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How Do I Choose a Life Insurance Product?

Jan 2, 2014

HnTim-The concept of life insurance is actually pretty simple: Pay today to protect your loved ones when you're gone tomorrow.

But with so many types of life insurance out there, it can be hard to choose the right one for your situation. We can help you with this big decision.

Coverage and features to consider when choosing life insurance

Basic protection − Do you need life insurance just to provide financial support to your survivors if you die unexpectedly? Term insurance generally provides coverage at a lower cost than other types of insurance and can cover a specific length of time.

Market participation and cash value − If you need insurance protection for the long term, want the potential to build cash value (money from which you can borrow, even during your lifetime) and have a little more money to spend, consider permanent life insurance.

There are three types of permanent insurance:

Whole life insurance builds value based upon a set schedule. You'll know the exact cash value of your policy on each policy anniversary. (If you take a loan or withdrawal from your policy, of course, the cash value and death benefit will decrease.)

Universal life insurance earns a fixed interest rate on the cash value in the policy. While the interest rate may change over time, it will never dip below a guaranteed minimum rate.

Variable universal life insurance lets you invest your cash value in the stock market, so your policy value goes up or down based on the performance of your investment choices. The investment subaccount options in VUL policies are not offered for sale to the general public.

How long should your coverage last? Do you need life insurance coverage just for a specific timeframe – like while you're paying off your mortgage?

Term life insurance offers protection for a set period. All other types of insurance cover you for life, as long as the necessary premiums are paid.

Fees and charges − Before you buy, ask about the fees and charges associated with a life insurance policy, how they're calculated and what they're for.

Access to your money − Will you need to take money out of your policy in the future, for instance, to pay college tuition or to take retirement income?

Most whole, universal and variable universal products let you withdraw money from your policy or take loans.1 Some, however, restrict when you can take money, how much you can take and, in the case of loans, the interest rate.

Flexible payments − Some universal and variable universal life products let you make flexible payments once youve paid enough to cover your policy charges.

Ready to take the next step?

Determining the right insurance coverage for your needs is an important decision. For help with your life insurance needs, call us at 1-866-207-9160 or find an agent in your neighborhood.

Read this important information

As your personal situations change (i.e., marriage, birth of a child or job promotion), so will your life insurance needs. Take care to ensure these strategies and products are suitable for your long-term life insurance needs. Also, be aware that market volatility can lead to the possible need for additional premium in your policy. Investors should evaluate the impact of their financial ability to continue premium payments and the market risk associated with the variable product on the risk of lapse of the insurance policy.

Also, know that any loans, withdrawals, and surrenders, partial or whole, can adversely affect the death benefit, may have adverse tax consequences, and could result in the policy lapsing. Variable life insurance has fees and charges associated with it that include a cost of insurance that varies with such characteristics of the insured person as gender, health and age, underlying fund charges and expenses, and additional charges for riders that customize a policy to fit your individual needs.

Before deciding on a variable life insurance policy, you should carefully consider the investment objectives, risks, charges, and expenses of the policy and its investment options. The product prospectus and underlying fund prospectus contain this and other important information. To obtain a product prospectus, variable universal life insurance quote, or underlying fund prospectus, contact your investment professional or Nationwide. Read the prospectus carefully before making a purchase.

1Assumes contract qualifies as life insurance under Internal Revenue Code (IRC) Section 7702. Most distributions are taxed on a first-in/first-out basis as long as the contract remains in force and meets the non-MEC (Modified Endowment Contract) definitions of IRC Section 7702A. Loans and partial surrenders from a MEC will generally be taxable, and if taken prior to age 59 ½, may be subject to a 10% tax penalty.

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