differs from whole life insurance and universal life
insurance in that policy owners direct the distribution of
their premium payments among several different accounts
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.
Life Insurance combines the flexibility of universal life
insurance with the investment account features of variable
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
We are a professional independent agency. We assess your
needs, answer your insurance questions and help you to establish
IMPORTANT THINGS TO REMEMBER
Identify your need.
Select the type of policy and amount that best fills your
Review all illustrations and other presentations carefully.
We are always available to answer your questions and
give you solid advice.