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Getting life insurance is an important step toward becoming financially self-reliant. Latter-day Saints have been encouraged by Church leaders to have an appropriate amount of life insurance. In order to follow this counsel, we must understand our needs and understand how life insurance can help us accomplish our goals.

Life insurance products vary widely, and they can be challenging to understand. Life insurance marketing is often confusing, and recommendations and policy language differ. It is critical to understand the major principles of life insurance and how life insurance can help you reach your specific personal and family goals.

In this section, we answered the five key questions about life insurance: 1. Why should you have life insurance? 2. How does life insurance work? 3.Who needs life insurance? 4. How much life insurance should you have? 5. What kind of life insurance should you have?

Term insurance provides life insurance protection that is valid over a specific term, or time period. After this term is over, the life insurance company is not required to continue coverage. The major advantage of this type of insurance is that, in the short term, it is the least expensive death benefit coverage. However, this insurance is disadvantageous because it is valid only if the insured dies during the term of coverage.

Permanent life insurance is a contract in which premiums go towards both death protection and savings. A portion of the premium pays for the death benefit component, and a portion goes into paying the fees; the remainder of the premium goes into an account that earns tax-deferred interest, dividends, or investment gains. Cash-value insurance is often called permanent insurance and is intended to provide benefits over a lifetime. However, the policy will not be permanent if there is not enough cash value, if the insured is not able to continue paying the premiums, or if the investments decline substantially.

Determining which type of life insurance is right for you can be a challenge. For most people, especially students, renewable convertible term life insurance is the cheapest and best alternative. If your goal is income replacement, term insurance is relatively inexpensive, and this type of insurance has the most affordable coverage when life insurance is needed the most; it is possible to carry the coverage only for the amount of time that insurance is needed. Although term life insurance becomes more expensive with age, it may become less necessary as your other assets, such as your investment portfolio, grow, so your dependents would need fewer benefits from life insurance in the event of your death. However, when taxes or other liabilities are due at death, or when one desires to leave an estate, insurance may still be necessary.

Selecting an insurance agent is your responsibility—choose wisely. You are not just buying insurance: you are building an insurance structure that will shelter you and your dependents for many years. The five steps to purchasing life insurance are as follows:

  1. Understand what you want.
  2. Compare costs of competing policies.
  3. Select only a high-quality insurance company; base your choice on company ratings.
  4. Select an insurance agent with whom you feel comfortable and who does not pressure you.
  5. Use wisdom in your decisions.


Now that you have completed this section, ask yourself the following questions:

  1. Do you understand the benefits of life insurance?
  2. Do you know the answers to the five key questions about life insurance?
  3. Do you understand the types of term life insurance?
  4. Can you identify the types of permanent insurance?
  5. Can you determine which type of life insurance is right for you, and are you familiar with the steps to buying life insurance?

If you can answer yes to each of these questions, you are ready to move on to the next section!


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