Life Insurance Allocation Tool
Section I  |  How Much Life Insurance Do I Need?
There are many ways to determine how much life insurance may be appropriate to provide your family. One way is to focus on how much money would be necessary to replace your monthly income in the case of an unfortunate event. This allows you to determine how much your life insurance provides for those most important to you, by focusing on the total amount of coverage needed to provide income that your family could use monthly to supplement lost household income.

By providing your family with a monthly income in your absence, they may still be able to keep the lifestyle they have grown accustomed to and cover any other obligations your monthly income may now cover.
    Simple Steps:
  1. What is your monthly income?
  2. How much of your income do you want to provide for your family in the event something happens to you?
  3. How long would your family need this income in the event something happens to you?
Instructions for Life’s Choices Income Simplifier
Determine your monthly income, the amount you wish to protect and how many years you wish to protect it. For protected monthly income levels and a duration of years protected other than what’s shown – we can develop a customized report.
  • What is your monthly Income?
  • How much income do you want to provide for your family in the event something happens to you?
  • How long would your family need this income?
  • Current Life Insurance Coverage
  • Use Life’s Choices Income Simplifier Chart to determine how much life insurance you would want to provide to your family in the event that something happens to you.
  • Additional Life Insurance Needed Today
Amount of
Protected
Monthly Income
Years Protected
10 years 15 years 20 years 25 years 30 years 35 years 40 years
$2,000 $197,540 $270,384 $330,044 $378,905 $418,922 $451,697 $478,539
$3,000 $296,311 $405,576 $495,066 $568,357 $628,384 $677,545 $717,809
$4,000 $395,081 $540,769 $660,087 $757,810 $837,845 $903,394 $957,079
$5,000 $493,851 $675,961 $825,109 $947,262 $1,047,306 $1,129,242 $1,196,348
$6,000 $592,621 $811,153 $990,131 $1,136,715 $1,256,767 $1,355,091 $1,435,618
$7,000 $691,391 $946,345 $1,155,153 $1,326,167 $1,466,229 $1,580,939 $1,674,888
$8,000 $790,161 $1,081,537 $1,320,175 $1,515,620 $1,675,690 $1,806,788 $1,914,157
$9,000 $888,932 $1,216,729 $1,485,197 $1,705,072 $1,885,151 $2,032,636 $2,153,427
$10,000 $987,702 $1,351,921 $1,650,219 $1,894,525 $2,094,612 $2,258,485 $2,392,697
$15,000 $1,481,553 $2,027,882 $2,475,328 $2,841,787 $3,141,919 $3,387,727 $3,589,045
$20,000 $1,975,403 $2,703,843 $3,300,437 $3,789,050 $4,189,225 $4,516,969 $4,785,393
$25,000 $2,469,254 $3,379,804 $4,125,546 $4,736,312 $5,236,531 $5,646,212 $5,981,742
$35,000 $3,456,956 $4,731,725 $5,775,765 $6,630,837 $7,331,143 $7,904,697 $8,374,438
$40,000 $3,950,807 $5,407,686 $6,600,874 $7,578,099 $8,378,450 $9,033,393 $9,570,787
$45,000 $4,444,658 $6,083,647 $7,425,984 $8,525,362 $9,425,756 $10,163,181 $10,767,135
$50,000 $4,938,509 $6,759,607 $8,251,093 $9,472,624 $10,473,062 $11,292,424 $11,963,484
Values in this table represent the present value of a future income stream and are based on a hypothetical rate of return of 4%. If the rate of return were higher or lower, a different value would result.

Section II  |  Insurance Portfolio Allocation

While determining the right amount of life insurance is a challenge for most people, deciding which type of policy can be even more confusing. In fact, half of American households (58 million) readily admit they currently don’t have adequate life insurance coverage – the highest level ever.

Some people feel they need life insurance for a certain period of time – just long enough to meet their responsibilities for those who depend on them. This is typically done with term insurance.

Others, however, recognize that owning some form of life insurance for their entire lives can provide them with added security and flexibility as they prepare for life’s responsibilities. This is typically done with permanent life insurance.

The Life’s Choices will present you with the opportunity to share your feelings and attitudes and provide you with guidance in choosing the appropriate type and amount of insurance. Many people find their objectives are best met with a combination of term insurance and permanent insurance.
  • The idea of leaving an inheritance is important to me - either for my family or a charitable organization. I would want to do this in an efficient manner.
  • In the future, my adult children and/or parents may rely on me for Financial support. I want to make sure my life insurance policy is there if they need it.
  • I would prefer the least expensive type of insurance, even though my benefits may expire at some point in the future.
  • I only want life insurance for a limited period of time (e.g. until my mortgage is paid, children finish college, or other financial obligations are met).
  • If I die prior to my spouse during retirement, I want to ensure he or she receives a life insurance death benefit.
  • If I were to die during my working years, I would want my family to receive a life insurance death benefit that would replace my income.
  • Regardless of how long I may live, it’s important for me to have my life insurance in place when I die.
  • I don’t want to commit to permanent insurance today; however, I’d like to have the right to convert term coverage into permanent coverage in the future should my situation change without having to undergo additional medical screening.
  • Your Score
Scoring:

0 Points = 100% Term

Clearly you’re concerned about those who depend on you; however, today you feel you want coverage for a limited time. Based on your answers, a term life insurance policy with the option of future conversion should be considered. The next section will help you understand which permanent policy you may want to consider converting to in the future.


1-2 Points = 75% Term / 25% Permanent

You recognize the importance of owning life insurance throughout your entire life; however, you also acknowledge that your biggest concern is protecting those who depend on you during your working years. Life insurance products with mostly term insurance and a small amount of permanent insurance should be considered based on your answers.


3-5 Points = 50% Term / 50% Permanent

Your answers show that you appreciate both the benefits of permanent and term insurance. Life insurance products consisting of equal amounts of term and permanent protection should be considered based on your answers.


6-7 Points = 25% Term / 75% Permanent

Protecting those who depend on you for your entire lifetime – regardless of how long you may live – is most important to you. Your preferences indicate that life insurance products consisting mostly of permanent insurance should be considered based on your answers.


8 Points = 100% Permanent

You want lifetime protection, to leave a legacy and protect your spouse’s retirement income. A permanent policy should be considered based on your answers.

Note:

Many companies offer term policies with guaranteed level premiums for a specific period of time. After the level premium period, the premiums increase significantly each year. During the level period you may be able to convert your term policy to a permanent policy with no additional medical questions or requirements.

Section III  |  Permanent Insurance Allocation

Many people find that owning some term insurance is an effective way to protect their families and others who depend on them, particularly for the short-term.

Many of these same people, however, also want the long-term protection and flexibility of permanent insurance but are unsure as to which type is most suitable for their situation.

The most appropriate type of permanent insurance for you is based on your preferences and attitudes toward a range of factors such as risk preference, flexibility, guarantees and your retirement and legacy objectives.

Life’s Choices will present you with the opportunity to share your feelings and attitudes, and provide you with the guidance regarding which product best suits your needs based on your situation. Your financial professional will help you understand the features and benefits of the options that are available.
  • I prefer the guarantee of knowing exactly what my insurance policy premium and death benefit will be, even though I may not be able to change it in the future.
  • I would like to have the flexibility to increase or decrease my premium payment, even though doing so may have an impact on my policy’s performance and guarantees (if applicable).
  • I would like my life insurance policy cash value to grow and eventually be worth more than the cumulative premiums that I’ve paid, even though it may require a higher initial premium outlay.
  • It’s important to me to find additional ways to set money aside on a tax-deferred basis to help meet my long term retirement goals if necessary.
  • I prefer the type of policy that has cash value. I would like to know that my policy cash value is guaranteed regardless of the future performance of interest rates and stock markets.
  • prefer the type of policy that has cash value. I am willing to accept some risk for more potential policy cash value growth. I understand, however, that a declining market may require additional premium in the future to keep my policy in place and that the performance of the policy may be better or worse than illustrated.
Scoring:

Below 59 Points:
Your answers show that you favor guaranteed death benefit protection over the potential for cash value growth. You should discuss with your financial professional whether universal life insurance with secondary guarantees should be considered based on your situation.

59-62 Points:
Your answers show that you generally prefer guaranteed death benefit protection, yet you may want to consider a policy that has some element of cash value growth. Working with your financial professional, you should consider universal life or whole life insurance to determine what policy best fits your situation.

63-67 Points:
Your answers show that you prefer a policy that has both guaranteed death benefit protection as well as a guaranteed form of cash value growth. You should discuss with your financial professional how whole or universal life insurance should be considered based on your situation.

68-72 Points:
You said you would prefer a policy with the potential for cash value growth, yet you also may be unsure about taking risks with your policy values. Working with your financial professional, you should consider either whole life or index universal life or maybe a combination of both. You can discuss the potential risks, benefits and crediting options available with index universal life policies to determine what crediting option is best for you and if it is right for your situation.

Over 72 Points:
You clearly prefer a policy that has cash value with the potential for growth associated with the stock market. Working with your financial professional, you should discuss the potential risk, benefits and crediting options available with an indexed universal life policy.

Contracts available in the market based on your answers above:
Universal Life
Can provide clients with an array of options. Some products are designed to offer a secondary death benefit guarantee with a return of premium, while others focus on cash accumulations.

Whole Life
Has guaranteed level premiums, guaranteed cash value and guaranteed death benefits. Whole life is also eligible to receive annual dividends (participating contracts). Dividends are not guaranteed, however, if paid they may increase the cash value and death benefits over time.

Indexed Universal Life
Premiums may be allocated to fixed account, one or more index strategies, or a combination of any of the available interest crediting strategies. Depending on the allocation, the policy holder can earn fixed interest or interest based upon the performance of the S&P 500® Index.