What You Should Know About Life Insurance:
Choosing a Policy

Your Life Insurance Agent’s Recommendation

After discussing your financial needs and objectives with your agent, he or she will recommend the type of life insurance policy that best suits your situation and goals. Often, the agent will provide a policy illustration that shows how your policy will work.

Carefully study your agent’s recommendation. Ask for a detailed explanation for any item you do not understand. Because your policy is a legal document, it’s important that you know what it provides. Do not be shy or feel stupid. This is your policy and you are the customer. People do not know about life insurance until they ask and it is the agent’s job to inform.

Free Look Period

Review the policy immediately upon receipt. This is very important. In most states, you get a “free look” period of 10 or more days. During this time you may return the policy for cancellation and a full refund of any premium(s) paid should you decide you do not want it.

Throughout the “free look” period, you may continue to ask questions to ensure that you understand the policy and to ensure that it is right for you.

Questions You Should Ask About the Life Insurance Policy

Does This Policy Really Meet My Needs?

If your agent recommends a term policy, consider:

• How long can I keep this policy? If you want the option to renew the policy for a specific number of years, or until a certain age, ask your agent about the terms of renewal of the contract.
• When will my premiums increase? Annually? Or after a longer period of time, such as five or 10 years?
• Can I convert to a permanent policy? Some policies allow you to convert the policy to permanent insurance without a medical exam, regardless of your physical condition at the time of the conversion. These policies are known as “convertible term.”

If your agent recommends a permanent policy, consider:

• Are the premiums within my budget? Be sure you want to spend the money for this type of long-term coverage.
• Can I commit to these premiums over the long term?
• How much money would you receive if you surrender your policy?
• Keep in mind that permanent insurance is designed to provide protection for your entire life. If you don’t plan to keep the product for many years, consider another type of policy. Cashing in a permanent policy after only a couple of years can be a costly way to get insurance protection for a short term.

The Policy Illustration

A policy illustration shows policy premiums, death benefits, cash values and information about other items that can affect your cost of obtaining insurance. Some of the items listed in the illustration are used by the insurance company to reduce your costs if its future financial results are favorable.

Your policy may provide for dividends to be paid to you as either cash, or paid-up insurance. Or, it could provide for interest credits that could increase your cash value and death benefit or reduce your premium. These items are not guaranteed.

Your costs or benefits could be higher or lower than those illustrated because they depend on the future financial results of the insurance company. With variable life, your values will depend on the results of the underlying portfolio of investments.

Ask your agent for an explanation of the illustration. Some figures are guaranteed and some are not. Remember that the insurance company will honor the guaranteed figures regardless of its future financial experience.

If your policy is a variable life policy, be sure the interest rate assumed is reasonable for the underlying investments you will allocate your premium to. Historically, interest rates fluctuate.

An illustration is not a legal document. Legal obligations are spelled out in the policy itself.