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Learn... Plan... Act... Insure!

Steps to Build Plan
  Step 1 - Locate policies
  Step 2 - Get educated
  Step 3 - Determine needs
  Step 4 - Evaluate policies
  Step 5 - Make changes
  Step 6 - Get help
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Get educated

The key to getting the right type and amount of insurance coverage is education. Yes, there are plenty of websites with calculators that can help assist you in determining how much coverage you need, but the only way to be sure of the result is to learn everything you can and then make your own informed decisions. Even if you seek help from a professional, you should at least understand the terminology as well as the basics so that you know that you are getting the right product at the right price.

Do you need life insurance?
Life insurance protects the financial future of your loved ones should you pass away. If you have a wife who would need financial assistance, have children, or have lots of debt, you will probably want to have life insurance. However, if you are single, have no real debts or financial responsibilities, then you might not need life insurance or at most might need enough protection to cover the cost of your funeral (typically, less than $10,000).

What type of life insurance do you need?
There are two basic types of life insurance: term insurance and cash value insurance. Term insurance offers protection for a specified period of time or "term", such as 10 years, 20 years or 30 years. Cash value insurance provides protection for your entire life, and combines both insurance and a cash savings component. Cash value insurance is known by dozens of different names and variations, the most common of which are whole life, universal life and variable life.

Generally, you will want term insurance because it is much cheaper, and you can do your own savings. Cash value insurance is usually not a good deal unless you can definitely afford to make the higher payments for at least 20 years, you have maxed out other tax-deferred investments, or you expect to have a very large estate ($3 million or more). The real purpose behind insurance should be to maximize protection of your loved ones at the least expense. This coverage should be maintained only until you are basically self-insured, meaning you have at least an equal amount of savings that can be used to replace your life insurance protection.

How much will life insurance cost?
How much you pay for life insurance will depend on a number of risk factors, including your age, your health, your height and weight, your profession, risk associated with your hobbies (flying or hazardous sports), whether you use tobacco, your family health history, whether you ride a motorcycle, your driving record, your credit rating, and finally the type and amount of insurance you're buying. If you purchase cash value insurance, your cost will be very expensive but will remain constant throughout your entire life. If you do purchase this type of insurance, be sure that you can afford the payments, especially down the road when you have more responsibilities and more expenses because canceling the policy means you wasted the money you paid on those much higher premiums. Term insurance is very inexpensive in comparison and the cost will remain constant only throughout the term of the policy, e.g., 20 years. At that time, it can be renewed but the new rate for the new term period will be higher.

Step 3 - Determine Your Life Insurance Needs

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