Basic Types of Life Insurance &
Frequently Asked Questions

1. Term Life Insurance
Term insurance is, by definition, temporary insurance. Each year a premium is paid to cover the risk of death during that year. Term insurance has no cash value. The only way that your beneficiary receives payment is to die during the term. If death occurs, the beneficiary generally collects the face amount (death benefit) of the policy free of income tax. Historically, term insurance premiums increased each year, as the risk of death became greater. This type of coverage is still available and is commonly referred to as annually renewable term (ART). Many insurance companies now also offer level premium term. This type of coverage has premiums that are designed to remain level for a period of 5, 10, 15 or even 20 years. Many companies now also offer plans with premiums guaranteed for 25 and 30 years. These policies have become very popular because they are inexpensive, have guaranteed premiums and can provide relatively long term coverage.

2. Whole Life Insurance
Whole Life Insurance is a form of permanent insurance and is designed to stay in force throughout one's lifetime. It is well suited to needs that do not diminish over time, such as paying survivor income and paying estate settlement costs. Generally, the premiums for this type of policy remain the same throughout the life of the insured. During the early years of the policy, premiums are higher than those of term insurance policies. As a result, and by design, these policies develop cash values which can be accessed by the owner of the policy through policy loans or surrenders. This cash value accumulates on a tax-deferred basis and at a rate based upon numerous factors, including the investment experience of the insurance company.

3. Universal Life Insurance
Universal Life Insurance differs from Whole Life in that these policies distinguish and itemize the protection element, the expense element, and the cash value element. By separating the three elements, the insurance company can build more flexibility into the policy. This flexibility allows (within certain guidelines) the policy owner to modify the face amount or the premium in response to changing needs and circumstances. Here's how these policies work:

• Premiums are credited to the policy as they are paid. Most plans deduct certain administrative charges from the premium before crediting the balance to the policy value as net premiums.
• Each month the insurance company deducts certain amounts from the policy value to cover the costs of mortality (death benefits), as well as for any riders and/or supplemental benefits.
• Each month interest is credited to the policy based upon the cash value in the policy and based on a current declared interest rate as determined by the insurance company. This rate can and will change periodically.
• Most policies also have a decreasing surrender charge which is deducted from the cash value if the policy is surrendered. This feature allows the insurance company to recover certain expenses which are associated with the issue of the policy. The surrender value is the cash value less any applicable surrender charge.

 4. Survivorship or "2nd-to-die" Life Insurance
This type of coverage is generally offered either as Universal Life or Whole Life plan and pays a death benefit at the later of two insured individuals, usually a husband and wife. It has become extremely popular with wealthy individuals since the mid-1980's as a method of discounting their inevitable future estate tax liabilities. Ever since Congress instituted the unlimited marital deduction in 1981, most individuals have taken advantage of their ability to arrange their affairs in a manner such that they delay the payment of any estate taxes until the second spouse's death. These "2nd-to-die" contracts allow the insurance company to delay the payment of the death benefit until the second spouse's death, thereby creating the dollars needed to pay the taxes exactly when they are needed. This coverage is widely used because it is generally much less expensive than individual coverage on either spouse.

Life Insurance Frequently Asked Questions

1. How much Life Insurance is enough?
If you have a family, you nee an amount equal to 10 times your annual salary. Because life insurance (when purchased carefully) is extremely inexpensive, many people own larger amounts. A Financial Planning Profile can be made to determine your specific situation.

2. How do I apply?
Generally, we can handle the entire process right over the phone. We will ask you the questions on the appropriate application form. Then the completed forms are sent to you for review and signature. We even provide you with a pre-addressed, postage-paid return envelope.

3. Will I need a medical exam to qualify?
In most cases, an exam is required. If so, it will be done at the expense of the insurance company and at a time and place convenient for you -- usually right in your home. The exam is usually conducted by a licensed paramedic or medical doctor and generally involves a blood test, urine specimen, blood pressure reading, height and weight measurement, and a series of questions about your health history. The whole process takes about 20-30 minutes.

4. When does my coverage begin?
If you are replacing existing coverage, you should NEVER DROP YOUR EXISTING COVERAGE until your new policy has been approved, and your first premium has been paid.

5. Do I need to send a check with the application?
If you remit the first premium along with your application, most insurance companies will provide limited temporary conditional coverage during the application/underwriting process. However, there is no requirement that you submit a check with your application. The premium can be paid after the policy has been approved.

6. What financial criteria is used in selecting a safe insurance company?
There are a number of ways to evaluate the financial strength, performance, and integrity of a life insurance company. At Professional Community Insurance Services, we maintain a separate database of financial information about most life insurance companies. We only monitor the rates from insurance companies with a proven track record of financial strength, integrity, performance, and claims-paying ability. And, before quoting any company, we require that it have a rating of excellent (A-, A) or superior (A+, A++) by A. M. Best, the nations leading independent evaluator of insurance companies since 1899. As part of our service, we provide a financial profile of the companies quoted.

7. What about coverage on my spouse and/or children?
Most families have coverage on both spouses. There are many financial pressures on a family after the loss of either parent. Beyond the obvious final expenses, the financial strain on a family after the loss of a spouse can be significant even if the deceased spouse wasn't working. Often the surviving spouse will need to take time off from work or change jobs in order to spend more time with the children. Coverage for children is also available to cover final expenses and/or to guarantee insurability for the child's future.

8. What is the difference between standard and preferred rates, and how do I qualify for preferred rates?
Although the qualifications for preferred rates vary from company to company, generally you must be in excellent overall health. There are strict limits on height, weight, cholesterol and blood pressure, and you must not have a history of any significant health impairments. You also cannot use tobacco in any form. You must have no history of drug or alcohol abuse, and you cannot be engaged in any hazardous activities. The specific criteria for preferred rates differ widely among the various insurance companies, and it is not uncommon for an individual to be classified as standard at one company and preferred at another. The key is finding the right company. At Professional Community Insurance Services, we constantly monitor each company's criteria so that we can assist you in finding a company that will have the best rates for you based upon your specific situation.

9. What if I smoke cigarettes?
Rates for smokers are higher than for non-smokers. In order to qualify for non-smoker rates, most life insurance companies require that you be smoke-free for at least one year; some require longer periods. Through our extensive research of the market, we have found that certain insurance companies treat smokers much more favorably than others.

10. What about other tobacco use?
Believe it or not, most insurance companies treat all tobacco use, including Cigars, Pipes and Chewing Tobacco in the same category as cigarettes. However, certain companies allow pipe, cigar, and chew to qualify as non-smokers. This one difference alone can save you as much as 50% on your premiums. We know which companies will do so, and we will recommend only those companies when appropriate.

11. What happens if I become disabled?
Most insurance companies offer a rider called "waiver of premium" which provides that in the event you become totally disabled for a period of six months or longer, the insurance company will pay your premium for you until you are no longer disabled. This rider is optional and available at an extra cost and must be chosen at the time of your application. The rider is generally not available for purchase after age 55 and, even if elected, will automatically be removed from most policies at age 60. However, if your disability begins while the rider is part of the policy, most policies provide that premiums will be waived for as long as your disability lasts, even if that period lasts beyond the age in which the rider would have been removed.

12. Will my policy ever be canceled because of health reasons?
No. Your policy will never be canceled because of a change in your health, and you will not be asked to provide evidence of good health in order to renew your policy each year. However, you have the right to cancel your policy at anytime.

13. After the initial period of guaranteed premiums, what will my insurance cost?
Each product, if renewable, has a contractually guaranteed maximum renewal premium which can be illustrated and which is shown in your policy. This amount is the most you'll have to pay to renew the coverage. After your initial guarantee period ends, you can re-apply for new coverage, and, if you qualify, you can begin a new period of guaranteed rates (in effect, a new policy), which will generally cost less than your current or maximum renewal rates. This process is referred to as 're-entry.' Since your future good health is not guaranteed, the ability to 're-enter' is not guaranteed.

14. Is there a money-back guarantee?
Yes. If at any time during the application process you change your mind for any reason whatsoever, you will receive a full refund, no questions asked. This guarantee continues for a minimum of ten full days after your policy is delivered to you.

Professional Community Advisory Services, Inc.
4075 Hermitage Drive
Voorhees, New Jersey 08043
Tel: 856-424-0103
Toll Free: 1-888-424-1533
Fax: 856-424-0102
E-mail: info@profcommty.com