Term Life Insurance - The Simplified Buyer's Guide

• Secrets to Buying Term Life Insurance
• Determining the Right Amount
• The Times Income & Rule of 200
• When the Need Ends
• The "Best" Life Insurance Plan
• Finding a Safe Life Company
• Taxation of Life Insurance
• Your Habits & Health are the Keys
• Advantages of a Shopping Spree
• ChoiceQuote^SM Is the Choice

Secrets To Buying Term Life Insurance

1. Use a life insurance shopping service to find the better buys of low cost term life insurance and to save time.

2. Annual payments save a 5-8% modal charge. Fees vary widely by company and payment method, so check out the differences.

3. Pay premium with the application, if allowed. Protection can start as soon as you are accepted if there are no changes to the original offer.

4. Employer-offered supplemental life insurance is not always cost effective. Shop it.

5. Decreasing term insurance, frequently called mortgage insurance, is usually overpriced and offered as a convenience. Some plans only pay the lender.

6. Dump the junk. Accidental death and dread disease such as cancer plans are emotional buys. The lower price means low payoff probability.

7. Quit smoking (if you do). After one to three years, you may save 30, 40, even 50% on your life insurance premiums.

8. Ask for the financial ratings of companies. Make sure the company you select has Superior/Excellent rating in the opinion of an independent insurance company rating service.

9. Big does not mean best. Some of the largest companies have the highest rates.

"Had I but world enough and time..."

–Andrew Marvel, "To His Coy Mistress."

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Determining the Right Amount

Time and uncertainty create the need for life insurance. Put differently, having the right amount of life insurance eliminates uncertainty for those left behind. One of the most frequently asked questions is: "How much life insurance is needed?" The simple answer is: "enough." Enough to continue the family lifestyle, enough to pay the mortgage and bills, enough for education, or enough to preserve a business.

Think of life insurance as a line of credit or overdraft protection available on the day it's needed. At the death of the insured, funds are available for the beneficiary. Figuring the amount needed is relatively simple.

"A family budget is a process of checks and balances; the checks wipe out the balances."

–Arthur Langer

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The Times Income & Rule of 200

Financial experts frequently use a rule of thumb for life insurance: a sum equal to five to ten times your annual income. Younger folks typically need the higher multiple and reduce the amount as children become self supporting, mortgages get paid down, and retirement funds grow.

Insurance companies do limit the maximum amount of insurance to a multiple of earned income (not including investment income). For example: At age 30 the multiple is as much as twenty times earned income which reduces to eight times earned at age 60. Extenuating circumstances such as special obligations or business needs will allow the multiple to be increased.

The Rule of 200 is a more specific measurement. First, decide how much dependents will need monthly (eliminate your own expense). Then, multiply the monthly amount by 200. The result is the liquid (spendable) fund needed. It assumes a 6% after-tax return. Example:

Dependent needs monthly	$3,000
Apply the Rule of 200
Funds needed:	$600,000
$600,000 x 6% = $36,000/12 mos. = $3,000 per mo.

From the fund needed deduct available cash, savings, mutual and retirement funds. Real estate is not liquid in the short run and survivors need somewhere to live.

However, given enough time all assets are liquid at some price, even deep discounts. Life insurance is the answer to any shortfall in liquid assets. Obviously, this method does not include inflation, spending down the fund, working spouses, payments from social security, and other factors.

Call 1-800/778-2001 For a more exact computation call ChoiceQuote^SM for a financial needs worksheet. We'll run our Capitol Needs Program and mail the calculations to you.

"We experience moments absolutely free from worry. These brief respites are called Panic."

–Cullen Hightower

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When the Need Ends

Panic is the emotion some survivors experience when they start to add up the debts and balance the available fund, especially if there isn't enough life insurance. Once you've determined how much life insurance is needed, then you must decide on how long you want the premiums to be guaranteed.

Term insurance is a type of life insurance. It can be the least expensive type for a specific time because it is pure insurance - no added features. The simplest is Annual Renewable Term Insurance, ART, which is characterized by increasing premiums and typically has premiums guaranteed for only a few initial years. ART is particularly competitive when the insurance is needed for a very short period, e.g., less than five years. After 4-5 years, this plan loses its value as rates increase disproportionately compared to guaranteed level premium plans.

The most frequently selected type of term insurance today is the guaranteed level premium form offered with 5, 7, 10, 15, 20, 25, and 30 year variations. The length of guarantee is the key - how long would survivors need life insurance as a substitute for lost income? The need might be twenty years with young children or until retirement is funded. In any case, term life insurance is the plan of choice when the need is (1) for a limited time - less than 20-25 years and (2) when rate guarantees are desired.

"The trouble with jogging is that by the time you realize you're not in shape for it, it's too far to walk back." –Franklin P. Jones

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The Best Type of Life Insurance

The best policy is the one in force when it's needed. Term life insurance is one type of life insurance. Other types are whole life, variable life, universal life and survivor life. In these plans, usually called permanent insurance, the common feature is a cash accumulation fund or cash value. As noted, term life insurance has its greatest appeal when (1) the need is short, 20-25 years or less, (2) a premium guarantee is desired, and (3) availability of life insurance will not be a major consideration for survivors in later years.

It's been estimated that about 2% of all life insurance claims are paid from term insurance policies. Reason indicates that the young don't keep it when the need expires, and the old cannot afford it when the premiums increase too much.

Most term life insurance plans, however, have a conversion feature. This allows an exchange of the term plan to a permanent plan for continuation beyond the 20-30 year limit of term plans. Conversion provisions guarantee this exchange. No evidence that you are in good health is required, but the plan may have limitations on how long you may exercise the right. Review plan language if this is important to you.

Some term plans avoid premium increase at some future date if you subject yourself to a new medical examination. This feature, called re-entry, can be an asset, but there are two very important considerations. First, re-entry should not be mandatory to avoid a substantial increase in premium. Second, re-entry may not be much of a value if you are healthy and can re-qualify with another company with even lower premiums.

We will not review forms of permanent life insurance except to note that cash value plans typically have an initial premium 3 to 6 times that of a term contract. If insurance to pay estate taxes or the long term needs of survivors is an issue (more than 20-30, years), only a cash value life insurance plan can endure.

Summary:

• Select the amount of life insurance you need.

• Determine how long insurance is needed.

• Pick the plan to fit the need.

Call 1 800/778-2001, ChoiceQuote^SM, if you need information about permanent insurance especially for estate panning needs.

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Finding a Safe Life Insurance Company

It's true, there were a number of insurance company failures in the last ten years. Most were due to mismanagement and adventuresome investing. While no one can guarantee non-failure, the majority of insurance companies under media exposure have reduced their junk bonds and problem mortgages to an acceptable level.

Although there is no foolproof measurement of safety, there is considerable strength in numbers. Most insurance companies are rated by three independent rating services: A.M. Best, Standard & Poors, and Weiss Research. The other services, Duff & Phelps and Moody's, do not rank all companies. In all cases, companies should be rated Superior or Excellent by at least one of the independent rating services. Why would you risk safety when so many competitive companies meet this standard?

Many of the most recognized names in insurance do not offer competitive guaranteed term life plans. For example: In a March 1997 survey of 180 companies for a preferred risk 40 year old male for $250,000, showed 266 ten year guaranteed level term plans with premiums from a low of $244 to $737. By May of 1999, the range had drop dramatically to $148 to $953.

Want company financial rating information? Call 1 800/778-2001. ChoiceQuote^SM recommends only companies with Superior or Excellent ratings from at least two independent services.

"What the world really needs is more love and less paperwork"–Pearl Bailey

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Taxation of Life Insurance

The taxation rules for term life insurance are relatively simple. Life insurance payable to a named beneficiary should not have income tax assessed. If the plan is owned by the beneficiary, it may also escape estate taxes for the insured person.

Typically, life insurance premiums are not tax- deductible by individuals and/or a business. Therefore, income taxes do not apply as premium is paid from after-tax income, i.e., from out-of-pocket income or savings.

Estate taxes are more complicated. Under current law, there should be no estate tax on life insurance policies owned by an insured which are payable to a spouse at the death of the insured. However, policies owned by the insured can be includable in the deceased's estate, which becomes an issue if (1) the spouse is not the beneficiary, and (2) if the estate exceeds a certain amount. In either case, you should seek advice from an attorney or tax advisor.

 

"Facts are stubborn things." –Alain Rene Lesage

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Your Habits & Health Are the Key to Lowest Premiums

The least expensive plans, called Preferred Best premium plans, are available to individuals who have no serious health conditions and have good genes. This can mean they have grandparents, parents and siblings who have not had a history of cancer, cardiovascular disease, or diabetes prior to 60 or 65, depending on the company. Personal habits such as sky diving, private flying, or a poor driving record will usually preclude the lowest Preferred Best premiums.

Nicotine users, especially cigarette smokers, pay 30-50% more for life insurance with most companies. A few companies have better rates for cigar and pipe smokers when compared to rates for cigarette smokers and are worth searching out.

"Nothing in fine print is ever good news."–Andy Rooney

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Advantages of a Shopping Service

Life insurance by phone, fax, or ecommerce is a relatively new option for consumers. On a specific day, one insurance company will offer the lowest premium for the type of plan, the amount of insurance, and your health condition. A life insurance shopping service can quickly find that most competitive plan for you with the least hassle.

Look for a full service agency that offers:

1.Only companies rated Superior or Excellent.

2.An extensive library of companies updated monthly.

3.Impartial advice from experienced insurance specialists.

4.A range of companies to fit your particular need, your health condition and personal habits.

 

Watch for these limitations:

A. If only a few companies are available, this may indicate the lack of distribution capacity.

B. Final Quotes issued before your complete health history may mean a switch to a higher premimum after you finally apply.

C. Pressure tactics to close you on the first call or a plague of calls thereafter are unacceptable.

"The more original a discovery, the more obvious it seems afterwards." –Arthur Koestler

 

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ChoiceQuote^SM is the Choice

Just discovered us? Actually, we're not new to direct-to-consumer insurance. In 1977 we began offering our term life insurance shopping service to financial advisors. Since then, we've helped clients acquire over $1,000,000,000 of the most competitively priced insurance from the highest quality companies.

In the fall of 1995 we began to tell consumers via radio how to save money on term life insurance using our full service agency and our extensive library of companies and policies. You may have seen us advertising in the Wall Street Journal and the Internet.

Our insurance specialists, the folks you speak to when you first call, say our acceptance has been most gratifying. As a result, we have placed over $1,000,000,000 (that's a billion) of life insurance for clients by the end of 1997 (a nice twentieth year anniversary accomplishment).

While life insurance is essentially a fair-traded product–rates for the same plan are identical with all agents–our dedication to having the most up-to-date rates means others seldom beat ChoiceQuote^SM best buys.

As I've been saying since 1977, with one-call-insurance, low cost guaranteed term life plans, and our friendly insurance professionals, why would you shop further?

–Robert O'Leary, MBA, CLU

President, ChoiceQuote^SM

1-800/778-2001

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What Folks Say About ChoiceQuote^SM . . .

"Knows the business and is honest ..."

–Nationally Syndicated Radio Financial Advisor

Thanks for reminding me, I really need to do the insurance...adding just a little personal touch to all this paperwork (a picture includes her two children, the beneficiaries)."

–Registered Nurse - Mrs. P.B., Point Reyes, CA

"Very responsive. Answered all my questions. Called others twice, one took a week to call back and the other has never responded. Made my choice, let's get started."

–Computer Consultant - M.H., San Carlos, CA

"Have quotes from six others and you tied or beat every one of them. You're getting my business because you were available when I wanted to place the business (3PM Sunday)."

–Technician - R.G., Oceanside, CA

"Picked you because you were the easiest and most professional to work with."

–Vice-President - Mrs. J.H., San Jose, CA

"Liked the personalized touch of the faxed rates in less than an hour of my call and that only companies with excellent financial ratings were quoted."

– Restaurant Owner - K.O., Oakland, CA

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Why ChoiceQuote^SM Has Low Guaranteed Premiums

Every month, ChoiceQuote^SM research finds new plans with the most recent premium reductions. Direct relationships with insurance companies saves time and expense which allows us to offer the most competitive plans. Overhead is kept low by direct-to-you marketing, computerized shopping, and elimination of frills. e.g., house visits. The significant sales with satisfied customers confirm the real value of ChoiceQuote^SM.

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