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LIFE INSURANCE INLIFE INSURANCE INLIFE INSURANCE INPLAIN ENGLISHPLAIN ENGLISHPLAIN ENGLISHan easy to understand consumer guidethat explains the many types and usesEnrique Lopez CLU CLTCFinancial Advisor

C O N T E N T ST A B L E O F1 1C O S T V S V A L U E12E M P L O Y E R S P O N S O R E D14W H O ' S W H Oagents, producers, brokers, financial advisors 1 5F I N A L T H O U G H T S3T H E B A S I C Sterm, perm, gul, vul, iul, whole life

8 0 % OF O U R C L I E N T S H A V EU N D E R E S T I M A T E D T H E L E N G T HO F T I M E T H E Y E X P E C T E D T ON E E D I N S U R A N C E . THE BASICSLife insurance can confuse even the savviest folks.That's why we created this guide. We hope it helps youunderstand basic concepts so you can make informeddecisions about your own life insurance coverage.The number one rule in purchasing life insurance is tobe sure you have enough coverage for your needs.That changes over time. Your needs at age 30 arelikely to be very different than at age 60. Life eventschange the amount of insurance you need. As yourincome changes, your family's need for income is likelyto change. The birth of a child, children leaving home,buying and selling homes - are all events that havefinancial consequences that can alter your insuranceneeds. Knowing that you have enough insurance to keep yourpromises to loved ones can give you peace of mind.All other buying decisions, like the choice of insurancecompany and type of plan, are secondary. Your familyjust wants to know there's enough.

No matter the product, variations exist from company to company. To differentiate theirproducts, companies offer many different riders or features that are often optional andusually available at additional cost. Some policies may be converted to permanentinsurance. Some may have living benefits for the insured to use before death. Some maywaive premiums if the insured is disabled and unable to work and so on. These factors arepart of the reason prices between companies differ. Additionally, each company handlesits expenses and underwriting policies differently which also impacts pricing.All insurers want to know about your health. How they evaluate your health - the processof evaluation is called "underwriting" - also varies. This is where consumers can benefitfrom working with a knowledgeable professional who knows the company differences andcan guide you to your best option. There is no cost for you to work with an insuranceprofessional because he/she is paid by the insurance company. TIP: MANY TERM POLICIES ALLOW YOUTO CONVERT A TERM POLICY TOPERMANENT COVERAGE EVEN IFYOUR HEALTH CHANGES IN A WAYTHAT WOULD OTHERWISE MAKE YOUINELIGIBLE FOR PERMANENTCOVERAGE. THIS CAN BE A VERYIMPORTANT FEATURE ESPECIALLYSINCE WE CANNOT FORESEE WHATLIFE HOLDS 10 OR 20 YEARS IN THEFUTURE. COMPANIES THAT OFFERONLY TERM INSURANCE MAYSEEMINGLY BE THE LEAST EXPENSIVESO BE SURE TO DISCUSS CONVERSIONPRIVILEGES WITH YOUR INSURANCEADVISOR.

Term is designed to last for a finite number ofyears. 10-year term insurance is designed to lastfor a term of 10 years. 20-year term lasts for 20years and so on, even up to 30 and 40 years.Most term policies have a level premium - thepremium doesn't change for the specified term. 'Some policies have a rising premium, startinglower than level term and overtime exceedingthe level premium. There is no cash value interm insurance. You are paying only forinsurance. If you only need coverage for alimited time, then term insurance may be a fineoption for youTERM ISTEMPORARYPermanent insurance is designed to last for yourwhole life. Whole Life is only one type ofpermanent insurance. There are other types aswell. When differentiating between perm andterm, you may have heard the analogy made tohomeownership vs home rental. Term insuranceis like renting your coverage because at the endof the term you have not accrued any equity,while permanent insurance will ensure that nomatter when you die, a benefit will be paid. A RECENT STUDY ESTIMATES THAT STAY-AT-HOME MOMS WORK ON AN AVERAGE OF 94HOURS A WEEK WITH AN EQUIVALENTSALARY OF $113,000. -TAX ACT

Properly configured, the policy owner can be assured there will be a death benefit nomatter when death occurs. Universal policies are flexible in that they can be designed toprovide coverage to age 90, 100, or even 120. By paying more premium early on, a policycan be configured for payments to end years before coverage ends.Universal policies are interest-sensitive. The cash accumulation supporting the premiumwill grow depending on the interest earned. Insurance professionals have latitude whenproviding an illustration, "insurance-speak" for a quote.UNIVERSAL - ULGUARANTEED UNIVERSAL - GULThese policies have some cash accumulation but the cash component is primarily a wayto defray the cost of insurance within the policy at older ages. UL and GUL are oftendescribed as permanent term, a seeming contradiction in terms. They are priced like termbut are designed to last a lifetime.PERMANENT COVERAGETIP: ALWAYS KNOW THE DIFFERENCEBETWEEN PROJECTIONS BASED ONASSUMPTIONS AND GUARANTEES.GUARANTEED VALUES ARE BASED UPONINTEREST AT 0% AND THE HIGHESTALLOWABLE CHARGES FOR MORTALITYCOSTS UNDER THAT SPECIFIC POLICY.ALSO, KNOW WHAT CIRCUMSTANCESCOULD VOID ANY GUARANTEES.

PERMANENT COVERAGEVUL was first conceived as the answer tothe advice: "Buy Term and Invest theDifference". VUL differs from UL or GUL inthat premium over the cost of insuranceand expenses goes into client-directed“separate accounts”. The Separate Ac-counts are analogous to mutual funds.Since these accounts are within the pol-icy they grow tax-deferred, unlike mutualfunds. Every company has a range ofavailable accounts like money market,small-cap, large-cap, growth, value etc. The values in the separate accounts arenot capped nor are they guaranteed. Asthe insured ages, the cost of insurancekeeps increasing and if the separateaccounts are not growing sufficiently, thepolicy could lapse. It is the responsibility ofthe policy owner to ensure the policy is notunderfunded and the allocation is inkeeping with the client’s risk tolerance.VARIABLE UNIVERSAL LIFE - VULINDEXED UNIVERSAL LIFE - IUL Indexed Universal Life is another productthat accumulates cash and may appealto a sophisticated buyer who understandshow index funds work. They are relativelynew, only first being offered in 1997. The cash accumulation account in thesepolicies mimics the performance of aselected index but is not in actualityinvested in the index fund. While theassociated index may go through the roof,the growth in the policy will be capped bya predetermined percent. In addition, the premium payments areflexible which also means they may not beguaranteed. Typically the policy owner canchoose between several index funds to tieperformance. However, the performancewill never equal that of the actual index asthere are caps on the returns.TIP: IF YOU ARE LOOKING FOR GUARAN-TEES, VUL IS NOT A PRODUCT FOR YOU.IT IS IMPERATIVE THAT POLICY OWNERSMEET REGULARLY WITH THEIR INSUR-ANCE PROFESSIONAL TO MONITOR AND ENSURE VIABILITY.

VUL IS AN INSURANCE ANDINVESTMENT PRODUCT ANDCAN ONLY BE OFFERED BY AREGISTERED REPRESENTATIVEThe chart below compares the generic features of three different types of Universal Life Insurance. Each insurance company may offer additional features:such as joint coverage, chronic health care or long term care benefits, paid upfeatures and more. When looking at quotes (illustrations), be sure you understand the differencebetween what is guaranteed and what are current assumptions.

The calculator below will give you an estimate of how muchinsurance your loved ones may need, should you die duringyour working years. For guidance regarding the best type of insurance and amore thorough needs analysis, speak with a qualifiedinsurance professionalHow Much do I need?

I N S U R A N C E CHOICES CAN B EC O N F U S I N G . TH E R E I S N O ONER I G H T S O L U T I O N F O R E V E R Y O N E ."Whole Life" is another form of permanentinsurance. By definition, it is designed tolast for your whole life. What makes itdifferent from the other types of perm-anent insurance is that its components arefixed at issue to guarantee the deathbenefit for your entire life. The tradeoff is greater guarantees formore upfront premiums. But while wholelife looks like it costs more going in, overtime these policies produce dividends thatgrow. The dividends reduce the net cost ofwhole life over the long run. And thedividends accumulate income-tax-free ina cash account that you can accessduring your life. They are valuable andflexible. you can think of them asperforming conservatively, similar to abond fund. PERMANENT COVERAGEWHOLE LIFEDividends are the hallmark of this type ofpolicy. They fluctuate and they are notguaranteed. However, most of the bettercompanies have paid dividendsconsistently over many decades, evenduring serious recessions. You can allocate dividends to suit yourown needs: Keeping them in the policy to grow thedeath benefit AND the cash valueReducing out-of-pocket premiumpaymentsCash paymentsThis is an asset with strong guarantees.Look for a company with a history ofproducing unfailing dividends.

While life insurance was initially conceivedas a way to protect the "widows andorphans" in case the breadwinner died,over the years it has developed into amultifunctional financial tool because ofits unique attributes: Life insurance proceeds are notsubject to income taxCash accumulation within a policygrows tax-deferred. Life insurance can be the solutionimplemented for each need on the list tothe right. The appropriate type is totallydependent upon individual circum-stances. COSTorVALUE?INCOME FOR SURVIVORSMORTGAGE INSURANCETAX EFFICIENT TRANSFER OF WEALTHFINAL EXPENSESESTATE EQUALIZATIONSUPPLEMENTAL RETIREMENT INCOMEPAY ESTATE TAXESFUND BUY-SELL AGREEMENTSEXECUTIVE DEFERRED COMP. "GOLDEN HANDCUFFSLIFE INSURANCEPROVIDES SOLUTIONS"A MAN WHO DIES WITHOUT ADEQUATE LIFE INSURANCE SHOULDHAVE TO COME BACK AND SEE THE MESS HE CREATED." -WILL ROGERS

I N S U R A N C E C H O I C E S C A N B EC O N F U S I N G . T H E R E I S N O ON ER I G H T S O L U T I O N F O R E V E R Y O N E .Employer-sponsored insurance is a con-venience for many. However, the cost is notnecessarily less than private insuranceespecially if you are eligible for preferredrates. This is because during periods ofopen enrollment everyone is eligible to getcoverage regardless of their health. Sincesome employees may not be as healthyas others the rates are adjusted or“blended” to accommodate the range. There also may be a limit as to how muchcoverage you can purchase.Human Resource professionals may beable to explain the coverage, but they arenot licensed insurance professionals andcannot advise employees or makeindividual recommendationsEMPLOYER SPONSOREDGROUP INSURANCE

IF YO U ARE IN EX C E L L E N T HEALTH,YOU MA Y Q U A L I F Y F O R INDIVIDUALCOVERAGE AT A LOWER RATE.If you are considering group coverage, besure to know if you can keep the coverageif you leave the company or retire. You willalso need to know how your premium willbe affected when you no longer work forthe company.A change in health or age could precludeyou from getting private coverage at anaffordable price or might prevent you fromgetting it at all.Buying on the internet is strictly for thoseinterested in term insurance. It is easy andconvenient, but you will not get the adviceof a personal professional.EMPLOYER SPONSOREDGROUP COVERAGE (con't)

DECISIONSIt’s not hard to find a way to purchase lifeinsurance. It can be bought from an insur-ance agency, an investment brokeragecompany, fraternal organizations, throughan employer, an independent insuranceprofessional or online. People who sell life insurance hold a“Producer” license which is different from a"Broker" license. All life insurance agentsare producers. Some agents are independent and mayrepresent different companies. CareerAgents have a primary association withone insurance company, however, theymay offer insurance from other comp-anies in accordance with their employ-ment agreement. WHO'S WHO?Captive Agents are associated with aprimary insurance company but are notallowed to work with any other insurer. Most large investment brokerage firmsrequire investment advisors to hold aproducer’s license. Usually, advisors inthese firms concentrate on investmentand rely on an internal insurancespecialist to guide them through matterspertaining to insurance.

I N S U R A N C E C H O I C E S C A N B EC O N F U S I N G . T H E R E I S N O O N ER I G H T S O L U T I O N FO R E V E R Y -O N EFINAL THOUGHTSSHOPPING FOR RATESBecause life insurance rates are filed witheach state’s department of insurance,shopping for life insurance based on priceis a waste of time and can only lead toconfusion. If you find differences in quotesfor the same amount of coverage from thesame company, the policies cannot be thesame. There have to be differences in theplan design for which you may not beaware. Producers do not have the ability to“make deals”. They DO have the ability totailor the coverage to your needs withincertain parameters.Instead of shopping for a rate, shop for aninsurance professional you can trust whowill do the shopping for you according toyour budget, needs and values. VIEW SOME OF OUR OTHER INSURANCE RELATED MATERIALS

Tap to view our other guides"I can think of no more effective an agent inadvancing our freedom to live as we choosethan the insurance salesperson.........for he walksall streets of American life and he sits down andtalks to youth and to the mature and to theaged. He knows their wants. He helps them tohelp themselves in times of need. He builds, forhe helps others to build. He insures the future. Heis respected. And he is a friend. "- John F. Kennedy Contact Us send