DEALING WITH THE LIFE INSURANCE WHEN YOU HAVE CHILDREN

There are many variations of the "family income" life insurance policy or rider. People with young children should discuss with their agent, the desirability of obtaining this special coverage. Basically a policy for a certain amount is purchased to cover the period when the children are dependent.
The insurance company is obligated to make payments to the beneficiaries of $10, $15, or $20 for each $1,000 of face amount if the insured should die before the time period is up. For example; if the insured should die four years after purchasing a policy which was written for $70,000 over a 20 year period at$10 per $1,000 the surviving family would get $700 per month for 16 years (20 yr. term minus the four years the insured lived after purchasing the policy) and $70,000 face amount at the end of that time.

The coverage combines a basic whole life insurance policy with a term coverage, either decreasing or leveldepending on the particular variation. It is a popular form of coverage and may provide just the projection you need if you are a young person starting to raise a family. Of course it costs more than term insurance.

Your particular financial circumstances must be considered by you and your agent or other professional planner to determine if it should have a place in your financial plan.

Dividends are issued only by participating life insurance companies. These companies can be regular stock companies or mutual companies where every policy holder owns a piece of the company; a co-op system. In order to issue a dividend the company must charge premiums in excess of what is actually distributed to its holders as death benefits. The amount of dividend, if any, is determined on the mortality rate of its presently insured participants as well as on how efficiently the company is managed and how well its investments have done. All mutual life insurance companies are participating.

The stock companies that are not participating charge a fixed rate for their premiums. The premium is calculated to cover all expenses with no "extra" to be refunded in the form of dividends. It is not possible to determine in advance which type of policy will be cheapest in any given year. When the dividend of a participating company is small the fixed premium of the non-participating company would save you money. On the other hand, in a year with high dividends returned to policy holders, the participating company would be your best bet

Term life insurance coverage is similar to putting your dime in a dryer at the public laundromat; when the time paid for runs out, the dryer stops. If you want more drying time you pout more money in the dryer. Under the provisions of term life insurance contracts, when payment stops, the coverage simply terminates. After all, you were only paying for a certain period of coverage. Whole life coverage with cash value poses a different problem. If for some reason you can no longer continue paying premiums do you lose everything that has been built up over time?
The answer is no. A choice that is always open to you is to cancel future protection and take the cash that has accumulated in the policy up to that point in time. A second alternative is to reduce your amount of coverage and replace your former policy with a newer smaller paid-up policy. However, if you sill need the full amount of coverage provided by the original insurance policy, you can buy a paid-up term policy instead.

Just how long a term you can purchase will be determined by the cash value of the old policy and your age at the time of the conversion.

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