LIFE INSURANCE PROTECTS SURVIVORS AGAINST THE FINANCIAL LOSS ASSOCIATED WITH DEATH. SPECIFICALLY, IT IS DESIGNED TO REPLACE A LOSS OF INCOME FOR FAMILY MEMBERS WHO ARE FINANCIALLY DEPENDENT UPON ANOTHER PERSON. LIFE INSURANCE CAN ALSO BE CONSIDERED A MEANS OF SAVING OR INVESTING, BUT ITS PRIMARY PURPOSE IS ALWAYS PROTECTION AGAINST FINANCIAL LOSS.

ANYONE WITH DEPENDENTS NEEDS LIFE INSURANCE. A DEPENDENT IS A PERSON WHO MUST RELY ON ANOTHER FOR FINANCIAL SUPPORT. IN THE FUTURE, YOU WILL NEED TO ASK THE QUESTION, "WHAT WOULD HAPPEN TO THE PEOPLE WHO ARE FINANCIALLY DEPENDENT ON ME IF I DIED TOMORROW?" IF THEY COULD NOT LIVE FINANCIALLY IN THE MANNER IN WHICH THEY LIVED BEFORE YOUR DEATH, YOU PROBABLY NEED LIFE INSURANCE.

INSURANCE COMPANIES OFFER A VARIETY OF LIFE INSURANCE PLANS THAT MEET THE DIFFERENT INSURANCE NEEDS OF INDIVIDUALS. THE TWO BASIC TYPES OF LIFE INSURANCE POLICIES ARE TERM LIFE AND PERMANENT LIFE.

TERM LIFE INSURANCE PROVIDES FINANCIAL PROTECTION FROM LOSSES RESULTING FROM LOSS OF LIFE DURING A DEFINITE PERIOD OF TIME, OR TERM. IT IS THE LEAST EXPENSIVE FORM OF LIFE INSURANCE THAT IS PURELY LIFE INSURANCE. IT IS THE ONLY FORM OF LIFE INSURANCE THAT IS PURELY LIFE INSURANCE. ALL OTHER FORMS OF INSURANCE HAVE SAVINGS OR INVESTMENT FEATURE ADDED TO THEM.

TERM POLICIES MAY RUN FOR A PERIOD, OR TERM, OF FROM 1 TO 20 YEARS OR MORE. IF THE INSURED DIES DURING THE PERIOD FOR WHICH THE INSURANCE WAS PURCHASED, THE AMOUNT OF THE POLICY IS PAID TO THE BENEFICIARY. A BENEFICIARY IS THE PERSON NAMED IN THE POLICY TO RECEIVE THE INSURANCE BENEFITS. IF THE INSURED DOES NOT DIE DURING THE PERIOD FOR WHICH THE POLICY WAS PURCHASED, THE INSURANCE COMPANY IS NOT REQUIRED TO PAY ANYTHING. PROTECTION ENDS WHEN THE TERM OF YEARS EXPIRES.

BY PAYING A SLIGHTLY HIGHER PREMIUM, A PERSON CAN BUY TERM INSURANCE THAT IS RENEWABLE. A RENEWABLE POLICY ALLOWS THE POLICYHOLDER TO CONTINUE TERM INSURANCE FOR ONE OR MORE TERMS WITHOUT TAKING A PHYSICAL EXAMINATION TO DETERMINE WHETHER SHE OR HE IS STILL A GOOD RISK.

TERM INSURANCE POLICIES MAY BE LEVEL TERM OR DECREASING TERM. WITH LEVEL TERM INSURANCE, THE AMOUNT OF PROTECTION AND THE PREMIUMS REMAIN THE SAME WHILE THE INSURANCE IS IN EFFECT. WITH DECREASING TERM INSURANCE, THE AMOUNT OF PROTECTION GRADUALLY BECOMES SMALLER, BUT PREMIUMS REMAIN THE SAME DURING THE TERM. THIS IS FREQUENTLY APPROPRIATE BECAUSE THE NEED FOR INSURANCE NORMALLY DECLINES AS CHILDREN GROW UP AND BECOME INDEPENDENT AND OTHER SAVINGS AND INVESTMENTS GROW.

THE SECOND TYPE OF LIFE INSURANCE IS CALLED PERMANENT INSURANCE. PERMANENT INSURANCE HAS CASH VALUE AND AN INVESTMENT FEATURE AS ITS COMMON CHARACTERISTICS. PART OF THE PREMIUMS YOU PAY FOR PERMANENT LIFE INSURANCE IS USED FOR INSURANCE THAT PROVIDES PROTECTION. ANOTHER PART OF THE PREMIUM, NOT REQUIRED FOR INSURANCE, IS INVESTED FOR YOU AND BECOMES PART OF THE CASH VALUE OF YOUR INSURANCE POLICY. CASH VALUE REFERS TO THE AMOUNT OF MONEY RECEIVED SHOULD A POLICYHOLDER DECIDE TO SURRENDER THE POLICY. CASH VALUE BUILDS AS A PART OF THE PREMIUM THAT IS NOT REQUIRED TO BUY PROTECTION. THE CASH VALUE INCREASES THROUGHOUT THE LIFE OF THE POLICY. AS LONG AS PERMANENT POLICIES ARE KEPT IN FORCE, THEY ACCUMULATE CASH VALUE IN ADDITION TO PROVIDING LIFE INSURANCE.

THE LONGER YOU KEEP YOUR PERMANENT LIFE INSURANCE POLICY, THE HIGHER ITS CASH VALUE WILL BE. IF YOU GIVE UP OR SURRENDER YOUR POLICY, YOU ARE PAID THE AMOUNT OF THE CASH VALUE. IF YOU NEED MONEY BUT DO NOT WISH TO CANCEL YOUR POLICY, YOU CAN BORROW FROM THE INSURANCE COMPANY AN AMOUNT UP TO THE CASH VALUE. IF YOU SHOULD DIE BEFORE THE LOAN CAN BE REPAID, THE UNPAID AMOUNT WILL BE DEDUCTED FROM THE FACE VALUE OF THE POLICY WHEN YOUR SURVIVORS ARE PAID. FACE VALUE IS THE AMOUNT OF INSURANCE COVERAGE THAT WAS ORIGINALLY PURCHASED AND THAT WILL BE PAID UPON THE DEATH OF THE INSURED.

THE CASH VALUE OF PERMANENT LIFE INSURANCE CAN BE SEEN AS A SAVINGS PLAN. THE RETURN ON YOUR MONEY IN THE CASH VALUE PORTION OF PERMANENT LIFE INSURANCE IS OFTEN NOT LARGE. HOWEVER, PERMANENT INSURANCE PLANS HAVE A BUILT-IN-SAVINGS FEATURE THAT ENCOURAGES PEOPLE TO SANE FOR THE FUTURE. PERMANENT LIFE INSURANCE COMES IN THE FORM OF WHOLE LIFE, VARIABLE LIFE, AND UNIVERSAL LIFE POLICIES. EACH TYPE ACCUMULATES CASH VALUE.

WHOLE LIFE INSURANCE IS PERMANENT INSURANCE THAT EXTENDS OVER THE LIFETIME, OR WHOLE LIFE, OF THE INSURED.

ONE TYPE OF WHOLE LIFE INSURANCE IS CALLED AN ORDINARY LIFE POLICY. PREMIUMS FOR ORDINARY LIFE INSURANCE REMAIN THE SAME EACH YEAR AS LONG AS THE POLICYHOLDER LIVES.

SOME WHOLE LIFE INSURANCE POLICIES ARE INTENDED TO BE PAID IN FULL IN A CERTAIN NUMBER OF YEARS AND ARE CALLED LIMITED-PAYMENT POLICIES. LIMITED-PAYMENT POLICIES MAY ALSO BE DESIGNED BY THE NUMBER OF YEARS THE POLICYHOLDER AGREES TO PAY ON THEM, SUCH AS 20-PAYMENT LIFE POLICIES. THEY ARE LIKE ORDINARY LIFE POLICIES, EXCEPT THAT PREMIUMS ARE PAID FOR A LIMITED NUMBER OF YEARS—20 OR 30, FOR EXAMPLE—OR UNTIL A PERSON REACHES A CERTAIN AGE, SUCH AS 60 OR 65. LIMITED-PAYMENT POLICIES FREE THE INSURED FROM PAYING PREMIUMS DURING RETIREMENT WHEN INCOME MAY BE LOWER.

VARIABLE LIFE INSURANCE IS A TYPE OF LIFE INSURANCE PLAN THAT RESEMBLES AN INVESTMENT PORTFOLIO. THIS PLAN LETS THE POLICYHOLDER CHOOSE AMONG A BROAD RANGE OF INVESTMENTS INCLUDING STOCKS, BONDS, AND MUTUAL FUNDS. THE DEATH BENEFITS AND CASH VALUES OF VARIABLE LIFE POLICIES VARY ACCORDING TO THE YIELD ON THE INVESTMENTS THE POLICYHOLDER SELECTS.

THE INSURANCE COMPANY FIRST DESIGNATES AN AMOUNT OF THE VARIABLE LIFE PREMIUMS TO COVER THE COST OF INSURANCE. THE REMAINING AMOUNT IS PLACED IN AN INVESTMENT ACCOUNT. BOTH THE DEATH BENEFIT AND THE CASH VALUE RISE AND FALL WITH THE SUCCESS OF THE INVESTMENT ACCOUNT OF YOUR CHOOSING.

A MINIMUM DEATH BENEFIT IS GUARANTEED, BUT THERE IS NO GUARANTEED CASH VALUE. THE MINIMUM DEATH BENEFIT, IN RELATION TO PREMIUMS PAID, IS WELL BELOW OTHER TYPES OF LIFE INSURANCE. ON THE POSITIVE SIDE, HOWEVER, A STRONG RATE OF RETURN ON THE INVESTMENT ACCOUNT CAN INCREASE THE CASH VALUE AND THE DEATH BENEFIT WELL ABOVE THE GUARANTEED LEVEL.

UNIVERSAL LIFE INSURANCE PROVIDES BOTH INSURANCE PROTECTION AND A SUBSTANTIAL SAVINGS PLAN. THE PREMIUM THAT YOU PAY FOR UNIVERSAL LIFE INSURANCE IS DIVIDED THREE WAYS. ONE PORTION OF IT PAYS FOR INSURANCE PROTECTION. A SECOND PORTION IS TAKEN BY THE INSURANCE COMPANY FOR ITS EXPENSES. THE THIRD PORTION IS PLACED IN INTEREST-EARNING INVESTMENTS FOR THE POLICYHOLDER. THE MOST IMPORTANT FEATURE IF UNIVERSAL LIFE INSURANCE IS THAT THE SAVINGS PORTION OF THE POLICY EARNS A VARIABLE INTEREST RATE. THIS INTEREST RATE IS USUALLY HIGHER THAN IS PAID ON OTHER CASH VALUE INSURANCE.

VIRTUALLY EVERYONE NEEDS LIFE INSURANCE AS FEW OF US HAVE THE FINANCIAL RESOURCES NECESSARY TO PAY THE COSTS THAT CAN OVERTAKE US UPON THE DEATH OF SOMEONE CLOSE TO US. THEREFORE, IN ORDER FOR A LIFE INSURANCE THAT CAN OVERTAKE US UPON THE DEATH OF SOMEONE CLOSE TO US. THEREFORE, IN ORDER FOR A LIFE INSURANCE PROGRAM TO BE MOST EFFECTIVE FOR YOU, IT MUST BE SUITED TO YOUR NEEDS AND THOSE OF YOUR FAMILY.

THE ANSWERS TO THE FOLLOWING QUESTIONS WILL HELP TO DETERMINE THE SUITABILITY OF A LIFE INSURANCE PROGRAM:

• HOW MUCH MONEY IS REQUIRED FOR YOUR DEPENDENTS’ SURVIVAL?

• HOW MUCH INCOME WILL YOU NEED WHEN YOU RETIRE?

• WHAT CAN YOU AFFORD TO PAY FOR YOUR LIFE INSURANCE NEEDS?

ANSWERS TO THESE QUESTIONS WILL HELP YOU PURCHASE THE BEST LIFE INSURANCE PROGRAM FOR YOU.

TO BUY INDIVIDUAL LIFE INSURANCE COVERAGE, ONE WOULD USUALLY APPLY FOR A POLICY THROUGH AN INSURANCE AGENT WHO REPRESENTS AN INSURANCE COMPANY.

NORMALLY YOU WILL BE REQUIRED TO TAKE A PHYSICAL EXAMINATION SO THAT YOUR HEALTH CAN BE ASSESSED. ASSUMING THAT YOU HAVE NO SERIOUS HEALTH PROBLEMS, YOU THEN PAY A PREMIUM AND RECEIVE YOUR LIFE INSURANCE POLICY. IF YOU ARE IN POOR HEALTH OR WORK IN A DANGEROUS OCCUPATION, YOU MAY BE CONSIDERED A POOR RISK. FOR EXAMPLE, IF YOU DRIVE RACING CARS TO EARN A LIVING, YOU ARE IN A DANGEROUS OCCUPATION. EVEN IF YOU ARE IN POOR HEALTH OR WORK IN A DANGEROUS JOB, YOU MAY BE ABLE TO OBTAIN INSURANCE. HOWEVER, YOU WILL PROBABLY PAY HIGHER PREMIUMS THAN PEOPLE WHO ARE IN GOOD HEALTH AND ARE EMPLOYED IN LESS HAZARDOUS OCCUPATIONS.

WHEN YOU BUY LIFE INSURANCE, YOU WILL BE ASKED TO NAME A BENEFICIARY. THIS IS MOST OFTEN A SPOUSE OR ONE OR MORE CHILDREN. YOU MAY INSURE NOT ONLY YOUR OWN LIFE, BUT ALSO THE LIFE OF ANY OTHER PERSON IN WHOM YOU HAVE AN INSURABLE INTEREST. TO HAVE AN INSURABLE INTEREST IN THE LIFE OF ANOTHER PERSON, YOU MUST RECEIVE SOME KIND OF FINANCIAL BENEFITS FROM THAT PERSON’S CONTINUED LIFE. YOU HAVE, FOR EXAMPLE, AN INSURABLE INTEREST IN THE LIVES OF YOUR PARENTS. YOU DO NOT HAVE AN INSURABLE INTEREST IN A STRANGER’S LIFE. A PARTNER IN A BUSINESS HAS AN INSURABLE INTEREST IN THE LIFE OF HIS OR HER PARTNER.

IN ADDITION TO THE HEALTH AND OCCUPATION OF THE INSURED, THE COST OR PREMIUMS OF A LIFE INSURANCE POLICY DEPEND ON THE TYPE OF LIFE INSURANCE BEING PURCHASED AND THE AGE OF THE PERSON BEING INSURED. IN PURCHASING A WHOLE LIFE POLICY, FOR EXAMPLE, THE PREMIUMS FOR ORDINARY LIFE INSURANCE ARE HIGHER THAN THOSE FOR TERM INSURANCE, BUT THE ANNUAL PREMIUM STAYS THE SAME THROUGHOUT THE INSURED’S LIFE. THE PREMIUMS ON LIMITED PAYMENT LIFE INSURANCE ARE HIGHER THAN THOSE FOR ORDINARY LIFE INSURANCE, BUT THEY ARE PAYABLE FOR ONLY A LIMITED NUMBER OF YEARS.

SOME INDIVIDUALS ARE FORTUNATE TO HAVE AN EMPLOYER OR SOME OTHER GROUP OFFER THE OPPORTUNITY TO BUY GROUP LIFE INSURANCE. AN INSURANCE POLICY THAT COVERS A GROUP OF PEOPLE IS CALLED GROUP LIFE INSURANCE. THE GROUP ACTS AS A SINGLE UNIT IN BUYING THE INSURANCE. OUR U.S. MARKET ECONOMY TENDS TO RECOGNIZE EFFICIENCIES AND SAVINGS THAT RESULT IN SELLING MULTIPLE QUANTITIES. YOU CAN OFTEN BUY THREE POUNDS OF HAMBURGER FOR A LOWER PER-POUND PRICE THAN BUYING JUST ONE POUND. YOU CAN SOME TIMES TRAVEL 1,000 MILES BY AIR FOR ONLY A FEW DOLLARS MORE THAN 500 MILES. SO IT IS, TOO, WITH INSURANCE. THE COST OF GROUP LIFE INSURANCE IS LESS THAN THE COST OF A SIMILAR AMOUNT OF PROTECTION BOUGHT INDIVIDUALLY BECAUSE INSURANCE COVERING MANY PEOPLE CAN BE HANDLED ECONOMICALLY IN ONE POLICY.

MOST GROUP LIFE INSURANCE CONTRACTS ARE ISSUED ON A TERM BASIS THROUGH EMPLOYERS. SOME POLICIES, THOUGH, ARE AVAILABLE THROUGH UNIONS, PROFESSIONAL ASSOCIATIONS, AND OTHER SIMILAR ORGANIZATIONS. THE AMOUNT OF PROTECTION AVAILABLE TO AN INDIVIDUAL UNDER A GROUP INSURANCE PLAN IS GENERALLY LIMITED. MANY PEOPLE, THEREFORE, SUPPLEMENT THEIR GROUP INSURANCE WITH POLICIES OF THEIR OWN.