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How do I choose an agent? Collect the names of several agents through recommendations from friends, family and other sources. Find out:

Is the agent licensed in your state? All states require agents to be licensed to sell life insurance. In addition, agents who sell variable products must be registered with the National Association of Securities Dealers and have additional state licenses.

What company or companies does the agent represent? Ask the agent which company he or she represents and what types of policies these companies sell.

Does the agent have any professional designations? Professional designations that life insurance agents may earn include Chartered Life Underwriter (CLU) and Life Underwriter Training Council Fellow (LUTCF). Agents who are also financial planners may have other designations, such as Chartered Financial Consultant (ChFC), Certified Financial Planner (CFP), or Member of The Registry of Financial Planning Practitioners.

Is the agent a member of a professional organization? The major association for agents is the National Association of Life Underwriters (NALU). NALU's local associations provide educational seminars and help update agents on trends. Similar training and services for financial planners are available through the American Society of CLU & ChFC, Institute of Certified Financial Planners (ICFP), and International Association for Financial Planning (IAFP).

What can I expect during the agent's visit? The agent will meet with you to discuss your life insurance needs. He or she will ask questions about family income and your net worth. With the information you have already assembled about your personal goals and financial situation, you'll be able to discuss your insurance options.

What can I expect the agent to do for me? The agent should be willing and able to explain various policies and other insurance-related matters. You should feel satisfied that the agent is listening to you and looking for ways to find you the right type and amount of insurance at an affordable price. If you are not comfortable with the agent, or you aren't convinced he or she is providing the service you want, find another agent.

Will the agent ask questions about my health? Be prepared at the initial meeting to answer questions about your health. For example, you can expect questions about your age, medical condition, medical history, family history, and personal habits. When you apply for life insurance, you may also be asked to have a medical exam. Often, a licensed medical professional will make a personal visit.

Always answer questions about medical history and health carefully and truthfully; this information helps a company establish a premium for your coverage based on your risk. For instance, you may pay a lower premium if you don't smoke. On the other hand, if you have a chronic illness, you may be charged a higher premium.

Also, in the event of a claim, accurate and truthful answers enable your beneficiary to receive prompt payment. Inaccurate or untruthful answers, however, may cause delay or even denial of a claim.

How do I know if a life insurance policy is right for me? The agent will recommend a life insurance policy that he or she thinks will meet your needs. Look at the recommended policy with care to be sure it fits your personal goals. Often, an agent will provide a "policy illustration" that shows how the policy will work.

Carefully study your agent's recommendation and ask for a point-by-point explanation. Make sure the agent explains items you don't understand. Because your policy is a legal document, it is important that you know what it provides.

If your agent recommends a term policy, ask:

  • How long can I keep this policy? If I want the option to renew the policy for a specific number of years or until a certain age, what are the terms of renewal?

  • When will my premiums increase? Annually? Or after a longer period of time, such as five or 10 years? Can I convert to a permanent policy? Will I need a medical exam when I convert?

If your agent recommends a permanent policy, ask:

  • Are the premiums within my budget?

  • Can I commit to these premiums over the long term?

  • How much will I receive if I surrender the policy?

Keep in mind that permanent insurance provides protection for your entire life. If you don't plan to keep the policy for many years, consider another type. Cashing in a permanent policy after only a few years can be a costly way to get short-term insurance protection.

What does my policy illustration show? A policy illustration shows premiums, death benefits, cash values, and information about other factors that may affect your costs.

Your policy may provide for dividends to be paid to you as either cash or "paid-up" insurance. Or it could provide for interest credits that could increase your cash value and death benefit or reduce your premium. Dividends and credits are not guaranteed. Your costs or benefits could be higher or lower than those in the illustration, because they depend on the future financial results of the insurance company. With variable life, your values will depend on the results of the underlying portfolio of investments. However, when figures are guaranteed, the insurance company will honor them regardless of its financial success. Ask your agent which figures are guaranteed and which are not.

If the illustration is for a variable life policy, be sure that the interest rate assumed is reasonable for the underlying investment accounts to which you would allocate premiums. For example, a higher interest rate may be warranted if you select a stock account, while a lower rate should be assumed for more conservative alternatives.

Is a policy illustration a legal document, like a contract? No, an illustration is not a legal document. Legal obligations are spelled out in the policy itself.

What else should I look for in a policy illustration?

  • Is it based on recent experience?

  • Is the classification shown appropriate for me (i.e., smoker/nonsmoker, male/female)?

  • When are premiums due -- annually, monthly or otherwise?

  • Which amounts are guaranteed and which are not?

  • Will I be notified if the non-guaranteed amounts change?

  • Does the policy have a guaranteed death benefit, or could the death benefit change depending on interest rates or other factors?

  • Does the policy pay dividends or provide for interest credits? Are those figures incorporated into the illustration?

  • Will my premiums always be the same? Could the premium increase significantly if future interest rates are lower than the illustration assumes?

  • If the illustration shows that I will not have to make premium payments after a certain period of time, is there any chance I would have to resume payments in the future?

  • Is the premium level sufficient to guarantee protection for my entire life?

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