Life insurance is a financial resource for your loved ones in the event of your death. You enter into a contract with an insurance company, which promises to provide your beneficiary(ies) with a certain amount of money upon your death.  In return, you make periodic payments, known as premiums.  The amount of the premiums generally depends on factors such as your age, gender, occupation, medical history and whether you intend to build up cash value in your policy.  Some policies may require a medical exam.

Certain types of life insurance may also provide benefits for you and your family while you're still living. Such policies accumulate cash value on a tax-deferred basis that can be used for future needs such as supplementing your retirement income or helping provide for a child's education.

The ability to earn an income can be considered your family's most valuable asset because your income allows you to obtain other assets, particularly the necessities of life and, of course, the creature comforts.  However, as we know, the ability to earn an income is not guaranteed.  Yet, the need for income may continue for those who were financially dependent upon you.  Consequently, your need for life insurance and the amount will depend upon your personal and financial circumstances.  If any of the following statements apply to you, you probably do need to consider life insurance:

• You have a spouse.
• You have dependent children.
• You have an aging parent or disabled relative who depends on you for support.
• You have another loved one that you wish to provide for.
• You have business or estate planning needs that life insurance can satisfy
• Your retirement pension and savings are not enough to insure your lived ones' futures against a rising cost of living.

In addition to the comfort of knowing that you have provided for your loved ones after your death, there are several other reasons you may want to consider life insurance, including:

• If your policy has cash value, the cash value may be used to help with big-ticket items such as college education or a downpayment on a home.  Most cash-value policies enjoy a tax-deferred status, meaning that you do not pay taxes on any cash value accumulation until you receive funds from the policy.

• Life insurance can be used to pay estate taxes and funeral expenses.  If your federal taxable estate (including real estate and investments) should exceed $1,000,000 (in 2002), your heirs can be taxed up to 50%.  So, even if you have a substantial sum of money, life insurance can be a benefit.  The proceeds usually go directly to your beneficiaries without going through the probate process.

Life insurance is a long-term commitment.  Before buying any policy, ask yourself these very important questions:

• How much insurance do I need?  If I were to die, what would my spouse and dependents need in order to live comfortably?

• In addition to protection, what am I trying to accomplish with life insurance?  Am I accumulating funds for education costs?  Providing away to pay estate taxes?  Do I need some additional supplemental income for my retirement or emergencies?  Remember that Term life pays a death benefit only, while Whole, Universal and Variable policies can supplement your income through withdrawals or loans against a policy's cash value.

• How much can I afford to pay for a policy?

• Is the insurance company I'm considering financially secure?  Do they have a good claims payment history, good customer service and competitive prices?  Independent companies such as Standard and Poor's, A.M. Best, Moody's, Fitch and Weiss rate insurance companies and their publications can be found in your local library.

There are four basic types of life insurance to meet your individual needs.

• Term life insurance is the least expensive type of coverage, at least initially, and the simplest. These policies do not build up a cash value.  Coverage is in effect for a fixed term or period of time - usually one to 30 years - and usually can be renewed.  The policy pays your beneficiary a fixed amount of money if you die during the term of the policy.  The premiums are lowest when you are young and increase upon renewal as you age.  Be sure to check your policy for age or other renewal restrictions

• Whole life insurance provides protection as well as a cash value.  The premiums remain at a fixed level for the duration of the contract.  Over time, the policy generally builds up cash value on a tax-deferred basis.  Many companies pay policyholders a dividend.  Dividends provide both flexibility and increased value to your life insurance policy.  They can add more coverage to your overall insurance benefit and can build a sizable cash value.  You may prefer this type of coverage since the cash value can benefit you while you're still alive.  You can use it to supplement retirement funds or help provide for a child's education - it's your money to use as you need.  You should, however, keep in mind that life insurance should not be purchased solely for accumulation, its primary purpose is protection.  Also, withdrawals and/or loans will decrease the death benefit.

• Universal life insurance is a flexible life insurance plan.  These policies are interest-sensitive and permit the owner to adjust the death benefit and/or premium payments, within limits, to fit the owner's situation.  Your net premium payments are applied to the accumulation fund, which earns a guaranteed interest rate.  The monthly cost of the death benefit and policy administration is deducted from the accumulation fund.  As with whole life insurance, the cash value is yours — you may withdraw it or borrow against it at any time.  Read your policy carefully to understand how withdrawals may affect the death benefits.  Since you decide how much premium to pay, within limits, some universal life policies even allow you to skip payments.  If you skip a premium payment, the administrative and death benefit costs are deducted from your cash value.  The policy stays in effect until your cash value can no longer cover these costs.  Make sure you understand your annual statement so you know how much interest your policy is earning and how much cash value you have.  Universal life insurance rates are subject to change, but the rate will never fall below the minimum rate guaranteed in the contract.

• Variable life insurance is for those who want to tie their life insurance policy to the performance of the financial markets.  You decide how your net policy values are to be invested.   Your cash value may have the opportunity to accumulate more rapidly than with other cash value policies, but you incur additional risk.  If market performance is poor, your death benefit may decrease, and you may have to pay higher premiums to keep the policy in effect.  As with whole and universal life policies, you may borrow against or withdraw the cash value at anytime.  Keep in mind that loans and withdrawals may reduce cash values and the death benefit.  Read your policy carefully for any possible charges associated with these transactions.  These policies are sold by prospectus, a valuable disclosure document, that you should also read carefully.