Why life insurance?
How would our lives be affected if there were no life insurance? What difference would it make in the lives of our families? Let's assume for a moment everything in this world is the same, except there is no life insurance.

First, there's Frank Penner. He's in his mid 30s, has a wife and three children. He owns a nice three- bedroom house in Valencia, which came with a nice 30 year mortgage.

Frank is a highly regarded Marketing manager in a large company making a good living. Over the next ten years, his income will probably double if he progresses as is expected. Life is good, and the future looks very bright, assuming he stays alive and healthy.

The Penners have a little money saved, may be six months income. In today's world, that's better than most. But, there is NO life insurance. IT NEVER WAS INVENTED.

What will the Penners do if something happens to Frank? The expenses for the funeral, cemetery plot, last illness and leftover debts and taxes will more than eat up their savings. Social Security will help a little, but it just won't reach far enough. It certainly won't be enough to pay the mortgage. And to rent a large apartment or house is just as costly, unless they move to a very undesirable neighborhood.

Mrs. Penner never really thought about it before, but with this, there are also taxes, utilities, and repairs. In all, total hosing costs are going to take over half their income.

What about all other expenses - food, clothing, transportation, and other expenses to live - expected and unforeseen. All of these were handled with such ease when Frank was alive. There isn't any extra money now - less than what they used to spend on food.

As degrading as it may be, Mrs. Penner would have to ask her friends or family for help to prevent repossession of the auto and the household appliance, such as the refrigerator or washing machine, for they were all purchased on credit. It won't be long until the creditors start knocking on their door.

Mrs. Penner works fulltime, but her income isn't enough to make the house payment. When Frank was alive, he had a flexible schedule and was able to help take care of the kids if they were sick or had trouble in school. As a single mother now, Mrs. Penner will have to take care of ALL the illnesses, all the problems at school.

What if she misses too much work? Her employer probably won't be pleased if absences are too frequent, too unpredictable. What is Mrs. Penner going to do?

Mrs. Penner could eventually remarry obviously, however, with three children; it might be tough to find the time to date much, not to mention the expense of a babysitter.

There will be times she feels cheated by life. Life is not easy for her now. Whereas she and Frank could enjoy many small luxuries before, she must now sacrifice things she used to consider necessities. The future used to look very bright. Now, it is filled with a feeling of helplessness. She realizes her income will never keep up with her expenses. What is Mrs. Penner going to do?

This is truly a tragedy, but in a world without life insurance, this tragedy would be routine.

The Penners are a typical family. As a matter of fact, they were better than most, prudent with their resources and they have had responsible attitudes towards providing for their family. But there was no vehicle for them to share their problems and risks. WOW……A world without Life Insurance.

We are fortunate because we do have Life Insurance, and there is an opportunity for people like Penners to solve some of their potential problems.

Life Insurance is more than a policy. For a widow with a young family, it means a mother's care and supervision of her children. It means living in a home and neighborhood where she and her husband wanted their children to be raised. This "policy" brought opportunities for the children, like college, and dignity, security and independence for the spouse. And pride………pride knowing that their deceased spouse loved them enough to plan and make sure they were cared for, no matter what may happen.

It was once said: "Death is an incident. In itself, it does not cause problems. The problems of the family are already there: death merely brings them to conspicuous attention. They are problems that were solved by the deceased's income. Now they must be met by a new source of income for today and tomorrow."


When you buy life insurance, you want coverage that fits your needs and doesn't cost too much.

1) First, decide how much your need - and for how long - and what you can afford to pay.

2) Next, find out what kinds of policies are available to meet your needs and pick the one that best     suits you.

3) Then, find out what different companies charge for that kind of policy for the amount of insurance     you want. You can find important cost difference between life insurance policies by using cost     comparison indexes as described in this guide.

It makes good sense to ask a life insurance agent or life insurance company to help you.

An agent can be particularly useful in reviewing your insurance needs and in giving you information about the kinds of policies that are available. If one kind doesn't seem to fit your needs, ask about others.

This Guide provides only basic information. You can get more facts from a life insurance agent or company or at your public library.


Think twice before dropping a life insurance policy you already have to buy a new one.

It can be costly because much of what you paid in the early years of the policy you now have was      used for the company's expense of selling and issuing the policy. This expense will be incurred      again for a new policy.

If you are older or your health has changed, premiums for the new policy will often be higher.

You may have valuable rights and benefits in your present policy that are not in the new one.

You might be able to change your present policy or add to it to get the coverage or benefits you now      want. 

Check with the agent or company that issued your present policy - get both sides of the story. In any case, don't give up your present policy until you are covered by a new one.


To decide how much life insurance you need, figure out what your dependents would have if you were to die now, and what they would actually need. Your new policy should come as close to making up the difference as you can afford.

In figuring what you have, count your present insurance - including any group insurance where you work, social security or veterans insurance. Add other assets you have - savings, investments, real estate, and personal property.

In figuring what you need, think of income for your dependents - for family living expenses, educational costs and any other future needs. Think also of cash needs - for the expense of a final illness and for paying taxes, mortgage or other debts.


All life insurance policies agree to pay an amount of money when you die. But all policies are not the same. Some provide permanent coverage and others temporary coverage. Some build up cash values and others do not. Some policies combine different kinds of insurance, and other let you change from one kind of insurance to another. Your choice should be based on your needs and what you can afford.

A wide variety of plans is being offered today. Here is a brief description of two basic kinds - term and whole life - and some combinations and variations. You can get detailed information from a life insurance agent or company.

Term Insurance

Term insurance covers you for a term of one or more years. It pays a death benefit only if you die in that term. Term insurance generally provides the largest immediate death protection for your premium dollar.

Most term insurance policies are renewable for one or more additional terms even if your health has changed. Each time you renew the policy for a new term, premiums will be higher. Check the premium at older ages and how long the policy can be continued.

Many term insurance policies can be traded before the end of a conversion period for a whole life policy - even if you are not in good health. Premiums for the new policy will be higher than you have been paying for the term insurance.

Whole Life Insurance

Whole life insurance covers you for as long as you live. The common type is called straight life or ordinary life insurance - you pay the same premiums for as long as you live. These premiums can be several times higher than you would pay at first for the same amount of term insurance. But they are smaller than the premiums you would eventually pay if you were to keep renewing a term policy until your later years.

Some whole life policies let you pay premiums for a shorter period such as 20 years, or until age 65. Premiums for these policies are higher than for ordinary life insurance since the premium payments are squeezed into a shorter period.

Whole life policies develop cash values. If you stop paying premiums, you can take the cash- or you can use the cash value to buy continuing insurance protection for a limited time or a reduced amount. (Some term policies that provide coverage for a long period also have cash value.)

You may borrow against the cash values by taking a policy loan. Any loan and interest on the loan that you do not pay back will be deducted from the benefits if you die, or from the cash value if you stop paying premiums.

Combinations and Variations

You can combine different kinds of insurance. For example, you can buy whole life insurance for lifetime coverage and add term insurance for the period of your greatest insurance need. Usually the term insurance is on your life- but it can also be bought for your spouse or children.

Endowment insurance policies pay a sum or income to you if you live to a certain age. If you die before then, the death benefit is paid to the person you named as beneficiary.

Other policies may have special features which allow flexibility as to premiums and coverage. Some let you choose the death benefit you want and the premium amount you can pay. The kind of insurance and coverage period are determined by these choices.

One kind of flexible premium policy, often called universal life, lets you vary your premium payments every year, and even skip a payment if you wish. The premiums you pay(less expense charges) go into a policy account that earns interest and charges for the insurance are deducted from the account. Here, insurance continues as long as there is enough money in the account to pay the insurance charges.

Variable life is a special kind of insurance where the death benefits and cash values depend upon investment performance of one or more separate accounts. Be sure to get the prospectus provided by the company when buying this kind of policy. The method of cost comparison outlined in this guide does not apply to policies of this kind.


After you have decided which kind of life insurance is best for you, compare similar policies from different companies to find which one is likely to give you the best value for your money. A simple comparison for the premiums is not enough. There are other things to consider. For example:

1) Do premiums or benefits vary from year to year?

2) How much cash value builds up under the policy?

3) What part of the premiums or benefits is not guaranteed?

4) What is the effect of interest on money paid and received at different times on the policy?

Comparison index numbers, which you get from life insurance agents or companies, take these sorts of items into account and can point the way to better buys.