Get the Skinny on Life Insurance before it's too late

Buying life insurance is NO FUN at all and is not like any other purchase you will make. When you pay your dues or premiums as we've been conditioned to call it, you're buying the future financial security for your family that only life insurance can provide. Among its many uses, life insurance helps ensure that, when you die, your dependents will have the financial resources needed to protect their home and the income needed to run a household.

Choosing a life insurance product doesnt' have to be a tough decision, but it often can be com-plicated. As with any major purchase, it is important that you understand your needs and the variety of options to choose from.

Life insurance also can be used to help with other financial goals, such as funding retirement or education expenses. However, it is important to remember that the main purpose of life insurance is financial protection. If your primary goals are something other than protection, you should consider what other financial products are available to meet those goals.

The information in this brochure has been compiled by the American Council of Life Insurance, a trade association of more than 600 life insurance companies. Collectively, these companies provide about 90 percent of the life insurance in force in the United States.

LEARNING THE BASICS

The best way to make an informed decision about buying life insurance is to become familiar with the basics.

Why do I need life insurance?
Life insurance is an essential part of financial planning. One reason most people buy life insurance is to replace income that would be lost with the death of a wage earner. The cash provided by life insurance also can help ensure that your dependents are not burdened with significant debt when you die. Life insurance proceeds could mean your dependents won't have to sell assets to pay outstanding bills or taxes. An important feature of life insurance is that no income tax is payable on proceeds paid to beneficiaries.

How much life insurance do I need? Before buying life insurance, you should assemble personal financial information and review your family's needs. There are a number of factors to consider when determining how much protection you should have.

These include: any immediate needs at the time of death, such as final illness expenses, burial costs and estate taxes;l funds for a readjustment period, to finance a move or to provide time for family members to find a job; and ongoing financial needs, such as monthly bills and expenses, day-care costs, college tuition or retirement. Although there is no substitute for a careful evaluation of the amount of coverage needed to meet your needs, one rule of thumb is to buy life insurance that is equal to five to seven times your annual gross income.

What is term insurance?
Term insurance provides protection for a specific period of time. It pays a benefit only if you die during the term. Some term insurance policies can be renewed when you reach the end of a specific period which can be from one to 20 years. The premium rates increase at each renewal date. Many policies require that evidence of insurability be furnished at renewal for you to qualify for the lowest available rates.

What is permanent insurance?
Permanent insurance provides lifelong protection and is known by a variety of names, described later. As long as you pay the necessary premiums, the death benefit always will be there. These policies are designed and priced for you to keep over a long period of time. If you don't intend to keep the policy for the long term, it could be the wrong type of insurance for you.

Conclusion: use your local phone directory to phone around for some quotes of life and mutual insurance from some agents in your area. Compare prices and shop around. Many companies now offer online quotes as well for you shy, quiet types.

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