L.A. Times 10-Lesson InsuranceTutorial

This is one of the Internet's best tutorials on insurance basics.

Los Angeles Times 10-Lesson Insurance Tutorial

Lesson 1: Do you need it?
The answer depends on whether you have dependents--children, a spouse or other people who rely on you for financial support. If you do and you want to ensure their continued financial health after you die, the answer is yes. If you don't have dependents, life insurance is an unnecessary expense.

The tough part is determining exactly how much insurance you might need. To answer that question, you must know how much you own, how much you owe and how much you spend today. With that information--and a little imagination--determining your insurance need is a cinch.

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Lesson 2: What kind should you buy?
There are two basic types of life insurance, term and cash value, and they are vastly different. The type determines not only how much the coverage costs, but also what you can do with your policy.

To choose wisely, you have to consider how much insurance you need in light of how much you can afford, how long you're likely to need it and whether you would like your policy to provide more than a simple cash payment when you die.

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Lesson 3: How insurance products have evolved.
Over the last several years, there has been a sea change in the life insurance industry. Whereas choice among cash-value policies once boiled down to picking a company, consumers now must weigh a wide variety of policy types and features. This lesson will provide an overview of what happened and how those events shaped the policies offered today.

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Lesson 4: Basics of whole life policies.
The granddaddy of cash-value life insurance is called whole life, and if ever there was a product difficult to understand, this is it. Entire books are dedicated to explaining whole life, and entire generations are still left wholly confused. We'll tell you what you need to know about whole life, including whether it's the right type of policy for you.

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Lesson 5: The basics of universal life and variable universal life.
If you were to sit down with the goal of creating the perfect financial product--one that provided good investment returns, reasonable guarantees, tax benefits and attractive bells and whistles, says Don Reiser, president of Veritas Insurance, a division of Ameritas Life Insurance Group of Houston, you'd probably come up with something very similar to what's now known as variable universal life.
What is it? And why are some of the insurance industry's most noted experts so enthusiastic about this type of policy? In a word, flexibility.

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Lesson 6: The nuts and bolts of variable annuities.
The hottest product in the life insurance industry--variable annuities--was dealt a body blow by the recent tax reform law. Although some experts maintain that variable annuities aren't dead yet, they're certainly gasping for air. The reason gets to the heart of what a variable annuity is and how it works. We'll explain what you need to know and what you should do if you own one.

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Lesson 7: How to evaluate insurance illustrations.
A key element in the sale of any cash-value policy is a graphic illustration of how much the policy will be worth in the future. However, abusive illustration practices, as well as simple misunderstandings about what an insurance illustration provides, have led to consumer complaints and a host of lawsuits; an industry advisory group instigated an overhaul of the illustration process as a result. Although some changes have been made, consumers still need to become better educated about what insurance illustrations mean and how to read between the lines to evaluate their accuracy.

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Lesson 8: How to borrow from your cash-value policy.
One of the most popular bells and whistles that comes with a cash-value policy is the ability to borrow against its value without paying tax on the proceeds--and, often, without the worry of ever having to pay the money back. We'll explain how the borrowing option works and what the risks and rewards are.

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Lesson 9: How to cash out without dying.
Traditionally, life insurance was for your heirs, not you. Policies paid your surviving loved ones a benefit when you died and not a moment before. The AIDS epidemic changed that, possibly forever. Now, recognizing that some people need or want cash from their policies for themselves, before they die, insurance companies are increasingly offering riders that allow you to get a good portion of your death benefit months and sometimes even years before you die.

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Lesson 10: How to use insurance in estate planning.
Do you own a small business that you'd like to pass on to your children? Do you have an unusually large estate or valuable assets that you want to keep in the family or that you fear would be hard to sell? If so, you may be a good candidate for what life insurance agents frequently call the 1% solution: buying an insurance policy that will pay estate taxes when you die.