| How much do you need?
To decide how much life insurance you need, figure out what
your dependents would have if you were to die now, and what they
would actually need. Your new policy should come as close to
making up the difference as you can afford.
In figuring what you have, count your present insurance - including
any group insurance where you work, social security or veteran's
insurance. Add other assets you have - saving, investments, real
estate, and personal property.
In figuring what you need, think of income for you dependents
- for family living expenses, educational costs and any other
future needs. Think also of cash needs - for the expenses of
a final illness and for paying taxes, mortgage or other debts.
What is the Right Kind?
All life insurance policies agree to pay an amount of money
when you die. But all policies are not the same. Some provide
permanent coverage and others temporary coverage. Some build
up cash values and others do not. Some policies combine different
kinds of insurance, and others let you change from one kind of
insurance to another. Your choice should be based on your needs
and what you can afford. Here is a brief description of two basic kinds - term
and whole life - and some combinations and variations. You can
get detailed information from a life insurance agent or company.
Term insurance 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 provides the largest immediate death protection for
your premium dollar.
Most term insurance policies are renewable for one or more additional
terms even if your health has changed. Each time you renew the
policy for a new term, premiums will be higher. Check the premiums
at older ages and how long the policy can be continued.
Many term insurance are renewable for one ore more additional
terms even if your health has changed. Each time you renew the
policy for a new term, premiums will be higher. Check the premiums
at older ages and how long the policy can be continued.
Many term insurance policies can be traded before the end of
a conversion period of a whole life policy-even if you are not
in good health. Premiums for the new policy will be higher than
you have been paying for the term insurance.
Whole Life Insurance covers you for as long as you live. The
common type is called straight life or ordinary life insurance
- you pay the same premiums for as long as you live. These premiums
can be several times higher than you would pay at first 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.
Some whole life policies let you pay premiums for a shorter
period such as 20 years, or until age 65. Premiums for these
policies are higher than for ordinary life insurance since the
premium payments are squeezed into a shorter period.
Whole life policies develop cash values. If you stop paying
premiums, you can take the cash - or you can use the cash value
to buy continuing insurance protection for a limited time or
a reduced amount. (Some term policies that provide coverage for
a long period also have cash values).
You may borrow against the cash values by taking a policy loan.
Any loan and interest on the loan that you do not pay back will
be deducted from the benefits if you die, or from the cash value
if you stop paying premiums.
Combinations and Variations. You can combine different kinds
of insurance. For example, you can buy whole life
insurance for lifetime coverage and add term insurance for
the period of your greatest insurance need. Usually the term
insurance is on your life - but it can also
be bought for your spouse or children.
Endowment insurance policies pay a sum or income to you
if you live to a certain age. If you die before then, the death
benefit is paid to the person you named as beneficiary.
Other policies may have special features which allow flexibility
as to premiums and coverage. Some let you choose the death benefit
you want and the premium amount you can pay. The kind of insurance
and coverage period are determined by these choices.
One kind of flexible premium policy, often called universal
life, lets you vary your premium payments every year, and even
skip a payment if you wish. The premiums you pay (less expense
charges) go into a policy account that earns interest and charges
for the insurance are deducted from the account. Here, insurance
continues as long as there is enough money in the account to
pay the insurance charges. |
