
Life insurance is something that most people need, but few people
understand.  This program is designed to help you learn a little
about the different types of life insurance, and how they might
fit in with your personal financial situation.


^C^IWhat IS a life insurance policy?

Simply stated, life insurance is insurance against the
possibility of your premature death.  As such, a more correct
term for it might be "Death Insurance" (just like insurance
against a fire is called "Fire Insurance"), but the marketing
folks must have felt that this would sound too negative, so they
named it life insurance.

Life insurance cannot ensure eternal life, but it CAN help your
dependents cope with the financial strains your untimely death
would impose.

However, the insurance companies have made the task of buying
life insurance much more complicated than other types of
insurance, because there are so many different types of insurance
plans.  Some of them combine savings plans with straight
insurance, complicating things with "dividends" and "cash
values".  Others are just insurance, like your home or auto
policies, protecting against a particular eventuality but not
serving any other purpose.

Sad fact: Most people do not understand their own insurance
policy.  They are sold policies which generate nice commissions
for the salespeople, but may not be appropriate for the policy
holder.

Here are the major types of policy:

^1*  Term Insurance

This is pure protection.  An annual renewable term policy has a
relatively low cost when you are young, but increases as you get
older.  Renewable means you can renew your policy regardless of
your health.

^1*  Whole Life

This is protection plus a cash value.  The premium is large but
fixed throughout one's life.  The cash value is not paid to you
unless you cancel this policy.  However, you can borrow from it
at low interest rates.  At death, your beneficiary is paid the
face value of the policy.  (The cash value is kept by the
insurer.)  There are "participating" versions of this which
increase the amount paid at death.

^1*  Universal Life

This is a versatile policy which consists of a fund which can
eventually pay insurance premiums.  The cash buildup with these
policies is tax-deferred and can provide some very attractive
estate planning tactics!

Recently, there has been a flurry of articles in the media
(Newsweek, Wall Street Journal, et al) indicating that many
Universal Life policies have not met projections due to low
interest rates.  Policy holders were asked to fork over
additional payments in order to maintain their policy.  Most were
taken totally by surprise, and several lawsuits have resulted.


^C^IWhat Insurance Shopper Does

This program has the following two main functions:

(1) Helps you determine your present insurance needs by analyzing
the amount your family will need to continue in the event of your
untimely death.

(2) Compares Term insurance and Whole Life insurance as a
financial investment over as many years as you'd like.

The method is easy to understand.  Since Term insurance costs
less than Whole Life in the early years, suppose one were to buy
Term insurance and invest the difference at some reasonable rate
of return.  This will give you a "nest-egg" which can be compared
with the cash value accumulation you would have under a Whole
Life policy to see which is a better deal.  That is what this
program does for you.

We might mention that we have not included the Universal Life or
Whole Life With Dividends type policies.  If you like, we'll
cover these in future issues of ON DISK MONTHLY.


^C^IHow To Use Insurance Shopper

If you are unsure of how much insurance you should have, you
should first use the Coverage Worksheet.  You get there by
pressing F8 from the main Parameter Screen (which is where you
get after reading this text and pressing F10).  In that group of
screens, you are asked for some financial information, and
eventually given a number for the amount of coverage needed.

Once you know how much insurance coverage you want, the next step
is to talk to an insurance agent to find out what the cost of a
policy of that level will be.  Ask in particular about Term Life
and Whole Life, as these are the types of policies directly dealt
with by this program.

You should get a list of the premiums for a policy of the size
you want.  The Whole Life premium will be constant from year to
year and should be entered in the main parameter screen along
with such information as your year of birth.  The Whole Life cash
value, and the Term Life premium, will be a table of figures that
changes from year to year, and should be entered on the Analysis
Schedule worksheet, which is like a spreadsheet.  You get to the
Analysis Schedule by pressing F10 from the parameter screen.

While you are in the Analysis Schedule screen, you can save your
data (including all entries on that schedule, as well as the
parameter screen and the coverage worksheet) by pressing F3.
Data files can be reloaded by pressing F4 from the Analysis
Schedule or the parameter screen.


^C^IMore Information

^1*  Company Ratings

It hasn't been a problem until recently, but if you are going to
take out a policy, check the company's rating, especially if you
take out a policy that builds a cash value.  There is no FDIC for
insurance companies; if your company goes under, so does the
equity you have built up in your policy.

There are four major ratings of insurance companies: A.M. Best,
Duff & Phelps, Moody's, and Standard & Poor's.

Contact your own state's Insurance Commissioner to get the
ratings of your insurance company.

^1*  Guaranteed Rates

You should use the "guaranteed rates" for your policy in
estimating the future premiums and cash build-up, rather than the
historical figures your salesperson is likely to quote you.  What
the insurance company paid historically is not applicable to
today's interest rates, and the guaranteed rate is the actual
maximum you may have to pay for your policy, or the actual
minimum rate at which the policy gains value.


^C^IProgram Notes

To run this program outside the ON DISK MONTHLY menu, type:

^C^1INSURE

Other options available:

     INSURE /M      runs in all black-and-white, for
                    monochrome or LCD screens

     INSURE /S      runs in silent mode

     INSURE /Q      skips this introductory text ("Quick run")

     INSURE /?      shows full list of command line options
