Term & Permanent Life Insurance

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1 Term Term & Permanent Life Insurance Understanding Your Options Products issued by National Life Insurance Company Life Insurance Company of the Southwest 10 % National Life Group is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of National Life Group is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York MK2938(0713) 74932(0713)1 Not For Use in Oregon

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3 Congratulations on your decision to consider life insurance Life insurance can give you the peace of mind that comes with knowing your heirs and assets will be protected in the event you die prematurely or suffer a long-term illness. There are different kinds of life insurance, the two most common being permanent and term. Choosing which type of contract is right for you, however, can sometimes get confusing. For instance, term insurance pays a generally high amount of death benefit for a generally low amount of premium, but only if death occurs within the term of the policy - for example, a 10 year term policy would pay a benefit if death occurred within 10 years of buying the policy. Permanent whole life insurance, by contrast, can cost considerably more than term at least initially but it generally locks in the cost for the lifetime of the insured, assuring as long as all scheduled premiums are paid, that a benefit will be paid regardless of when death occurs. 1

4 Why are term premiums so much lower than permanent? Typical term policies are between 10 and 20 years. The probability of a premature death within a normal term period is generally very low. In reality, the vast majority of term policies terminate or are converted to a permanent policy. With the probability of death so low during the normal term period, very few term policies end up paying a death claim. Increased life expectancy. It s common news that people are living longer, healthier lives today. Medical advancements over the past 100 years have greatly contributed to a dramatic increase in life expectancy for both males and females. As life expectancy increases, so does the percentage of individuals living well into their retirement years. Term insurance can be used as a starter policy to lock in insurability, at least through the conversion period, if the time frame for the insurance need is finite, and/or if cash flow is limited. 2

5 Do I need Permanent Life Insurance? Is lifetime protection and providing for your heirs an objective for you? If not, term may be the appropriate choice for you. Depending on the type of insurance need and the amount of resources available, it may even be advantageous to own both term & permanent. The term component could cover the short-term need, while the permanent portion serves as a source of lifetime protection and builds equity. Permanent insurance may also offer access to optional riders, which can provide benefits in the event of a chronic, critical or terminal illness, disability or unemployment. 1 Term Insurance Permanent Insurance Lifetime 1 Riders are optional, may be available at an additional cost, and may not be available in all states. 3

6 How can permanent insurance enhance my financial portfolio? Besides providing a survivor benefit for your beneficiaries, permanent insurance also offers the opportunity to equity in the form of cash value on a tax-deferred basis. You can potentially access this cash value using policy loans and withdrawals to meet unexpected cash flow needs or to supplement retirement income. 2 Is that important? With Americans living longer, retirement years are also extended. Many individuals worry they will not have enough money in retirement. Fortunately, supplemental retirement income from a permanent policy can help significantly. Additionally, when you consider that the future viability of Social Security remains unclear; that over the past decade, employers have been shifting away from traditional defined benefit retirement plans - which provide guaranteed fixed payment to the retirees - to defined contribution pension plans, which place the responsibility of accumulating assets on the participant/ employee; and that several high profile companies have defaulted on their pension obligations in the past few years; the need to take responsibility to accumulate your retirement nest egg becomes even more clear. The living values within permanent insurance can help provide these needed funds. 4 2 Policy loans and withdrawals reduce the policy s cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy s cash value in early years.

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8 Centralized Mailing Address: One National Life Drive, Montpelier, VT 05604