Life Insurance
Simple Answers to Your Questions

There are two basic types of life insurance:  term insurance and whole life.  Both types of insurance have experienced dramatic changes over the past several years.  If you bought a term policy more than a year ago, there is a substantial chance you could replace your existing coverage at a more favorable rate.

Term Life insurance is pure insurance and pays a benefit only if you die during the term.  There is no cash build-up or surrender value to these policies.  Term insurance generally provides a level death benefit at a level price for a fixed period of time:  usually 5, 10, 15, or 20 years.  Many term policies are guaranteed renewable, which means they may be continued in-force beyond the level term period, at the new current rate.  Many term polices are also guaranteed convertible, which means they may be converted to whole life policies if the owner so chooses.  The most important aspects of term insurance, other than price, are the length of the term period and the extent of conversion rights.  Although term insurance costs substantially less than whole life, it only meets very specific needs.

Whole Life (or Ordinary Life) policies generally have a cash building aspect to them, and the insured pays a guaranteed level premium for the life of the policy with virtually no risk.  As long as you pay the premiums, the death benefit will always be there.  In many cases, annual dividends will actually pay the annual premium.  These policies are designed for you to keep over a long period of time.

Flexible premium policies, which allow the policy-holder to vary the premiums and/or coverage as needs change, are called Universal Life (or Adjustable Life) policies.  A Universal policy that provides death benefits and cash values which vary with the performance of an underlying portfolio of investments is called Variable Life.  The flexible premium policy owner shares certain risks with the insurer.

With any life insurance, the best policy to buy depends on your current and future needs.

Do you need life insurance?

The answer may be with these five reasons you don't need life insurance:

  1. You are never going to die.
  2. You are going to win the lottery.
  3. Your children are going to support you.
  4. Your are never going to retire.
  5. The government will take care of you.
Two reasons for purchasing life insurance are to provide your family with long-term financial security and/or protect you estate.  Essentially, you should consider what your family's immediate and ongoing needs will be if something happens to you.

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.  One way to start the process is to consider this:  you should have life insurance that is equal to five to ten times your annual gross income.

If you answer yes to any of the following you may have a need for life insurance.  Do you have:

Term Life or Whole Life:  What kind of insurance is right?

Only an in-depth interview with an insurance professional can answer that question.

How do you buy the correct amount of insurance?

The simple answer is to buy for the right length of time, whether you need short-term or long-term insurance.  A good rule of thumb is to talk with a qualified agent who represents top rated companies.  A simple phone call or visit in person will greatly simplify the process.  Basic information from you will allow the agent to assess your needs and help you make the proper decision.  Life insurance choices should not be decided upon hastily.

How do you choose a company and an agent?

About 1,800 companies in the United States sell life insurance.  Before buying a policy, check the company's financial condition.  A number of insurance rating services (i.e., A.M. Best) rate the financial strength of companies.  Choosing a qualified agent is important.  Make sure the agent is licensed to sell life insurance.  Agents who sell Variable Life must be registered with the National Association of Securities Dealers, and have additional state licenses.  Professional designations and memberships in professional associations are held by the best agents.

Professional designations include Chartered Life Underwriter (CLU) and Life Underwriter Training Council Fellow (LUTCF).  Agents who are financial planners may have additional designations, including Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP) or Member of The Registry of Financial Planning Practioners.  Agents who have additional property and casualty licenses may have designations which include Certified Insurance Counselor (CIC) or Chartered Property and Casualty Underwriter (CPCU).

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Thank you for your interest!  Please go the the life quote page or email us at insure@cio.net now.  Also, you can call 360-647-0090 or 800-676-0090 for further assistance or questions.
 

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