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According to The Wall Street Journal, a family can maintain its standard of living with an after tax income of 75% following the death of the primary breadwinner.  But if a family winds up with income of less than 60% of the level, serious disruptions can occur.  After reading a number of studies that address the subject of "How Much Coverage is Appropriate?" We recommend that our clients insure 75% of their after-tax income if funds are available to pay premiums and not less than 60% if they want to avoid disruptions, e.g., pulling children from a school, selling the family home, etc., in the family's standard of living.  See the Financial Underwriting Guidelines to determine the amount of insurance that is appropriate for you.

Life insurance can be purchased as term insurance or as traditional insurance.  Both term and traditional insurance can be purchased by you as an individual or by your business as group insurance.

Term insurance does not include a savings component.  For this reason, the outlay is less expensive than traditional insurance.  According to an article that appeared in The Wall Street Journal, the outlay for traditional insurance is 10 times greater than for term insurance.  Policy forms include level term and decreasing term.  Level term can be purchased as annual renewable term or 5, 10, 15, 20, 25 and 30 year renewable term.  In general, term insurance is indicated when your need for life insurance is to cover the time you are raising a family and can not afford the outlay for traditional insurance.

Traditional insurance includes products that contain both a protection component and a savings component.  This is the reason why the outlay for traditional insurance is higher than the outlay for term insurance.  Typically, a policy owner earns 5% on the savings component of a traditional insurance product such as whole life, limited payment life or universal life.  Traditional insurance products are recommended when there is no longer a need to provide for dependents and the policy owner wants to use his/her policy as a savings vehicle or there is a need for traditional insurance to satisfy an estate planning need.

Considering the importance of life insurance in estate planning and planning for dependents, we recommend that our clients call our toll-free number and ask to speak to a representative.  There is no charge to do so and the information will be kept confidential. After discussing your needs, we will be happy to send you a free survey of the insurance companies that offer the type of coverage that you request.  Our toll-free number is (800) 501-8078 or E-Mail us at


Who needs Life Insurance?

Most people purchase life insurance to meet the future needs of dependents such as a spouse, a child or an elderly parent.  Some buy life insurance for the added purpose of building up cash reserves for future needs such as retirement or college tuition expenses.

You have to be in reasonably good health to take out an insurance policy.  Generally, insurance companies won't insure people who are in bad health because it's the risk of a sudden death that hits their pocketbooks.  they also shy away from people in high-risk occupations, such as high-rise construction.  But even people whose occupations or health conditions make them unattractive to insurers can obtain insurance if they shop around.

An insurance company determines whether you are a good risk by reviewing important personal factors.  This means that your application is reviewed for health factors (smoking, weight, heart disease and so on), family history, occupation, gender and your financial condition.  Industry statistics reveal that 93 percent of the people who apply for insurance are accepted at the so-called "standard" rate.  That means they are expected to live a "normal" lifetime, at least according to statistical probabilities.  About 5 percent are accepted as a higher risk.  Only about 2 percent of the applicants don't qualify at all.

To check insurance company ratings, click Moody , Standard and Poors or A.M. Best.


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Copyright 2001 Kaplan Management and Insurance Services

Last modified: Tuesday, July 30, 2002