How Much Life Insurance Do I Need
Universal Life Insurance
Variable Universal Life Insurance
Survivorship Life Insurance
Disability Income Insurance
Long-Term Care Insurance

How Much Life Insurance Do I Need? back to top

What Needs Can Life Insurance Fulfill?

When an individual dies, life insurance can assist with immediate needs:

· Pay final expenses caused by final medical or funeral costs
· Pay off a mortgage
· Pay off outstanding consumer debts such as car loans or credit cards
· Establish emergency funds for surviving beneficiaries
· Establish children's education funds

Life insurance can also help replace money needed for continual income to the survivors in order to:

· Pay for day-to-day living expenses such as food, clothing, transportation, school expenses, etc.
· Pay monthly mortgage or rental payments if there is no mortgage payoff

The amount of money required for any of these needs varies across geographic areas. Needs also vary depending on the current income, lifestyle and personal preferences of different individuals.

Do the Immediate Cash and Income Needs Represent the Amount of Insurance I Should Buy?

Not necessarily. Deducting any permanent life insurance that is already established, as well as other savings needs can make adjustments to the immediate cash. Deducting any Social Security income, a surviving spouse's income, pension distributions from the deceased person's account, as well as any other regular income can also make adjustments.

The Human Life Value Approach

To determine life insurance needs, take into consideration the monetary value to others in reference to a person's future earnings. Look at the income the wage earners spending to support him or herself and assume the remainder of their earnings is spent to support dependents. With this figure, the present value of future earnings, also called the human life value, is calculated. Insurance companies use standardized tables to determine this amount, which becomes the focal point for identifying life insurance needs.

Universal Life Insurance back to top

What Is Universal Life Insurance?

Universal life insurance is similar to traditional life insurance, however it includes variations and options that may make it more attractive. Such as:

· Higher rates of interest paid on the cash value.
· Flexible premium payment options.
· Flexible death benefit amount options.

How Does It Work?

Like traditional insurance, a universal life policy specifies a minimum guaranteed interest rate. However, universal life policies pay a current interest rate that is typically higher than the minimum guaranteed interest rate. Paying this higher rate the cash value account more rapidly. The current rate that will be paid as long as it is greater than the minimum guaranteed interest rate.

The insurer establishes a minimum premium that must be paid initially to keep the insurance in force. The policy owner may choose to pay a greater premium. The excess over the minimum premium will go into the cash value account where it can accumulate for the policy owner's benefit. When there is sufficient cash value to pay for the insurance protection, the owner may reduce the amount of the premium or elect to skip any premium payment entirely.

Why Choose Universal Life Insurance?

· Potential for faster and greater growth of the cash value accumulation.
· Flexibility in the amount and frequency of premium payments. Subject to certain requirements.
· Flexibility in selecting and changing the amount of the death benefit. Subject to certain requirements.
· Opportunity for policy loans or partial withdrawals from the cash value account.

Variable Universal Life Insurance back to top

What Is It?

Variable universal life insurance combines features of variable life and universal life. These features include:

· Investment options intended to provide a higher rate of interest than guaranteed* rates.
· Assumption by the policy owner of the investment risks, including the risk that the principal will be lost.
· Flexible premium payment
· Flexible death benefit options.

How Does It Work?

Variable Returns–The policy owner selects one or more investment options. These are considered "separate accounts", which are segregated from the insurer's general accounts. A portion of each policy premium is invested in the investment options. The return is variable and is not guaranteed.*

Flexible Premiums--A minimum premium must be paid initially to keep the insurance in force. The policy owner may pay a greater premium, with the excess going toward the investment options. When there is sufficient cash value to pay for the insurance protection, the owner may pay a smaller premium or elect to skip it entirely. However, these actions should be carefully monitored since poor investment returns could put the policy at risk of lapsing.

Flexible Death Benefit--The death benefit is both adjustable and variable. The death benefit is level unless the policy owner decides to adjust it. This is the same as Option A in a universal life policy.

The variable death benefit is Option B--the same increasing death benefit option found in regular universal life. The death benefit fluctuates over time because the cash value is added to the selected death benefit. As the cash value increases, so does the total death benefit. However, because the benefit is tied to the investment experience of the underlying investment options, the death benefit can also be reduced--but only to a specified minimum. A certain amount of pure insurance protection must always be maintained. If the policy values grow too close to the amount of insurance, the insurance must increase.

What Are the Benefits?

· Potential for a greater return on the policy holder's investment.
· Flexibility in the amount and frequency of premium payments.
· Flexibility in selecting and changing the amount of the death benefit.

What Is the Downside?

· Policy owner assumes all investment risk and principal may be lost.
· Earnings are not guaranteed* and are subject to market risk.
· The principal value and investment return of the investment options will fluctuate so that, when redeemed, the investment may be worth more or less than the original cost.**

* The death benefit guarantee and the guarantee associated with the fixed interest account are based on the claims-paying ability of the issuing insurance company, and do not extend to the separate account. Variable universal life contracts are not deposits or other obligations and are not guaranteed by any bank or credit union and are not insured by the FDIC, NCUA or any other federal entity. Variable universal life contracts may lose value and are subject to investment risks, including possible loss of the principal amount invested.

** Withdrawals are subject to ordinary income tax and may incur a withdrawal charge.

When considering Variable Universal Life Insurance, as with any investment, it is important that you work with a knowledgeable agent--one that will take the time to explain all of your options, their risks and potential rewards. And, that's just what we promise. Contact us today....

Survivorship Life Insurance back to top

What Is Survivorship Life Insurance?

Survivorship or second-to-die policies are written to cover the lives of two or more people--typically spouses. The death benefit is payable only after the death of the second (or last) insured.

The most common use for a survivorship policy is to fund estate taxes when the second spouse dies. Funding at the second death is an issue since assets generally pass tax free from one spouse to another under the "marital deduction" when the first person dies, but may become payable when the second person dies with an estate exceeding the exemption amount.

This is not the only use for a survivorship policy. Other uses include:

· Providing income for people who might be dependent on the couple, such as minor children, disabled adult children or elderly relatives.
· Funding the buyout of a business owned by parents and being bought by surviving children.
· Covering two key employees when the employer can handle the financial impact of one death, but not two.
· Insuring two or more business partners and providing income to cover expenses when the second person dies and the business must be dissolved or sold

How Does It Work?

The policy is written with two or more persons as the insured with the stipulation that the death benefit will be paid only upon the death of the second (or last) person. No benefit is paid when the first party dies (or any party other than the last survivor when multiple lives are covered).

What Are the Benefits?

· Funding is provided for certain expenses, including estate taxes, that arise upon the death of the second person.
· Premiums are typically lower than for two individual policies since the statistical risk is lower for the insurance company.
· Many insurance companies will insure a person whose health is marginal as long as the other insured person is healthy and poses less risk for the company.

Disability Income Insurance back to top

What Is Disability Income Insurance?

Disability income insurance provides a steady income for an insured person who becomes completely disabled and unable to work. The income amount is always a predetermined percentage (less than 100%) of the insured person's normal income at the time the disability occurs.

How Does It Work?

The policy includes an exact definition of what constitutes total disability that is the foundation for benefit payments. Most policies have a two-step definition that defines total disability as:

A)   The inability of the insured to perform the duties and tasks of his or her own occupation for a specified period of time.

B) After the aforementioned period passes, and if the insured is still unable to return to work, disability is then redefined as the inability to perform the duties of any occupation where the insured is reasonably suited by education, training or experience. Policies can differ significantly, so it is important to read and understand the definition in any particular policy.

Some policies pay a residual benefit if the individual is able to return to work, but can no longer earn income at the pre-disability level. The formula for determining the amount of the residual benefit will be specified in insured's policy.

Disability policies have a waiting period that begins when the insured becomes disabled and extends for a certain

length of time, usually from 30 to 120 days or longer. During this period, no benefits will be paid. If the insured is still totally disabled at the end of the waiting period, benefit payments then begin accordingly. This feature helps control the cost of the policy: a longer waiting period means smaller premiums, and a shorter waiting period results in larger premiums.

The length of the benefit period during which income payments will be made also affects the premium. Insurers commonly offer periods of one, two and five years, to age 65 or under certain circumstances, for life. The longer the benefit period, the greater the premium.

Why Is It Important?

· Most wage earners will need a source of ongoing income if they are unable to work. A Disability Income policy guarantees an income.
· For most of their wage earning years, people are at a higher risk of disability than of dying.
· A disability that is uninsured can undo other efforts to build and conserve an estate.

Long-Term Care Insurance back to top

What Is Long-Term Care?
"Long-term care" is associated with medical care giving services that can be grouped into two categories:

· Skilled nursing care : Intensive daily nursing care administered within a skilled nursing facility, under the licensed supervision of medical personnel, and in accordance with a doctor's orders.
· Custodial care : Assistance with "activities of daily living" (ADL's), such as getting in and out of bed, bathing, use of restroom, dressing, moving about, eating and taking medications. Custodial services are given under a doctor's supervision, but the care is not necessarily by licensed medical personnel.

Medicare and Medicaid

Medicare: The federal government's Medicare health insurance program for individuals over the age of 65 does not pay for custodial care. Under certain limitations, Medicare will cover skilled
nursing care.

Medicaid: Custodial care may be covered by Medicaid - a welfare health program funded partially by the federal government and administered by the states in accordance with federal guidelines. A person qualifies for Medicaid by meeting low income and asset levels established by the person's state regulations.

Long-Term Care Insurance

Long-term care insurance is private insurance purchased to cover the costs of custodial care for individuals choosing not to depend upon Medicaid.

Tax Benefits of LTC Policies

Individuals covered under LTC policies qualify for important tax benefits. Premiums paid on LTC policies may be regarded as medical expenses up to a maximum amount based on the insured's age.

The maximums for 2003 and 2004 are:

Age 2003 2004

40 or under $250 $260

41 - 50 $470 $490

51 - 60 $940 $980

61 - 70 $2,510 $2,600

71 or older $3,130 $3,250