Personal needs:

If you are a young parent, you may need life insurance on your own life to enable a surviving spouse to raise the children. When you are older, you may need life insurance if you are financially responsible for an aging parent or want to provide funds to take care of final expenses, debts or taxes. A rough rule of thumb suggests buying protection equivalent to FIVE TO EIGHT TIMES YOUR ANNUAL INCOME. Your needs may vary according to your financial assets and liabilities. Life insurance can provide for your heirs immediate and long-term needs.

• Immediate needs would include: funeral expenses, unpaid medical bills, debt and taxes, as well as the time to readjust to a new life-style.
• Long-term it will help provide: for the maintenance and care of a disabled child or elderly parent, college expenses and, in general, providing the means to your heirs to live the life to which they are accustomed.

Business Needs:
Life insurance is often the solution to:
• Replace a key person and provide the funds to cover the costs of locating and training a replacement.
• To fund Buy/Sell agreements.
• To provide collateral for business loans, etc.

There are two types of Life Insurance ‚ Term and Permanent

Term Insurance

It provides protection for a specified period of time, typically from one to 30 years. It pays a death benefit only if you die during this term. Some policies can be automatically renewed at the end of the coverage period, and some can be converted to permanent insurance without need for a medical exam.

Permanent Insurance

It provides lifelong protection as long as you continue to pay premiums. The premiums are based on your age at the time of purchase and generally remain level; they do not increase with age. Because premiums remain level, permanent insurance is more expensive than term insurance. But permanent insurance accumulates cash value, which may be refundable upon surrender of the policy. While the policy is in force, cash values can be borrowed against or used to pay premiums.

There are four basic types of permanent Insurance:

1. Whole Life (sometimes also called life or ordinary life) has a fixed guaranteed instant rate and develops guaranteed cash values.
2. Universal Life has more flexibility. Within certain limits, you can change the death benefit, the amount of premium and payment frequency. Unlike Whole Life, this is an "interest driven" policy, which normally pays a minimum guaranteed interest of 4% to 4.5%. If the interest rates are continuously low, additional premiums may have to be paid to avoid a lapse of coverage.
3. Variable Life has death benefits and cash values that vary with the performance of an underlying portfolio of investments that you select. The death benefit and cash value are not guaranteed. They can go down as well as up, although there may be a guaranteed minimum death benefit.
4. Variable Universal combines the premium and death benefit flexibility of universal life with the investment flexibility and risk of variable life.

Key things you should know about life insurance:

• Life insurance proceeds are generally income tax free.
• The proceeds of many permanent life insurance policies can be used to ease the financial burden of catastrophic illness, terminal illness or long-term care. These "accelerated benefits" may be offered as part of the basic policy or as a rider to an existing policy.
• As the holder of a permanent life insurance policy, you may borrow up to the cash value at an interest rate (fixed or adjustable) stated in the policy. Any unpaid interest is added to the loan. Any unpaid loan, including interest, will be deducted from the death benefit.
• The cash value can be used to pay premiums for a period of time, keeping the stated death benefit, or it can be used to purchase paid-up insurance in a lesser amount with no further premiums due.
• In addition to naming a specific beneficiary to receive the proceeds of your life insurance policy (permanent or term), you should name a secondary or "contingent" beneficiary just in case you outlive the first beneficiary. If there is no living beneficiary, the proceeds will be paid to your estate and have to go through probate proceedings, resulting in a possible delay before your family receives the money. If the proceeds go into the estate, these proceeds may be subject to estate taxes.
• On all of the above policies, riders are available at an additional cost to cover: disability waiver of premium, double indemnity for accidental death, guaranteed purchase options, as well as spouse and child riders.

Life insurance offers a way to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation). It is a contract between you as the insured person and the company or "carrier" that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax "cash benefits" to the person or persons you name as beneficiaries. A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death: funeral expenses, taxes, probate costs, the need for housekeepers and child care, and so on. And these cash benefits should provide for your family's future needs as well, including college education for your children and part or all of your spouse's retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction.

Some types of life insurance (permanent life insurance policies) have a cash value that you can obtain by cashing out the policy or by borrowing against it. Though it can seem attractive, most financial experts agree that this feature should be seen as a secondary purpose of life insurance.

Do You Really Need Life Insurance?

If there is someone who would suffer economic hardship if you died, then the answer is yes... you need life insurance! Families with young children have a clear need for life insurance. If both spouses work, the loss of one income will cause the family immediate economic hardship and make it harder for them to realize future goals, such as paying for the children's education. But even if one spouse works "inside the home" and doesn't bring in a formal income, his or her death will require the surviving spouse to hire child care, housekeepers and other professionals to help run the household and that can be a significant new expense.

If you are married without children or single, then you may need life insurance to protect your partner or surviving family members against the costs associated with your death. Funeral expenses, probate and administrative fees, outstanding debts, special obligations to charities, and federal and state taxes are costs that all of us must consider. And, they can add up quickly. Unless you already have sufficient financial resources, your survivors will probably need life insurance to cover these expenses.

What Happens To Your Family If You Don't Have Enough Coverage?

Under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. Depending upon their current financial resources and ability to "get back on their feet" emotionally and financially, your family might be forced to move to a less desirable home or community, abandon education and career plans, reorder family priorities (such as the amount of time spent with the children) and, in general, cut back on the quality of life you have worked hard to achieve.

Your family might even be forced to go into debt simply to pay the expenses, like funeral costs, taxes, and medical bills, that result from your death. A moment's reflection will tell you that the lack of sufficient life insurance coverage when a loved one dies can have devastating consequences for a family...consequences that can last for years.