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Life Insurance Buyer's Guide



Important Things to Consider

1. Review your own insurance needs and choose the kind of policy that has benefits to fit your needs.

2. Be sure that you can handle premium payments  now and in the future.

3. Don’t sign an insurance application until you review it carefully to be sure all the answers are accurate.

4. Don’t buy life insurance unless you intend to stick with your plan. It may be very costly if you quit during the early years of the policy.

5. Don’t drop one policy and buy another without good reason.  It can be very costly.


Buying Life Insurance

• Find a Policy That Meets Your Needs and Fits Your Budget

• Decide How Much Insurance You Need

• Make Informed Decisions When You Buy a Policy (it makes sense to ask an independent agent you trust)

What is the Right Kind of Life Insurance?

All policies are not the same. Some give coverage for your lifetime and others cover you for a specific number of years.  Some policies may offer other benefits while you are still living. Your choice should be based on your needs and what you can afford.


There are two basic types of life insurance -- Term and Cash Value


Term insurance generally has lower premiums in the early years, but does not build up cash

values that you can use in the future. You may combine cash value life insurance with term insurance for the period of your greatest need for life insurance to replace income. Term covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally offers the largest insurance protection for your premium dollar.

Cash Value life insurance is a type of insurance where the premiums charged are higher at

the beginning than they would be for the same amount of term insurance. The part of the

premium that is not used for the cost of insurance is invested by the company and builds up

a cash value that may be used in a variety of ways. You may borrow against a policy’s cash

value by taking a policy loan. If you don’t pay back the loan and the interest on it, the amount

you owe will be subtracted from the benefits when you die, or from the cash value if you stop

paying premiums and take out the remaining cash value. You can also use your cash value to

keep insurance protection for a limited time or to buy a reduced amount without having to

pay more premiums. You also can use the cash value to increase your income in retirement

or to help pay for needs such as a child’s tuition without canceling the policy. However, to

build up this cash value, you must pay higher premiums in the earlier years of the policy. Cash

value life insurance may be one of several types; whole life, universal life and variable life are

all types of cash value insurance.


There are three basic types of Cash Value Life Insurance - Whole, Universal & Variable


Whole Life insurance covers you for as long as you live if your premiums are paid. You

generally pay the same amount in premiums for as long as you live. When you first take out

the policy, premiums can be several times higher than you would pay initially for the same

amount of term insurance. But they are smaller than the premiums you would eventually pay

if you were to keep renewing a term policy until your later years.


Universal Life insurance is a kind of flexible policy that lets you vary your premium payments.

You can also adjust the face amount of your coverage. Increases may require proof that you

qualify for the new death benefit. The premiums you pay (less expense charges) go into a

policy account that earns interest. Charges are deducted from the account. If your yearly

premium payment plus the interest your account earns is less than the charges, your account

value will become lower. If it keeps dropping, eventually your coverage will end. To prevent

that, you may need to start making premium payments, or increase your premium payments,

or lower your death benefits. Even if there is enough in your account to pay the premiums,

continuing to pay premiums yourself means that you build up more cash value.


Variable Life insurance is a kind of insurance where the death benefits and cash values

depend on the investment performance of one or more separate accounts, which may be

invested in mutual funds or other investments allowed under the policy. Be sure to get the

prospectus from the company when buying this kind of policy and STUDY IT CAREFULLY. You

will have higher death benefits and cash value if the underlying investments do well. Your

benefits and cash value will be lower or may disappear if the investments you chose didn’t do

as well as you expected. You may pay an extra premium for a guaranteed death benefit.


Finding a Good Value in Life Insurance

After you have decided which kind of life insurance is best for you, compare similar policies from different companies to find which one is likely to give you the best value for your money. A simple comparison of the premiums is not enough. (Working with an independent agent is best to obtain quotes from various companies). To read the full article, please click here:


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