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Life Insurance

ife insurance may be one of the most important purchases you'll ever make. In the event of a tragedy, life insurance proceeds can help pay the bills, continue a family business, finance future needs like your children's education, protect your spouse's retirement plans, and much more. This section can help you gain a better understanding of life insurance and its role within a sound financial plan, and answer many of your questions. You'll find information and interactive tools to help you get a sense of how much and what kind to buy, plus information about how different life events, such as having children or buying a home, can affect your insurance needs. For those ready to consider a purchase, there's advice for finding and working with an agent, and an agent locator search engine to help you find a qualified insurance professional in your area.

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Who needs it? How much do I need? Life insurance needs calculator Human life value calculator What are the different types? 1. Term 2. Perm 3. Product selector Where do I buy it? 1. Four ways to buy 2. Find an agent 3. Find a company Life events

Who Needs Life Insurance?
Life insurance for every stage... • You're married • You're married with kids • You're a single parent • You're a stay-at-home parent • You have grown children • You're retired • You're a small business owner • You're single

f someone will suffer financially when you die, chances are you need life insurance. Life insurance provides cash to your family after your death. This cash (known as the death benefit) replaces your income and can help your family meet many important financial needs like funeral costs, daily living expenses and college funding. What's more, there is no federal income tax on life insurance benefits.

Most Americans need life insurance. To figure out if you need life insurance, you need to think through the worst-case scenario. If you died tomorrow, how would your loved ones fare financially? Would they have the money to pay for your final expenses (e.g., funeral costs, medical bills, taxes, debts, lawyers' fees, etc.)? Would they be able to meet ongoing living expenses like the rent or mortgage, food, clothing, transportation costs, healthcare, etc? What about long-range financial goals? Without your contribution to the household, would your surviving spouse be able to save enough money to put the kids through college or retire comfortably? The truth is, it's always a struggle when you lose someone you love. But your emotional struggles don't need to be compounded by financial difficulties. Life insurance helps make sure that the people you care about will be provided for financially, even if you're not there to care for them yourself. To help you understand how life insurance might apply to your particular situation, we've outlined a number of different scenarios below. So whether you're young or old, married or single, have children or don't, take a moment to consider how life insurance might fit into your financial plans. Back to top

You're Married

When you're married, you share everything with your significant other, including your financial obligations. Many people mistakenly believe that they don't need to think about life insurance until they have children. Not true. What it one of you were to die tomorrow? Even with the surviving spouse's income, would that person be able to pay off debts like credit-card balances and car loans, let alone cover the monthly rent and utility bills. If you're planning to have children, you'll want to buy life insurance right away and not wait until the mom-to-be is pregnant. Some companies won't issue a policy to a woman during her pregnancy. Since health complications sometimes arise, they'll want to wait until after the baby is born to issue the policy. Buying insurance before a baby is on the way helps avoid this potential problem. Back to top

You're Married With Kids

Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain their standard of living on your spouse's income alone? Probably not. Life insurance makes sure that your plans for the future don't die when you do.

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You're a Single Parent

As a single parent, you're the caregiver, breadwinner, cook, chauffeur, and so much more. Yet nearly four in ten single parents have no life insurance whatsoever, and many with coverage say they need more than they have. With so much responsibility resting on your shoulders, you need to make doubly sure that you have enough life insurance to safeguard your children's financial future. Back to top

You're a Stay-At-Home Parent

Just because you don't earn a salary doesn't mean you don't make a financial contribution to your family. Childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Surveys have estimated the value of these services at over $40,000 per year. Could your spouse afford to pay someone for these services? With life insurance, your family can afford to make the choice that best preserves their quality of life.

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You Have Grown Children

As the years go by, you may feel your need for life insurance has passed. But just because the kids are through college and the mortgage is paid off doesn't necessarily mean that Social Security and your savings will take care of whatever lies ahead. If you died today, your spouse will still be faced with daily living expenses. What if your spouse outlives you by 10, or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren? Back to top

You're Retired

Did you know that depending on the size of your estate, your heirs could be hit with a large estate tax payment after you die (45% of your estate). The proceeds of a life insurance policy are payable immediately, allowing heirs to take care of estate taxes, funeral costs, and other debts without having to hastily liquidate other assets, often at a fraction of their true value. And life insurance proceeds are generally income tax free and can be arranged to avoid probate. Finally, if your insurance program is properly structured, the proceeds from your life insurance policy won't add to your estate tax liability. Back to top

You're a Small Business Owner

Besides taking care of your family, life insurance can also protect your business. What would happen to your business if you, one of your fellow owners, or perhaps a key employee, died tomorrow? Life insurance can help in a number of ways. For instance, a life insurance policy can be structured to fund a "buy-sell" agreement. This would ensure that the remaining business owners have the funds to buy the company interests of a deceased owner at a previously agreed upon price. That way, the owners get the business and the family gets the money. To protect a business in case of the death of a key employee, "key person insurance," payable to the company, provides the owners with the financial flexibility needed to either hire a replacement or work out an alternative arrangement. Back to top

You're Single

Most single people don't need life insurance because no one depends on them financially. But there are exceptions. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn't want to pass on to family members who survive them. Insurability is another reason to consider life insurance when you're single. If you’re young, healthy and have a good family health history, your insurability is at its peak and you’ll be rewarded with the best rates on life insurance. If you anticipate a need for life insurance down the road (e.g., you’re the marrying type) and you can fit the premiums into your budget, it might make sense to lock in coverage while you're young and single. Doing so can eliminate the worry of having to qualify for coverage when you’re older and maybe not as healthy as you once were.

How Much do I Need?

The answer isn't really how much life insurance you need, it's how much money your family will need after you're gone. Ask yourself:

How much money will my family need after my death to meet immediate expenses, like funeral expenses and debts? How much money will my family need to maintain their standard of living over the long run?

Life insurance proceeds can help pay immediate expenses including uncovered medical costs, funeral expenses, final estate settlement costs, taxes and other lump-sum obligations such as outstanding debts and mortgage balances. They can also help your family cover future financial obligations like everyday living expenses, money for college or your spouse's retirement, and so much more. But how do you know if you need $100,000, $500,000, $1 million or more? The most common way to determine your life insurance needs is by conducting what's called a Capital Needs Analysis. Here's how it works. Start by evaluating your family's needs. Gather all of your personal financial information and estimate what your each of your family members would need to meet current and future financial obligations. Then tally up all of the resources that your surviving family members could draw upon to support themselves. The difference between their needs and the resources in place to meet those needs is your need for additional life insurance (see diagram below).

This may look simple enough, but calculating one's life insurance needs can actually get pretty complicated. To make it easy for you to get a general sense of your needs, check out our life insurance needs calculator. It'll walk you through the process and provide you with an estimate of your insurance needs in a matter of minutes. But remember, our calculator (or anyone else's for that matter) is no substitute for the guidance and assistance you'll get by meeting with a qualified insurance agent or other financial professional. So if you're serious about protecting your family's future, contact an insurance professional in your community.

Life Insurance Needs Calculator


o, how much life insurance do you need? Well, the answer isn't really how much life insurance you need... it's how

much investment capital your family will need at the time of your death. Their need for capital -- on a gross basis -- is really a function of two variables: 1. How much will be needed at death to meet immediate obligations? 2. How much future income is needed to sustain the household?

The first category is fairly easy to estimate. It's the sum of final expenses (including uncovered medical costs, funeral expenses and final estate-settlement costs) and other lump-sum obligations (such as outstanding debts, mortgage balance, and college costs). The second variable is a bit trickier. It involves calculating the "present value" of future needed cash-flow streams. By answering a few simple questions below, you can get a rough sense of the needs for capital that might exist at your death. A few tips: Our analysis of your needs depends upon the answers you provide us to the questions below. Please answer all questions. If you do not understand a question, click on the highlighted term for more information and we'll explain what we're driving at. This calculator has provided a rough sense of your potential life insurance needs. To the extent that you or your beneficiaries are eligible for Social Security benefits, those benefits have not been included in this analysis. Social

Security benefits, if available, will somewhat reduce the need for life insurance. For a more accurate and detailed analysis, contact a professional life insurance agent.

Below, please estimate some of the lump-sum needs that would exist at the time of your death. Enter only numbers, no commas or dollar signs. Estimate Your Family's Expenses in Case of Your Death:

1. Final expenses:

2. Outstanding debts (other than your mortgage):

3. Outstanding mortgage: 4. College funding needs:

Child 1 age

Child 2 age

Child 3 age

Child 4 age

Child 5 age

Child 6 age







Estimate Your Family's Income Needs in Case of Your Death:

1. Total annual income your family would need if you died today:

2. How many years should income be provided?

3. What is your current savings and investments (not including retirement funds)?

4. What are your current retirement savings?


5. What is the value of the life insurance in force on your life? Assuming your spouse would work following your death:

1. What is your spouse's annual income?

2. How many years does your spouse expect to work?

3. Your spouse's marginal tax rate?


Please note: The following assumptions are incorporated in the calculation. You may enter your own data and override these assumptions to gain an even more personalized analysis.

1. Estimated inflation rate:


2. After-tax net investment yield:
Analysis Clear


Return to calculator. Final expenses: Typically the greater of $15,000 or 4% of your estate. This would include uncovered medical costs, funeral expenses, and final estate settlement costs. Note: If your estate is over $1,500,000 your final expenses may be much higher due to federal and state estate or inheritance taxes. College funding: Total projected college costs (tuition plus all other costs such as room and board, books, etc.), less current funds in the child's name. Savings and investments: Includes bank accounts, money market accounts, mutual funds, CDs, bonds, stocks and other assets. Mortgage payment fund: Whether or not your survivors would use life insurance proceeds to pay off the mortgage right away, creating a fund to cover mortgage payments makes sense. Annual income needs: Total amount your family needs, before taxes, to maintain their current standard of living, typically 60%-75% of total income. Families with higher incomes typically fall into the lower end of that range. Retirement savings: Includes 401(k), Keoghs, pension and profit sharing plans. Life insurance in force: Includes individual policies, group term coverage available through work, and any other life insurance on your life payable to your family or for the benefit of your family. Do not include accidental death insurance or "double indemnity" insurance.

Spouse's marginal tax rate: This is the rate of tax you are paying on your highest dollars of income. For instance, in 2005 a single taxpayer earning $50,000 has a Marginal Tax Rate of 25%. That's because earned income between $29,700 and $71,949 gets taxed at 25%. The lowest Marginal Tax Rate is 10% an applies to people who earn less than $7,299. The highest Marginal Tax Rate is 35% for dollars earned in excess of $326,450.

Human Life Value Calculator


he human life value calculator has been designed to help you assess your

financial value to those you love by estimating the future financial contributions you will make to your family ... or, more starkly, the financial loss that your family would incur if you were to die today. For the purposes of this calculator, a human life only has economic value in its relation to other lives, specifically a spouse or dependent children. Therefore, if you have neither, the calculator will not generate a result. Please note, this calculator will provide only a rough sense of your human life value, which can be a factor in determining the amount of insurance you should have in your financial portfolio. Typically, the amount of life insurance someone needs is less than his or her human life value due to the availability of other sources of income (e.g., existing life insurance coverage, Social Security benefits, etc.). For an analysis of your life insurance needs, please visit the Life Insurance Needs Calculator or contact a professional agent or advisor in your area.

This calculator projects typical lifetime income for someone with the characteristics you provide in the input section, less taxes and expenditures devoted to your own consumption, plus any fringe benefits your family receives from your employer, such as health insurance, and the services you provide around the house. The resulting estimate is an approximate measure of your net financial contribution to your family - your human life value. This human life value calculator should not be viewed as a comprehensive assessment. For example, you will notice that it does not account for the specific occupation and education of you or your spouse. Also, to simplify your responses, only general information is sought regarding your non-wage income, which impacts both your consumption and your income taxes. Furthermore, the dollar value of your fringe benefits is assumed to be equal to the average for someone of your income and family situation. Nevertheless, we believe that, given the limited information the calculator is using, it is the best estimate available. Click here for more information on the assumptions used to generate these estimates. Enter only numbers or letters, no commas or dollar signs. 1. Your age at nearest birthday:

2. Sex: Select

3. Your planned retirement age (e.g., 65):

4. Major occupation category: 1

1. 2. 3. 4.

Executive, Administrative, and Managerial -(e.g., Chief Executives, Managers, Accountants, Marketers, Buyers) Professional Specialty -(e.g., Engineers, Scientists, Teachers, Lawyers, Doctors, Nurses, Artists) Technicians, Computer Programmers, and Related Support -(e.g., Electrical, Mechanical and Health Technicians) Sales -(e.g., Real Estate, Insurance, Retail and Personal Services) Administrative Support, Including Clerical Support Service and Public Safety -(e.g., Food, Health and Cleaning Services, Police, Firefighters, and Security) Farming, Forestry, Fishing Craft, Repair, Skilled Laborers -(e.g., Mechanics, Construction Workers, Textile and Food Production, Inspectors) Operators, Fabricators, Laborers -(e.g., Machine Operators, Motor Vehicle Operators, Assembler, Rail Transportaion)


8. 9.

5. Your annual wage earnings before taxes:

6. Does your employer provide fringe benefits? Yes

7. Do you have a spouse? Yes

If yes, then: Age of spouse:

Is spouse employed? No

Spouse's planned retirement age (e.g., 65):

Spouse's annual wage earnings before taxes:

8. Annual non-wage earnings (e.g. investment or rental income) 0

9. Ages of children under 23: -----








Clear Form

What are the Different Types?

There are many kinds of life insurance, but they generally fall into two categories: term insurance and permanent insurance.

Term insurance, the most affordable type of insurance when initially purchased, is designed to meet temporary needs. It provides protection for a specific period of time (the "term") and generally pays a benefit only if you die during the term. This type of insurance often makes sense when you have a need for coverage that will disappear at a specific point in time. For instance, you may decide that you only need coverage until your children graduate from college or a particular debt is paid off, such as your mortgage. Permanent insurance by contrast provides lifelong protection. As long as you pay the premiums, and no loans, withdrawals or surrenders are taken, the full face amount will be paid. Because it is designed to last a lifetime, permanent life insurance accumulates cash value and is priced for you to keep over a long period of time. It's impossible to say which type of life insurance is better because the kind of coverage that's right for you depends on your unique circumstances and financial goals. Often, a combination of term and permanent insurance is the right solution. Explore the other parts of this section to learn more about term and permanent insurance and the pros and cons of each. Also, try our interactive product selector. It walks you through the questions you need to consider to determine the kind of life insurance that's right for you. But remember, the best way to figure out the amount and type of life insurance that makes sense for your particular situation is to meet with a qualified insurance professional.

Term Insurance

Term Insurance 101 • Advantages • When the Term Ends • Return-of-Premium Option • Key Policy Provisions • Convertibility

s the name implies, term insurance provides protection for a specific period of time and generally pays a benefit only if you die during the "term." Term periods typically range from one year to 30 years, with 20 years being the most common term.

One of the biggest advantages of term insurance is its lower initial cost in comparison to permanent insurance. Why is it cheaper when initially purchased? Because with term insurance, you're generally just paying for the death benefit, the lump sum payment your beneficiaries will receive if you die during the term of the policy. With most permanent policies, your premiums help fund the death benefit and can accumulate cash value. Term insurance is often a good choice for people in their family-formation years, especially if they're on a tight budget, because it allows them to buy high levels of coverage when the need for protection is often greatest. Term insurance is also a good option for covering needs that will disappear in time. For instance, if paying for college is a major financial concern but you're pretty sure that you won't need life insurance coverage after the kids graduate, then it might make sense to buy a term policy that'll get you through the college years. Back to top

When the Term Ends
But what happens if you buy a term policy only to realize at the end of the term that you still have a need for life insurance? Well, it's sort of a good news, bad news story. The good news is that many policies will give you the option to renew your policy when you reach the end of the term. The bad news is that you'll probably face much higher costs since age is one of key factors used to determine life insurance premiums. To renew the policy, you also may have to present evidence of insurability (that's insurance jargon meaning, "take another medical exam and answer a new round of questions about your lifestyle, health status and family health history"). If you're still a fine specimen with healthy living habits, you might requalify at a reasonable rate. But if your health has deteriorated, you may find that it's too expensive to renew your policy or you may not even requalify. So if you're considering a term policy, make sure you carefully consider how long you'll need the coverage. If you're pretty sure that your needs are temporary, then term insurance is probably the right choice for you. But if you think there's a possibility that you might need the coverage for a long time, then remember that if you want to renew your term policy after it expires or buy a new term policy at that time, your age, health status or other factors may make coverage very expensive. To better understand term insurance, consider this analogy. When you purchase term insurance, it's sort of like renting a house. When you rent, you get the full and immediate use of the house and all that goes with it, but only for

as long as you continue paying rent. As soon as your lease expires, you must leave. Even if you rented the house for 30 years, you have no "equity" or value that belongs to you. Back to top

Return-of-Premium Option
One exception to this rule is what's called a return-of-premium term policy. With these policies, if you keep the policy in force for the entire term, say 20 years, the insurance company will refund the premium payments you made over that 20-year period. Of course, there is a price to be paid for this added benefit. The premiums for return-of-premium policies are considerably higher than premiums for standard term policies. The price difference can be 20%, 30% or more. Another factor to consider is that term insurance rates have dropped considerably over the past decade, mostly because people are living longer. If you own a standard term policy, there's really no harm done in dropping that policy in favor of a newer and cheaper term policy. But if you own a return-of-premium policy, dropping the policy before the full term has expired means that you will have paid a high price for your term insurance coverage and the premiums you paid won't be fully refunded. At best, you'll get a partial refund of the money you put into your policy to that point. Back to top

Key Policy Provisions
When considering a term purchase, one thing to keep in mind is that not all term policies are the same. Some may include certain provisions as standard features, while others may require you to pay extra to add these features as "riders" to your policy. So if you're comparing term policies, remember that price is not the only factor to consider. Ask your agent about provisions such as: • Accelerated death benefits - allows a terminally ill person to collect a significant portion of his or her policy's death benefit while that person is still alive Disability waiver of premium - waives premiums when a policy owner suffers a long-term disability, typically one lasting six months or longer Accidental death benefits - doubles or triples the benefit in the case of death by accidental means Back to top

Another provision that is very important is something called convertibility. Some insurance contracts only allow "conversion" in the first few years of the policy, while others allow it at any point during the term. This valuable feature allows you to convert your term policy to a permanent policy (e.g., whole life insurance) without submitting evidence of insurability. Being able to convert to a permanent policy is a great option to have in the event that circumstances in your life change such as failing health or maybe just the realization that coverage is needed for a longer period of time than you originally anticipated. That's why when purchasing a term policy, it's never a bad idea to find out what kind of permanent policies are offered by the company you are considering. Some companies may only have strong term insurance offerings, while others may have very competitive products in both categories.

Permanent Insurance
Perm Insurance 101 • Cash Value - A Key Feature • Cash Value vs. Face Amount • Whole Life • Variable Life • Universal Life • Variable Universal Life

ermanent insurance provides lifelong protection, and the ability to accumulate cash value on a tax-deferred basis. Unlike term insurance, a permanent insurance policy will remain in force for as long as you continue to pay your premiums. Because these policies are designed and priced for you to keep over a long period of time, this may be the wrong type of insurance for you if you don't have a long-term need for life insurance coverage.

Why would someone need coverage for an extended period of time? Because contrary to what a lot of people think, the need for life insurance often persists long after the kids have graduated college or the mortgage has been paid off. If you died the day after your youngest child graduated from college, your spouse would still be faced with daily living expenses. And what if your spouse outlives you by 10, 20 or even 30 years, which is certainly possible today. Would your financial plan, without life insurance, enable your spouse to maintain the lifestyle you worked so hard to achieve? And would you be able to pass on something to your children or grandchildren?

Cash Value – A Key Feature
Another key characteristic of permanent insurance is a feature known as cash value or cash-surrender value. In fact, permanent insurance is often referred to as cash-value insurance because these types of policies can build cash value over time, as well as provide a death benefit to your beneficiaries. Cash values, which accumulate on a tax-deferred basis just like assets in most retirement and tuition savings plans, can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children's education or to provide income for your retirement. When you borrow money from a permanent insurance policy, you're using the policy's cash value as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash-surrender value. If you need or want to stop paying premiums, you can use the cash value to continue your current insurance protection for a specified time or to provide a lesser amount of death benefit protection covering you for your lifetime. If you decide to stop paying premiums and surrender your policy, the guaranteed policy values are yours. Just know that if you surrender your policy in the early years, there may be little or no cash value.

Cash Value vs. Face Amount
With all types of permanent policies, the cash value of a policy is different from the policy's face amount. The face amount is the money that will be paid at death or policy maturity (most permanent policies typically "mature" around age 100). Cash value is the amount available if you surrender a policy before its maturity or your death. Moreover, the cash value may be affected by your insurance company's financial results or experience, which can be influenced by mortality

rates, expenses, and investment earnings. "Permanent insurance" is really a catchall phrase for a wide variety of life insurance products that contain the cash-value feature. Within this class of life insurance, there are a multitude of different products. Here we list the most common ones.

Whole Life or Ordinary Life
If you're the kind of person who likes predictability over time, Whole Life insurance might be right for you. It provides you with the certainty of a guaranteed amount of death benefit and a guaranteed rate of return on your cash values. And you'll have a level premium that is guaranteed to never increase for life. Another valuable benefit of a participating Whole Life policy is the opportunity to earn dividends. While your policy's guarantees provide you with a minimum death benefit and cash value, dividends give you the opportunity to receive an enhanced death benefit and cash value growth. Dividends are a way for the company to share part of its favorable results with policyholders. When you purchase a participating policy, it is expected that you will receive dividends after the second policy year - but they are not guaranteed. Dividends, if left in the policy, can provide an offset (and more) to the eroding effects of inflation on your coverage amount.

Variable Life
Variable Life insurance is offered via a prospectus and provides death benefits and cash values that vary with the performance of a portfolio of underlying investment options. You can allocate your premiums among a variety of investment options offering different degrees of risk and reward: stocks, bonds, combinations of both, or a fixed account that guarantees interest and principal. This type of insurance is for people who are willing to assume investment risk to try to achieve greater returns. With Variable Life you're shifting much of the investment risk from the insurance company to yourself. Good investment performance would provide the potential for higher cash values and ultimate death benefits. If the specified investments perform poorly, cash values and death benefits would drop accordingly.

Universal Life
Unlike Whole Life and Variable Life where you pay fixed premiums, Universal Life offers adjustable premiums that give you the option to make higher premium payments when you have extra cash on hand or lower ones when money is tight. Universal Life allows you, after your initial payment, to pay premiums at any time, in virtually any amount, subject to certain minimums and maximums. You also can reduce or increase the death benefit more easily than under a traditional Whole Life policy. Most Universal Life policies will also provide a guaranteed rate of return on your cash values, with one important exception. It is possible that you will not accumulate any cash value if any, or all, of the following circumstances occur: administrative expenses increase, mortality assumptions are changed, the insurance company's investment portfolio underperforms, premium payments are insufficient. In recent years, there’s been considerable interest in what’s commonly referred to as Universal Life with Secondary Guarantees (also known as a “No-Lapse Guarantee”). With an ordinary Universal Life product, the policy could lapse under certain circumstances (e.g., interest rates fall below projections, insurance costs or administrative expenses rise, etc). When you buy a policy with a “secondary guarantee,” you’re guaranteed that the policy won’t lapse even if the above factors come to pass. One of the most attractive things about Universal Life policies with Secondary Guarantees is that they provide lifelong coverage at rates that can be considerably lower than other forms of permanent insurance. That’s one of the main reasons why these policies have become so popular for estate planning purposes. If you have a federal estate tax liability (in 2008, estates valued at over $2 million are taxed), your main concern is liquidity at death. When you die, you don’t want your heirs to have to hastily sell off assets in order to pay estate taxes. With a Universal Life policy with Secondary Guarantees, the death benefit is guaranteed for life and you have the flexibility of adjusting your premiums, a valuable feature since estate tax rates and exclusion amounts keep changing from year to year.

Variable Universal Life

Variable Universal Life insurance is a flexible premium, permanent life insurance policy that allows you to have premium dollars allocated to a variety of investment options, offering varying degrees of risk and reward. These policies are a good choice for people seeking maximum flexibility. Should your insurance needs change over time, Variable Universal Life usually provides the flexibility to increase or decrease your amount of coverage. You can also make a lump-sum payment to increase the policy's cash value. (The maximum lump-sum payment is subject to IRS limitations.) And, should an emergency arise and you are short on cash, you may be able to skip a scheduled payment and let the accumulated cash value cover the policy's expenses. Keep in mind that the cost of insurance and administrative expenses are still incurred. As your insurance needs change, it is quite probable so will your long-term investment goals and risk-tolerance levels. With Variable Universal Life, you have flexibility to transfer funds between the investment divisions, tax free. So, you have the freedom to make decisions based on your needs and not on the tax ramifications.

Life Insurance Product Selector
What Type is Right for You?
Access our Life Insurance Product Selector


ne of the most common questions people have about life insurance is, term or permanent? The answer is: It

depends on a number of factors, including how long you need the coverage, how much you can afford, how much risk you can tolerate and how much flexibility you need. To help you gain a better understanding of which type of insurance might be right for you, we've created an interactive product selector that walks you through the decision-making process. While this interactive guide is not meant to be a substitute for working with an insurance professional, it's a great way to familiarize yourself with some of the issues you'll need to think through in making this important decision.

Where do I Buy it?

nce you've determined that you have a need for life insurance, you then need to decide where to buy it. And this is not a decision you want to take lightly. After all, purchasing the right amount and kind of life insurance might end up being the most important financial decision you'll ever make. So what are your options? Because so many variables are involved in figuring out how much and what kind of life insurance to buy, it shouldn't come as a big surprise that most people prefer to buy life insurance through an insurance agent or other financial advisor. A good agent will take the time to carefully assess your financial situation and long-range objectives, and then work with you to find the right products for your specific needs.

If you decide to go the insurance agent route, we encourage you to read the information on our Agent Locator page. If you don't have an insurance agent, it provides advice on how to pick the right agent and even contains an agent locator feature to help you identify qualified agents in your community. It'll also provide you with useful tips for building a productive relationship with your insurance advisor. This section also contains information to help you pick the right insurance company or to check up on a company that someone has recommended to you. Buying life insurance through an agent is the most common way to purchase, but by no means the only way. Buying through the workplace or direct via a toll-free number or the Internet are other options you may want to consider. Explore the Four ways to buy part of this section for more information about your purchasing options.

Four Ways to Buy



Through an Agent or Other Financial Advisor Most people buy life insurance through agents or other financial advisors, and for good reason. Determining how much and what kind of insurance to buy is one of the most important financial decisions you'll ever make, but it's also one of the most complicated. A qualified insurance professional will conduct a comprehensive financial needs analysis, and walk you through the multitude of questions you need to consider to determine how much and what kind of insurance is right for you. Of course, the quality of advice you get is dependent on how good your agent is. You'll obviously want to work with someone who has the right licensing, training and experience. But don't underestimate the importance of finding someone who's a good listener. A good agent will take the time to understand your objectives, help you construct a financial gameplan, and then work with you to find the right insurance products for your specific situation. Click here for more information about how to find the right agent. At the Workplace Obtaining life insurance through your employer is another option to consider. Your first step should be to make sure you understand how much coverage your employer provides at no cost to you. Many employers provide, at their own expense, a "basic" life insurance benefit, often equal to one to two times your base salary. While this is a nice benefit to have, insurance experts believe that most people need somewhere in the range of 10 to 20 times their net income and sometimes even more than that. Check to see if your employer offers you the option to purchase additional coverage through its group plan. Many employers do. To qualify for additional coverage, you may have to answer a few basic questions about your health. It’s important to keep in mind that if you have group coverage and you leave your job, you generally are not able to take the coverage with you. If your employer does not provide group life insurance coverage, it may make a life benefit available to you on a voluntary, employee-paid basis. While you pay the full cost of the benefits under a voluntary arrangement, there are several advantages to buying insurance this way. Voluntary plans help workers get coverage more easily than if they were to purchase an individual policy on their own outside of the workplace. Premiums are typically paid through an automatic payroll deduction and can be as much as 10% to 20% less because of efficiencies in enrollment and billing procedures. Additionally, you may be eligible for more coverage under a voluntary plan than is offered by a traditional group plan.



Via the Internet Like most things nowadays, life insurance can be purchased online. You can get instant quotes, apply for, and even purchase policies. To make sure you get the right amount and type of insurance, the better sites won't allow you to complete the purchasing process until you've spoken with a qualified insurance professional. Some sites work like a brokerage agency. They'll have contractual relationships with, say, 10 or 20 companies and they'll broker your case with the company that offers the best product for your specific needs and circumstances. Other insurance e-commerce sites are more like insurance policy marketplaces. They promote the products of a large number of companies and function a lot like a search engine. Their main objective is to take the data you enter into their online quote engine and link you to a company that has a product that's compatible with your specifications. Some insurance company Web sites also offer the option of buying online, but most will typically try to direct you to an agent who can provide you with personalized service. Keep in mind, most Web sites only offer term insurance, not permanent. Also, if you buy online, the onus is often on you to figure out which policy is right for you. If you're about to buy a policy but you're not sure that you're making the right decision, it's never a bad idea to run the quotes by an agent in your community. He or she can assess the information you've gathered and may even be able to offer you the same types of policies at competitive prices. If not, you can always return to the Internet to complete your purchase and you'll have the peace of mind of knowing that you're buying the right product for your specific needs. Over the Phone or By Mail Internet purchases of life insurance is one form of direct buying, but certainly not the only one. There are a number of companies that advertise and market almost exclusively via toll-free numbers and/or direct mail solicitations. How might this benefit you? If you want to buy term insurance and you have a good sense of how much coverage you need, you may be able to get the right coverage you need by buying directly. Just be aware of the possible limitations of buying direct. Most direct sellers only offer term insurance, and you generally won't have the benefit of advice from a qualified insurance professional

Agent Locator
5 Tips for Finding the Right Advisor • Get referrals • Find out about their specialties • Inquire about their education and training • Meet face to face • Ask if they hold any professional memberships


aving a sound financial plan requires knowing which insurance and investments products to buy. But there are

literally thousands of insurance policies, stocks, bonds, mutual funds, annuities, etc. from which to choose. That's where a qualified insurance professional or other financial advisor can help. LIFE is affiliated with the National Association of Insurance and Financial Advisors (NAIFA), the nation's largest financial services membership association, and LIFE’s agent locator is powered by NAIFA’s membership database. With tens of thousands of members nationwide, you can find a NAIFA member almost anywhere.

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To search by name, you must enter at least the first two letters of the first and last name. A search of first name "ja" and last name "ed" would display all names that begin with "ja" and "ed." To search by zip code, you must enter at least the first three digits of your zip code. For example, "208" will locate members in all zip codes starting with "208." A search of "2085" will yield all active members in zip codes that begin with "2085." Also, you must include a city name when conducting a city/state search. If you are a NAIFA member needing to update your contact information, please call NAIFA directly at 877-TO-NAIFA.

Find a Company


ith more than a thousand companies offering various types of insurance products, it can be a bit overwhelming to

figure out which one to do business with. But don’t despair. There are a number of resources to help you determine whether a company is worthy of your business. To learn about them, look through our Tips for Choosing a Company. As you’re weighing your options, you may want to consider doing business with one of the many companies that supports LIFE Foundation. LIFE receives financial support from more than 100 leading insurance companies, all of whom share LIFE's commitment to making sure consumers have the knowledge needed to make informed insurance-buying decisions.

Life Events
Factors Affecting Your Life Insurance Needs • Having a child • Getting married • Buying a home

• • • • • • •

Taking on debt Changing jobs Supporting aging parents Changes in your business Changes in marital status Planning for college Planning for retirement

f you're like most people, you probably don't take the time to routinely evaluate your life insurance needs. Why might that be a mistake? Well, your life insurance needs change as circumstances in your life change. That's why it's a good idea to re-examine your life insurance needs at least every few years and certainly when big changes, or life events, occur.

Just about any life event you can imagine will have an impact on your life insurance needs. An obvious example is having a child. As you bring a new person into the world, you also bring a major financial responsibility into your life. If something happens to you, where's the money going to come from to help provide the kind of upbringing you want your child to have? This section will explore the major life events that might trigger the need to re-evaluate your life insurance coverage. Our Life Insurance Needs Calculator is a great resource for seeing how changes in your life, like having a child, taking on a bigger mortgage or getting a raise, might impact your life insurance needs. Once you have a general sense of your needs, you should consider meeting with a qualified insurance professional who can conduct a more thorough analysis of your needs and help tailor a plan that meets your specific financial objectives.

Having a child
It's time to start thinking about whether to wallpaper the extra bedroom in pink or blue - your child is on the way. With your growing family, you're probably doing all you can to save and invest for the future. But is that enough? You have big plans for your kids and want to see them realize their hopes and dreams. It's hard enough to make that happen with you in the picture. But what if you or your spouse - or both of you - were suddenly out of the picture? From diapers to diplomas, would there be enough income to pay for day care, a college education, and everything in between? Your children are your greatest responsibility, and life insurance can help them to grow up in a stable environment, one in which they are physically safe and financially secure, if something were to happen to you. Back to top

Getting married
Driving away from the reception in a blue convertible with balloons flapping in the wind, you're headed for a bright future. Together, you both dream of a nice home, a good education for the kids and a comfortable retirement. Enjoy these early carefree days, but make sure you talk to an insurance professional sometime soon, now that you're financially dependent on one another. As a married couple, you share a life together, but you also share each other's financial obligations. What if one of you were to die tomorrow? Would the surviving spouse have enough money to pay for your final

expenses, eliminate debts such as credit-card balances and car loans, and buy some time to be able to adjust to a new way of life? Life insurance can help ensure that these financial goals will be met in the tragic event that one of you were to die prematurely. Back to top

Buying a home
When you finish signing that huge check, your realtor hands you the keys to the cutest little Victorian three-bedroom you've ever seen. Mortgage payments are a little daunting. Now, it's time to make sure you've thought ahead. What if the worst were to happen? Could your spouse manage the mortgage payments without you? What about monthly maintenance, utilities and unforeseen repairs ¨ not to mention property taxes? How long would your spouse have before your dream house is back up for sale? If tragedy were to strike, turning over the keys to the family home to the bank is probably the last thing you'd want to have happen to your loved ones. Having adequate life insurance coverage can help keep the family you love in the home they love. Back to top

Taking on debt
These days, living with debt seems to be as American as baseball and apple pie. We rely on credit to help pay for lots of important things like a reliable car, home improvements, education expenses, vacations, etc. We also pile up sizable credit card bills to pay for everyday living expenses such as groceries, gas, clothing, entertainment, etc. The truth is, living with debt is a way of life for many of us. But that's not necessarily a bad thing, as long as you have a plan for managing your debt. First, make sure you're living within your means. You should never assume a debt load that you can't keep up with. Second, if you've got lots of different creditors and some of them are charging you high-interest rates, it might make sense to consolidate at least some of your debt at a more favorable rate. And finally, you should carefully consider how your family would manage the payments if something were to happen to you. If you were suddenly out of the picture, you wouldn't want to leave your family to drown in a sea of debt. You should have at least enough life insurance to pay off all your outstanding debt and provide a financial cushion to help your loved ones begin a new life without you. Back to top

Changing jobs
Congratulations on your new position or your big raise. You may not realize it, but when your income rises, your spending tends to rise too. If something were to happen to you, you'd probably want your family to be able to maintain their new and improved lifestyle. That's why it makes a lot of sense to re-assess your life insurance coverage whenever your income rises. If you determine that you need additional coverage, the first thing you'll want to do is find out if your life insurance benefit through work (assuming, of course, that you have such a benefit) has increased along with your compensation. Many group plans will tie life insurance benefits to your annual income. So if you get a $5,000 raise and your company's life insurance plan will pay two times your income if you die, then your death benefit will increase by $10,000. If you feel that's not enough, many employers will give you the option to increase your coverage, often through a payroll deduction. Determining whether to take advantage of this option usually depends on your age and health status. How so? With most group plans, employees are offered the same premium as others in their general age bracket (e.g., 25-34 year olds), regardless of their health status or actual age. So if you're healthy or near the lower end of your age bracket, this one-size-fits-all premium may be higher than what you would find if you shopped around on your own. On the other hand, if you're an older employee or perhaps suffer from a chronic health condition, increasing your coverage through work might be a great option because you might not be able to find a policy on the open market that's as affordable as what your employer is offering.

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Supporting aging parents
When you were growing up, your parents made lots of sacrifices for you. They did all they could to provide for your basic needs, and then some. And they probably did so without ever thinking that they'd need to rely on your financial support later in life. But that's not always the way things work out. Today, many people find themselves having to support their aging parents ¨ financially and otherwise. If you're one of them, you need to think about what would happen to them if something happened to you. Would your parents be able to afford quality healthcare and a decent place to live? Would they have to turn to friends or other family members for financial support? By figuring your parents financial needs into your life insurance plans, you can take the guesswork out of what would happen to your parents if something were to happen to you. Back to top

Changes in your business
One of the keys to running a successful small business is being able to adapt to change. Maybe you need to buy an expensive new piece of equipment to keep pace with a competitor. Or perhaps you have to hire a new person with a specialized skill set in order to expand into a new area. Whatever the case may be, anytime you make big changes in your business is an ideal time to find out if it also makes sense to make changes to your life insurance plans. To get a sense if it's a good time to reevaluate your life insurance coverage, ask yourself the following questions: • • • Has your business taken on more debt recently? Has your business become more dependent on a key employee or several key employees? Has the value of your business changed lately?

Life insurance can help address all of these scenarios. For instance, you could buy an individual life insurance policy to cover a new loan that you may have taken out for the business. If an employee or group of employees have become crucial to the ongoing success of your business, you can buy "key person insurance." Then, if one of these employees dies, you'll have the financial wherewithal to either hire a replacement or work out an alternative arrangement. If you have business partners and the value of your business changes significantly, it might be time to revisit your buy-sell agreement (assuming you have one). This is an agreement between owners to buy out a deceased owner's share of the business in the event of the co-owners retirement, disability or death. You've worked far too hard to leave the future of your business to chance. Make sure you have an insurance plan that will protect your family, your employees and the business. For help getting started, visit the Small Business Planning section of our site. Back to top

Changes in your marital status
If you're on your own now, whether through death or divorce, you need to carefully re-examine your entire financial situation, including your life insurance needs. In fact, you almost have to start from scratch because going from two spouses in a household to one will affect just about every financial calculation you can imagine. With regard to life insurance, the first thing you'll want to do is determine whether you still have a need for coverage. Remember, one of the main reasons you purchased life insurance in the first place was to provide financial security for your immediate family. If your spouse has died and you either have no children or your children are grown and financially independent, you may no longer need life insurance. But what if your spouse has died and you now have to raise young children on your own. Then instead of dropping your life insurance, you actually might need to increase your coverage. Think about it. As a single parent, you're the primary caregiver, breadwinner, go-to person and so much more. Your children are probably entirely dependent on you. By having adequate life insurance coverage, you can help ensure that your children will have the kind of lifestyle and

opportunities you'd always dreamed they'd have. Another important consideration is beneficiary designations. Most people will list their spouse as their primary beneficiary. So if your spouse has died, you should immediately change the beneficiary designation. Otherwise, a surrogate court judge might be the one to decide how to distribute your life insurance proceeds among your children or other family members. If you have children, deciding whether to list them as beneficiaries will depend, in part, on their age. If they're minors (under age 18), you should probably establish grantor trusts for each of your children and name the trusts as the beneficiaries. If you go this route, you'll also need to appoint a trustee (It's also a good idea to appoint a successor trustee, in case something happens to your first trustee). When you die, the trustee will be responsible for distributing funds to your children in accordance with your wishes. When the children are minors, trustees are often granted the discretion to make distributions as needed, within certain parameters. Once they're older, wills will often specify that distributions be made to the children in lump sums when they attain certain ages (For instance, you could arrange for your children receive equal payouts when they reach ages 20, 25 and 30). Alternatively, you could name adult children as the beneficiaries of your policy. But just know that if you do that and, say, your son or daughter gets divorced or is divorced when you die, the proceeds may be subject to equitable distribution. And would you really want half the proceeds to go to someone who's no longer in the family. Trusts can help prevent that from happening. The various scenarios described above all assumed that your spouse is deceased. But what if you've just divorced and have young children. Then things can get more complicated because your ex-spouse may be the one to care for and provide for your children if you die while they're still minors. Again, this is where trusts can be a good option. They can help ensure that the money is used to support your children needs. A final word of advice. These are very important and complex decisions, and may require the assistance of not just an insurance professional, but an attorney and an accountant as well. So if you're suddenly in the unfamiliar position of having to make financial decisions on your own, don't try a do-it-yourself approach. The stakes are way too high, especially if there are young children involved. Back to top

Planning for college
With college costs continuing to skyrocket, you need to plan earlier and more carefully than ever to achieve your collegesavings goals. Meeting this challenge requires a disciplined approach to saving and investing. But having a smart investment strategy is just one part of a sound college-funding plan. You also need a smart risk management strategy to ensure that your college savings goals will be achieved, even if you're not able to complete them due to illness, accident or death. Saving and Investing for College. Federal and state-sponsored college-savings programs are increasing in popularity because they let you save and withdraw tax-free. Education IRAs, now called Coverdell Education Savings Accounts, let you contribute $2,000 annually per child, but phase out contributions at higher income levels. Section 529 plans, a more flexible option, permit much larger contributions (over $200,000 per beneficiary in most states), and generally have no income restrictions. Permanent life insurance is another option to consider because it, too, allows you to save and withdraw tax-free, while also providing the protection you should be building into your college savings plan (see below). Withdrawals, and loans, which are also subject to interest charges, can lower the ultimate death benefit. Because of the insurance component, your costs may be somewhat higher than with, say, a Section 529 plan. Protecting Your College-Savings Plan. Protection products form the foundation of a sound college-funding program, ensuring that your college-savings plan won't die or become disabled if you do. Life insurance can complete a college-savings program that hasn't matured, while disability insurance can help make sure that you can continue to set aside money for college, even if you're unable to work for a period of time. Remember, a college-funding plan without insurance is just a savings and investment program that can die or become disabled when you do. Back to top

Planning for retirement
Mention "retirement planning" and most people think about their 401(k)s, IRAs or mutual funds. Keep saving, invest those savings wisely, get to age 65 and voila! You're set for retirement. Maybe. But what if things don't work out exactly the way you planned? What if you die prematurely or become disabled? What will happen to those people in your life, especially your spouse, who may be depending on your retirement savings to help support them well into old age? A retirement plan without insurance is just a savings and investment program that dies or becomes disabled when you do. Below are three ways life insurance can help you meet important retirement planning objectives: Prevent your retirement plans from dying when you do. If you die before retirement, your survivors would miss out on both your salary for living expenses and the money you were setting aside for the future. People who die prematurely haven't had as much time to put together an investment program that can really pay off. If you have sufficient life insurance, it can help pay your family's expenses and may still be there for your spouse's retirement. Supplement your retirement income. Suppose your circumstances change and you no longer have anyone who would need the proceeds of a death benefit. With a permanent life insurance contract, you have the flexibility to surrender the policy and supplement your retirement income with the funds that have accumulated in the policy's cash value account. Preserve your estate assets for your survivors. If you've accumulated a large estate, life insurance can help foot the estate tax bill from Uncle Sam, preserving assets for your heirs. Or, if your estate is more modest, life insurance can provide a legacy for your children and grandchildren even if you use up most of your assets during your retirement years.