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Life insurance is the foundation of a sound financial plan. It provides financial security for your family by protecting your financial resources, such as your present and future income, against the uncertainties of life.



PLEASE READ THIS ARTICLE BEFORE YOU BUY LIFE INSURANCE

The purchase of life insurance is an important decision for both you and your family. There are many reasons why life insurance is purchased, but these reasons should be based upon your needs or wants.
Your marital status, number of dependents, family size, income, and wealth all play a role in determining the amount of life insurance that is right for you. The first step is to determine your current need for life insurance and how much you can afford to spend. It is a good idea to consider future needs too, because unlike most purchases, you can’t always buy life insurance when you need it; you have to be in reasonably good health to purchase most types of life insurance products.

Remember if one kind of life insurance does not seem to fit your needs, ask about other plans. Be sure to read your new policy carefully, and ask the agent or company for an explanation of anything you do not understand. Take full advantage of the free look provisions that are provided on the policy cover page. New York requires a minimum free look period of 10 days and a maximum of 30 days.
A 30-day free look period is required for any policy offered through the mail. "Free look" provisions allow you to cancel a policy without penalty within a set time period. Whatever you decide, it is important to review your life insurance program every few years to keep up with your changing financial and family circumstances and responsibilities.

    FOR NEW JERSEY STATE RESIDENTS


    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:


    First "How much will be needed at death to meet immediate obligations?"
    and 
    Second "How much future income is needed to sustain the household?"

    The first  
    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 It involves calculating the "present value" of future needed cash-flow streams. By talking with our Resident Agent you will get a rough sense of the needs for capital that might exist at your death.


         A financial analysis of your needs depends upon the answers you provide. Please answer all questions your agent will need to ask to help you. 

    • Term Life 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 the term, which can be from one to 30 years. The premium rates increase at each renewal date. Many policies require that you present evidence of insurability at renewal to qualify for the lowest rates.
    • Permanent or Whole Life Insurance provides lifelong protection. As long as you pay the premiums, the death benefit will be paid. 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, this may be the wrong type of insurance for you. You can cancel or surrender the policy in total or in part and receive the cash value as a lump sum.
    • " If you need 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 protection covering you for your lifetime.
      " You usually can borrow from the insurance company, using the cash value in your life insurance as collateral. 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. 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. 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.

Analyze Your Need For Life Insurance

One approach to determine how much life insurance one should carry is to analyze the various needs of the family in the event of the death of a wage earner. Life insurance satisfies a number of these needs by providing a fund that can be used to:

  • Pay off an individual’s last debts such as medical bills and funeral expenses
  • Meet estate taxes and other expenses in settling an estate
  • Provide life income for the spouse
  • Pay off a mortgage
  • Pay for the children’s education
  • Provide funds for retirement
  • Provide an income for the policyholder’s spouse to give the family time to readjust to a new standard of living
  • Draw interest to provide funds for some special purpose
  • Provide a monthly income until the children are grown and out of school

Optional Riders/Supplemental Benefits

At the time you purchase a life insurance policy certain supplemental benefits are available to you. Usually the addition of a rider is reflected in an additional charge by the company and may require that the insured provide evidence of insurability. Some of the more important riders to add are:

Waiver of Premium  Waiver of premium provides that your policy will be kept in force by the company, without further payment of premiums, if you become totally disabled before age 60 or 65, after an initial waiting period. Total disability will be defined by the terms of the rider. Premiums are waived as long as your disability continues and policy benefits including cash values and dividends (where payable) continue just as if you had paid the premiums. This coverage is really a disability benefit and is both worthwhile and inexpensive.

Automatic Premium Loan Provision   This provision provides that at the end of the grace period, if the premium due has not been paid, a policy loan will automatically be made from the policy’s cash value to pay the premium. This helps to prevent an unintentional lapse in the policy. This provision is often recommended because of the numerous circumstances when a premium payment may have inadvertently gone unpaid. The value of the cash surrender must at least equal the loan amount plus a year of interest. This provision must be elected by the policyowner and can be cancelled at any time by the policyowner.

Waiver of Mortality Deduction Charges   The waiver of mortality deduction charges operates in the same manner as the waiver of premium benefit above except that it is offered with flexible premium universal life type policies.

Disability Income Disability income provides a monthly income while you are totally disabled after an initial waiting period. The monthly disability income benefit is limited to a percentage of the death benefit.

Accidental Death Benefit  The accidental death benefit provision provides an additional amount of insurance in the event that death of the insured occurs by accident. Some accidental death benefits will provide for two or three times the face amount of the policy for specified types of accidents. The accidental death must occur prior to a specified age, such as 65. Among other exclusions, death due to sickness is excluded.

Guaranteed Insurability  The guaranteed insurability rider gives you the option to buy a stated amount of additional insurance at specified intervals up to a maximum age, usually 40, without presenting evidence of insurability. Such riders will also provide alternate dates to obtain additional insurance such as the date of marriage, the birth or adoption of a child when you need for insurance coverage may increase. This rider guarantees you the option of buying additional coverage regardless of the state of your health at the time you request the additional insurance at premium rates based on your attained age.

Cost of Living Rider  The cost of living rider enables you to purchase more insurance each year to help offset increasing insurance needs due to inflation. The amount that can be purchased is based on increases in the cost of living index. This additional coverage is usually available at low rates and evidence of insurability need not be provided for such increases.

Payor Benefit Rider  A rider may be added to the policy of a juvenile stating that if the payor (the one paying the premium) dies or becomes totally disabled prior to the juvenile’s reaching majority, the subsequent premiums due are automatically waived.

Spouse Rider  This type of rider will provide level term coverage on the life of the insurer’s spouse. Such rider will also provide a conversion provision permitting the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy.

Children’s Rider  This type of rider will generally provide level term coverage on the life of your children. Such riders are usually offered at one premium rate and may cover newborns and adopted children who can be added to the coverage without increasing the premium you pay. The rider will also provide a conversion provision, which will permit each child to convert to a permanent plan of coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy.

Term Riders  Term riders provide temporary coverage which may be attached to an existing permanent policy or interest sensitive policy to provide an amount of extra insurance protection for a fixed period of time. These types of riders are useful if you need more insurance or a decreasing amount of coverage for a limited period.

Differences Between Companies and Products

The following is a brief list of some of the other factors that you will need to consider when comparing products and companies:

Company Financial Strength - Not all life insurance companies are the same. Some are very large financially, some are small. Some companies are in better financial condition than others. The longer the level term period, the more important it is to consider how healthy and strong the life insurance company is. Make sure that you ask your agent for information about the financial ratings for the companies that you are considering.

Premium Guarantees - Are the premiums for the policy fully guaranteed? Not all companies fully guarantee the initial premium for the entire level period. If two products have the same price, but one is guaranteed while the other is not, the guaranteed product would be better.

Renewal Period - Most level term policies have the ability to renew the policy beyond the initial level premium period. Two products may offer identical premiums for the initial level period, and yet there may be an enormous difference in renewal costs beyond the level period. No Lapse U/L products have term-like premiums which offer initial guaranteed level premiums comparable to the level periods of corresponding guaranteed level term policies. For the intial level period, U/L policies with term-like guaranteed premiums provide comparable premium/death benefits as the corresponding level term products. However, the ability to renew those U/L policies, and the premiums that you might pay to renew those policies, can differ significantly from a corresponding level premium term policy.

Conversion Period - Many term policies offer the ability to exchange the term policy for a whole life policy without having to again medically qualify. Should your health change, and should you not be able to buy a new policy elsewhere, you may find the conversion option important. Not all policies offer the same time period for conversion to take place, and not all give you access to the same types of whole life.

Comparing Different Level Periods - Should you be buying a 10 year term product, a 20 year term or a 30 year term? How long do you need the insurance? If you buy a 10 year term, how will future cost increases after the 10th year compare to a longer level term plan such as 20 year term? If you only need insurance for 10 years, you could be wasting your money buying a 20 year term product. You should discuss why you are buying the insurance with your agent and let them give you the benefit of their knowledge and experience.

Monthly Payment Options - Many consumers pay their term insurance premiums on a monthly basis. The least expensive product based upon the annual premium may not have the lowest monthly, quarterly or semi-annual premium. Many life insurance companies charge extra to pay more frequently than annually, and some charge more than others.

Health Risk Conditions - Each life insurance company establishes its own health and lifestyle requirements to determine what premiums you may qualify for. Slightly high blood pressure may disqualify you for one company's preferred health premium, but might be acceptable to obtain another company's preferred health premium. Your agent will be able to give you more guidance.

Smoking Considerations - Not all life companies define smoking the same way. If you have never smoked or used tobacco products in any way, then a non-smoking comparison will include products that you can qualify for based upon non-smoking. If you were a smoker and later quit, then how long ago that you quit may limit your choices. If you do smoke, some companies may offer products with better premiums depending on how little you smoke, or whether you smoke cigars or pipe rather than cigarettes. You will need to discuss all of this with your agent.

There are other considerations that you will want to discuss with your agent.

About This Comparison

The information used in this comparison has been taken from the rate cards and rate manuals which life companies routinely publish and distribute to life agents and brokers. To the best of our ability we have done everything we can to ensure that the information contained in this comparison is up-to-date and accurate. However, WE CANNOT GUARANTEE ACCURACY.

In the event that there is a discrepancy between the information contained in this comparison, and any life company authorized illustration and/or policy, the policy shall govern.



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