Frequently Asked Questions for Life Insurance

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Why do I need life insurance?
Life insurance provides cash to your family after you die. The money your dependents receive (the death benefit) can be an important financial resource - to help pay the mortgage, run the household, and ensure that your dependents aren't burdened with debt. Having a life insurance policy might mean your family won't have to sell assets to pay outstanding bills or taxes. What's more, there is no federal income tax on life insurance benefits. If protection is not your primary goal, you should consider other financial products.

Where do I begin?
Start by evaluating your family's needs. Gather all your personal financial information and estimate what your family will need after you're gone. Include ongoing expenses (day care, tuition, or retirement) and immediate expenses (medical bills, burial costs, and estate taxes). Your family may also need money to help them readjust - perhaps to pay for a move, or job hunting expenses. Remember, life insurance provides financial protection.

How much life insurance will I need to purchase?
While there is no substitute for evaluating needs, one rule of thumb is to buy life insurance equal to five to seven times your annual income.

What are the different types of insurance?
Life insurance generally falls into two categories: term insurance and permanent insurance.

What are the advantages and disadvantages of term and permanent insurance?

	Advantages	Disadvantages
Term Insurance	Initial premiums generally are lower than those for permanent insurance, allowing you to buy higher levels of coverage at a younger age. It covers needs that will disappear in time, such as mortages or college expenses.	Premiums increase as you grow older. Coverage may terminate at the end of the term or become to expensive to continue because of age or health status. The policy doesn't offer cash value.
Permanent Insurance	As long as the premiums are paid, protection is guaranteed for life. Premium costs can be fixed or flexible to meet personal financial needs. The policy accumulates a cash value against which you can borrow. (Loans must be paid back with interest or your beneficiaries will receive a reduced death benefit). You can borrow against the policy's cash value to pay premiums or use the cash value to provide paid-up insurance. The policy's cash value can be surrendered - in whole or in part - for cash, or converted to an annuity (an insurance product that provides an income for a person's lifetime or a specific period of time"). A provision or "rider" can be added to a policy to give you the option to purchase additional insurance without taking a medical exam or having to furnish evidence of insurability. Other riders waive the premium if you become disabled, or allow you to collect all or part of the death benefit if you become terminally or chronically ill.	Required premium levels may make it hard to buy enough protection. It may be more costly than term insurance if you don't keep it long enough.

How do I know if a life insurance policy is right for me?
Your agent will recommend a life insurance policy that will meet your needs. Look at the recommended policy with care to be sure it fits your personal goals. Carefully study your agent's recommendation and ask for a point-by-point explanation. Make sure the agent explains the items you don't understand. Because the policy is a legal document, it is important that you know what it provides.

Source: American Council of Life Insurers (ACLI) "What You Should Know About Buying Life Insurance" -

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