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Pension Plans Comparison Guide
Plans if you're entering the real world on a real budget. Options that offer value and quality care for you and the kids Budget-minded plans for the two of you... and beyond We have plans that won't devour your profits
Plan Your Retirement

After you have decided which kind of life Insurance fits your needs, look for a good buy. Your chances of finding a GOOD BUY are better if you use two types of Index numbers that have been developed to aid in shopping for Life Insurance. One is called "SURRENDER COST INDEX" and the other is the "NET PAYMENT COST INDEX" It will be worth your time to try to understand how these indexes are used, but in any event, use them only for comparing the relative costs of similar policies. LOOK FOR POLICIES WITH LOW COST INDEX NUMBERS

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What Are Cost Indexes?

In order to compare the cost of policies, you need to look at:

    1. Premiums
    2. Cash Values
    3. Dividends

Cost indexes use one or more of these factors to give you a convenient way to compare relative costs of similar policies. When you compare costs, an adjustment must be made to take into account that money is paid and received at different times. It is not enough to just add up premiums you will pay and to subtract the cash values and dividends you expect to get back. These indexes take care of the arthmetic for you. Instead of having to add, subtract, multiply, and divide many numbers yourself, you just compare the index numbers which you can get from Life Insurance Companies

1) Life Insurance Surrender Cost Index.   This index is useful if you consider the level of the cash values to be of primary importance to you. It helps you compare costs it at some future point in time, such as 10 or 20 years, you were to surrender the policy and take its cash value.

2) Life Insurance Net Payment Cost Index.   This index is useful if your main concern is the benfits that are to be paid at your death and if the level of cash values is of secondary importance to you. It helps you compare costs at some future point in time, such as 10 or 20 years, if you continue paying premiums on your policy and do not take cash value.

There is another number called the Equivalent Level Annual Dividend. It shows the part dividends play in determining the cost index of a participating policy. Adding a policy's Equivalent Level Annual Dividend to its cost index allows you to compare total costs of similar policies before deducting dividends. However, if you make any cost comparisions of a particular policy with a non-participating policy, remeber that the total cost of the participating policy will be reduced by dividends, but the cost of the non-participating policy will not change.

How Do I Use Cost Indexes?

The most important thing to remember when using cost indexes is that a policy with a small index number is generally a better buy than a comparable policy with a larger index number. The following rules are also important:

    1. Cost comparisions should be made between similar plans of Life Insurance. Similar plans are those which provide essentially the same basic benefits and require premium payments for approximately the same period of time. The closer policies are to being identical, the more reliable the cost comparision will be.
    2. Compare index numbers only for the kind of policy for your age and for the amount you intend to buy. Since no one company offers the lowest cost for all types of insurance at all ages and for all amounts of insurance, it is important that you get the indexes for the actual policy, age, amount ehoch you intend to buy. Just because a "Shopper's Guide" tells you that one company's policy is a good buy fo a particular age and amount, you should not assume that company's policies are equally good buys.
    3) Small differences in index numbers could be offset by other pilicy features, or differences in the quality of service you may expect from the company. Therefore, when you find small differences in cost indexes, your choice should be based on something other than cost.
    4) In any event, you will need other information on which to base your purchase decision. Be sure you can afford the premiums and that you understand its cash values, dividends, and death benefits. You should also make a judgment on how well the life insurance company will provide service in the FUTURE to you as a policy holder.
    5) These life insurance cost indexes apply to new policies and should not be used to determin whether you should drop a policy you already have for a while, in favor of a new one. If such a replacement is suggested, you should ask for information from the company that issued the old policy before you take action.