How Much Life Insurance Do You Need?

One of the costliest risks that families face is the death of a breadwinner (worker). This is especially true if a spouse and/or children depend upon that person for all or part of their support. To protect family members against financial disaster, consider the purchase of life insurance.

There is no simple formula to determine the amount of life insurance you need. Many factors must be considered, including:

  • current assets and current liabilities
  • earning power of surviving family members
  • other sources of income to the family
  • projected expenses and family support

Carry too little insurance and you may not provide a reasonable living for your family after death. Carry too much and you may not enjoy a reasonable level of living while you’re alive. Many insurance companies have worksheets to calculate life insurance needs. They total up a family’s economic needs and subtract available resources.

Worksheets generally include a total for lump sum cash needs such as mortgage liquidation, debt repayment, and final expenses. There are also calculations for the income needs of children and a surviving spouse. After the total amount of money needed is calculated, existing insurance and assets are subtracted to determine the additional amount of insurance required.

Once you have calculated the amount of coverage that you need, choose an insurance product that is right for you. There are two basic types of coverage which, in one form or another, are the basis for virtually all forms of life insurance. The two basic types are term insurance and permanent (cash value) insurance.

Term insurance, simply stated, is insurance that provides protection only for a specific period of time–this period of time is called the term. Term insurance has no cash value or investment value. Term insurance is one of the best ways to solve an insurance need having a short or limited duration (e.g., the years when children are dependents). It generally also has the lowest up front premium cost.

Term insurance offers a specific amount of protection for a given period of time. Each time the policy is renewed, the premium increases to reflect the additional risk as an insured person ages. Some types of term insurance, called level term, may have premiums which only increase every five or ten years or stay level for a certain number of years or until a given age. The longer the time of the guaranteed premium, the higher the initial premium will be.

Decreasing term was developed for people having an insurance need which becomes smaller over time. It is most commonly used when there’s a declining degree of financial responsibility, such as a home mortgage. With decreasing term insurance, the level of protection declines over time, but the premium remains constant.

Permanent life insurance combines protection for the entire life of the insured person along with a savings component known as the cash value. Annual premiums are fixed for the life of the policy and are based on assumptions about interest and mortality rates. These premiums may be payable for life or for a limited number of years. Common forms of cash value life insurance include whole life, variable life, and universal life. The main difference between these different forms is in the method of cash value buildup.

Most People Don’t Have Enough Life Insurance

An agent selling life insurance may tell you to “buy now” because your premium (insurance cost) will cost more later. Others argue that if you don’t need insurance now, saving your money and investing it is better. This may be true. It depends on your ability to save and your health. Before you decide to put off buying now, consider your chances of getting an illness or injury later in life that could make you uninsurable.

Children don’t need life insurance unless they are family wage earners. You, as head of the household, should buy insurance on your life to protect your children in case of your early death. Again, there is one exception. If you get support payments for a child and these are important to your family’s income, you may want to buy life insurance for that child.

Say you’ve decided you need life insurance. How much is enough? There is no simple formula that tells you the right amount.

One way often suggested to figure how much life insurance you need is to use a formula. Some experts suggest buying life insurance equal to five times your yearly income. Using this formula helps you buy enough insurance for your family’s current money needs. This formula assumes that there is group life insurance from work for an amount equal to one year’s salary. It also assumes that the person who will get the life insurance payment is eligible for social security survivor benefits.

If both husband and wife work, buy insurance on both. You need more insurance on the person with the highest income. For example:



 You earn $15,000
Spouse earns $20,000


Using this rule, buy life insurance



 on your life (5 x $15,000) $75,000
on your spouse’s life (5 x $20,000) $100,000


In this example, using the five times annual income rule, you should buy $25,000 more insurance on your spouse’s life than on your life.

Other formulas figure in the income needs and financial goals specific to your family, such as ages of your children, current income, pensions, property, veteran’s benefits, social security, savings, health of your spouse and children and amount of money you have to spend on insurance.

Remember, there is no final formula for deciding the amount of life insurance you need. So be careful! Don’t buy it if you don’t need it.





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How To Choose Your Life Insurance

Before buying insurance, you must decide what is right for you and your family. Don’t forget, your family also may be protected by such plans as Social Security, veteran’s benefits, or other savings plans.

Before you decide on term or permanent insurance, think about how well you can save. Permanent insurance forces you to save through the build-up of cash value. Depending on the kind of policy you have, the rate of return may be low. Sometimes a cash value policy must be held for several years because most have no cash value at the end of the first few years. If you drop a cash value policy too early, you will lose money.

Studies show more than 20 percent of people buying cash value (permanent) policies lose their policies within 2 years of purchase. More than 50 percent lose them within 10 years.

Think about your tax situation. If you are in a high tax bracket, permanent insurance may be good because the savings built up in the policy are tax-deferred. Also the face value of a life insurance policy will be available to your family immediately after your death. With ordinary investments your family may have to wait for the benefits or be forced to sell investments at a loss.

Death benefits of any life insurance policy, permanent or term, are not taxable for income tax purposes. However, life insurance held in your name is added to your taxable estate for estate tax purposes. That is, if you own the policy and pay the premiums, when you die the insurance proceeds will be added to your other property to determine death taxes. Each person can leave property of up to $600,000 to heirs without paying federal estate taxes. Contact your county Extension office for more information on estate planning.

Deciding what kind and how much insurance to buy will take study. You can’t do a good job on a hit-and-miss basis. Actually, the job will never be finished. Both your situation and insurance policies and provisions will change, so new possibilities will be open to you. No one can give you an exact formula, but you might keep these suggestions in mind:

  1. Study your needs as a family. You must make the decisions as to which are the most important needs now and how much you can afford to pay for insurance that will protect you in the future.
  2. Insure first the risk that would be most damaging if it occurred.
  3. Review your insurance needs at least annually and more often if there is a change in the family: marriage, birth, new home, more possessions, etc.
  4. Select an agent you can trust. Your most valuable guide in buying insurance is a reputable agent. A competent agent will take into account your needs now and any future needs you may have. You will want to review your program with your agent periodically as family needs change. Having an agent you can trust will ensure that you are not over- or under-protected with insurance.





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Life Insurance Companies, what to know and look for..


If you have searched for life insurance, you’re biggest hesitation has probably been a fear that the company may go bankrupt, or may find some excuse to avoid paying when you need to submit a claim.

Two bits of education can put you in the driver’s seat when it comes to choosing a policy. The first is to know the kind of insurance you want and know whether or not any given company offers it—as well as what conversions are available if you should need something different I the future. The second is to know something about the company itself. Neither piece of that puzzle takes a college degree or a month of research.
The following (in no particular order) are examples of top, nationally known companies, with solid financial ratings that have a wide variety of products designed to meet your needs.

  • Metropolitan
  • United Wisconsin Life
  • Bankers Life & Casualty Company
  • Fidelity and Guarantee Life
  • American General Life
  • New York Life

Major types of insurance
Three major types of insurance are offered by insurance companies today. They are Term Life—which is cheap, but either expires or goes up in price at the end of the term, Universal Life—which is a flexible premium policy with a lot of built in options that prevent you from lapsing your policy, or Guaranteed Whole Life—a type of policy with a set premium and a benefit that can never change and will be paid directly to you if you live to be 100 years old.

Minor insurance variations
Several other types of insurance policies are available and are written in the terms of one of the major three. For example, key man insurance, joint life insurance, and second to die insurance can all be written as Term, Universal, or Whole life. If you know the basic type you are looking for, and also know the purpose of the insurance, a knowledgeable agent will be able to explain any variations the company may offer.

More important than price
We spend most of our lives looking for bargains, always hoping to get the biggest benefit for the smallest reduction in our check books. Thus, it is no surprise that when looking for life insurance, the first thing many folks consider is the size of the face value compared to the size of the premium. However, insurance should never be purchased on the basis of price alone. Granted, price is important because if we can save a dollar on one thing, we have to put on something else. And, if a company is radically higher than other companies for the same type of insurance, they’d better have some impressive interest rates or built in features, or they won’t be in business very long. On the other hand, if a company is radically cheaper than all the competitors for the same product, you need to ask how long it takes to settle claims and whether that company has actually been bought up by a larger company. When you need help, will you be giving the 800 number run-around and told you have to contact your agent (who may not be with the company any longer), or will you promptly be given the help you need.

Getting at the truth
But how do you find out who is really reputable? No agent is going to tell you that his company takes several months to pay off. He couldn’t keep his job very long if he did. You can begin by asking your friends who they have; also, talk to a funeral director and find out which companies pay with the least hassle.

Now, be aware that a funeral director has the license to sell you a “pre-needs” insurance which is simply a life insurance policy for which you pay the premium while the funeral home receives the benefit. However, if you are direct with your questions and clearly indicate that you want to know which insurance companies have been the easiest to work with and the most dependable, the funeral director should be willing to tell you.

A third opinion
An unbiased report on any company can be obtained from any of the five top insurance rating companies.

Ratings furnished by a third party company are on the financial strength of the company itself. It is not a comment on the quality of the product. Even if you choose a company with a lower rating—in hopes of a lower premium—you do not have to worry about the company being unable to pay due to bankruptcy or other financial problems. By law, any insurance company must pay into a company called the “Guarantee Association.” This organization protects you—the client—and insures that in the event of financial problems, other companies would buy up the book of business and would pay off on any policies sold by that company. Furthermore, in a free-enterprise economy, major companies do merge with others, and sometimes get bought up by other companies even when—(often because) they are financially solid. Purchasing a solid company can improve the ratings for both the purchaser and the purchased. The most reliable indicators of strength are the total assets, the outstanding debt ratio, and the overall size of the company.






Life insurance is used to replace in whole or part the economic value of human life for either family purposes or business purposes. In exchange for premium payments, the life insurance company agrees to pay a death benefit upon the death of the insured to the beneficiary named in the application for the policy. Life insurance policies may provide other uses and benefits as well.

  1. Do I need life insurance? You need life insurance if you want to provide financial protection for your dependents (or to your creditors) in the event of your death. A business may want to use life insurance to fund its employee benefit plans, protect against the premature death of a keyperson or to provide for business continuation.The following are typical examples of family and business purposes to consider when assessing the need for life insurance:
    • Dependent children.
    • Dependent spouse, parent or grandparent.
    • Credit enhancement.
    • Key person indemnification.
    • Business continuation.
    • Employee benefit plans.

    Should one or more of these examples apply to you, the purchase of life insurance may be suitable for your needs.


  2. How much life insurance do I need? The amount of life insurance a person needs will depend on their own particular circumstances and the reasons for purchasing the policy. One approach to determine how much life insurance you should purchase is to analyze the various needs of your family in the event of the death of a family member. Life insurance may satisfy a number of these needs by providing a fund that can be used to:
    • Pay off an individual’s last debts such as medical bills and funeral expenses;
    • Meet estate taxes and other expenses in settling an estate;
    • Provide life income for the spouse;
    • Pay off a mortgage;
    • Pay for the children’s education;
    • Provide funds for retirement;
    • Provide an income for the policyholder’s spouse to give the family time to readjust to a new standard of living;
    • Draw interest to provide funds for some special purpose; or
    • Provide a monthly income until the children are grown and out of school.

    Thus, the current and future financial needs particular to your family can be a significant consideration in determining the amount of life insurance that is right for you. Another factor that may be taken into consideration in determining how much life insurance you need is the amount of your annual salary.


  3. What are the main types of life insurance products available for purchase? While there are many types and variations of life insurance products available in today’s marketplace, there are basically two types of life insurance: term insurance and permanent insurance. Term life insurance provides death benefit protection for a certain period of time such as one or ten years. Death benefits are paid to the beneficiary only if the insured dies during that term period. Generally, term policies do not build up any cash values. Permanent life insurance can provide death benefit protection for your lifetime and the policy will provide for the build up of a cash value. The cash value may be used in several different ways e.g. you may borrow against the cash value by taking a loan. Permanent insurance includes several different types of policies such as whole life, universal life and variable universal life.  
  4. What factors should I consider when selecting a life insurance company? There are two types of life insurance companies i.e. stock companies and mutual companies. Stock insurers are corporations owned by the shareholders of the corporation. Mutual insurers are owned by their policyowners who may receive a yearly dividend if one is declared by the company’s board of directors. Both stock insurers and mutual insurers offer suitable policies for purchase. Some factors you may want to consider when selecting a company include the following:
    • The types of life insurance policies the company sells.
    • The company’s reputation for treating policyholders fairly (especially with respect to discretionary items such as the crediting of additional interest or dividends)
    • Financial safety
    • The company’s history and experience in the life insurance industry.
    • Insurance companies must be licensed by the New York State Insurance Department to operate in New York State; however, the Insurance Department does not rate the financial condition of insurance companies. There are private rating services that conduct financial analyses and grade insurance companies.


  5. How is life insurance sold? Individual life insurance can be sold directly from an insurance company through an agent or broker, through the mail, over the internet, over the telephone as well as from banks or other financial institutions. You may also be able to purchase insurance from a fraternal benefit organization if you are a member. Group insurance may be available through your job or from associations or other organizations in which you participate.
  6. What is underwriting? Underwriting is the process an insurance company uses when it selects applicants it is willing to insure and determines the cost of providing coverage. There are common factors that insurance companies may use to decide how much to charge you for the kind and amount of coverage you want to buy, such as:
    • your age,
    • your gender,
    • your health and health habits (smoking for example),
    • your family health history,
    • whether you are engaged in a hazardous occupation, or
    • dangerous hobbies (auto racing or sky diving for example).

    The insurance company receives this information from your application, and may ask you to fill out a health questionnaire or have a health examination or certain medical tests. In addition, the company may request that you consent to the preparation of an investigative consumer report or a Medical Information Bureau (MIB) report.

    It should be noted that there are varying levels of underwriting including full underwriting, simplified underwriting and guaranteed issue. Each type of underwriting impacts the premium rates to be charged. Ask your agent or the company which type of underwriting is applicable to the policy you are interested in purchasing and what type of medical information, if any, needs to be provided.

    Often group life insurance is subject to different types of underwriting. In some cases, employees actively at work do not need to provide any medical information if they enroll within a specified period of time.


  7. How do I compare cost? To compare the costs of purchasing a life insurance policy, it is recommended that consumers obtain quotes for similar policies from different companies. Comparing costs only makes sense if you are comparing similar policies. Comparison of costs can become increasingly complicated when products include such non-guaranteed features as dividends or additional amounts. There is no guarantee that a company’s past practices with respect to non-guaranteed features will continue. Quotes for various products can be readily obtained from many sources, including local agents and brokers, telephone quote services and the internet. Make sure that you can afford the amount of coverage you intend to purchase. Premiums for some products can change over time and your circumstances i.e. your ability to pay the premiums over an extended period of time may change as well. When comparing the costs of policies be sure to ask if the premiums, death benefit, or cash values can change over time.  
  8. Do I need a sales illustration? A sales illustration is a detailed projection of future policy values based upon the variables selected by you and your agent in conjunction with the purchase you are considering. The illustration can help to show you how the policy is expected to work. The illustration will show you what costs and benefits are guaranteed and what costs and benefits are not guaranteed. It is recommended that consumers request a sales illustration if available, prior to purchase.
  9. Can I change my mind after I purchase a policy? You will have a period that can be anywhere between 10 and 30 days, depending on the terms of the policy, after you receive the insurance policy to return the policy if you are not satisfied and receive a refund of premium. This period of time is called the “free-look” period, and a “free-look” notice is required to be displayed on the cover page of the policy. Use the free look period to read your policy carefully. If there is something in the policy you do not understand call your agent or contact the company for an explanation.
  10. Should I replace my existing life insurance policy? Replacing an existing life insurance policy can be costly and may not be in your best interest. When you apply for a life insurance policy you will be provided with a “Definition of Replacement” form which will explain what constitutes a replacement. If you intend to replace your policy, than no later than when you sign an application for a policy to replace your current policy with a new policy, you will receive a copy of a “Important Notice Regarding Replacement or Change of Life Insurance Policies or Annuity Contracts,” and a “Disclosure Statement.” These documents give you information to think about before replacing your life insurance policy or annuity contract. Some factors you should take into consideration if you are thinking of replacing your policy:
    • Contact your present life insurance company to discuss the proposed replacement of your current policy. Your company may be able to help you make a change to your current policy that is more favorable than replacing your existing coverage.
    • Since you are older than you were when you purchased your original policy it is likely the premium for the new policy will be higher due to your age.
    • If your health status has changed for the worse the premiums for the new policy will be higher.
    • The contestable and the suicide provisions will begin again in the new policy.
    • If your policy has a cash value you should know that the initial costs for such policies are charged against the cash value in the earlier years. The replacement of such a policy by a new cash value policy results in you sustaining these costs again.
    • Your present policy may also include surrender charges which you will incur if you surrender your policy during the surrender charge period. Alternatively, there may be a surrender charge period which has already ended on your present policy. You will want to find out if you will be subject to a surrender charge period in your new policy.
Please visit Advance4Life at for more information…





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What is Term Life Insurance?

Term life insurance is generally the least expensive and least complicated type of life insurance. It provides insurance protection for a specified period of time, such as 10, 20 or 30 years.1 If you die within the term period and the policy is in force, a death benefit is paid to your beneficiary. If you are still living at the end of the term, protection ceases unless your term life insurance policy is renewed. There is no “accumulation” element, or cash value with term life insurance.

Who’s it for?

  • People with a temporary need for life insurance protection. 
  • Those who need a large amount of insurance protection but have limited budgets. 
  • People with specific business needs (e.g., business owners who want to cover the life of a key employee who has a set number of years until retirement).

Benefits of Term Life Insurance:

  • It provides insurance protection for a low cost (at least initially).  
  • If your needs change, most term life insurance policies allow you to convert to a permanent life insurance policy without having to take a medical exam or provide other information about your health. 
  • Term life insurance is a good way to supplement other coverage when you have added financial responsibilities for a given period of time (e.g., mortgage, college expenses). 
  • Death benefits are generally received free from income tax.

Things You Should Consider:

  • Premiums generally increase with age and they could become unaffordable later in life. There is no cash-value element with term life insurance, so you miss the tax-deferred growth of the cash value of permanent life insurance policies, such as Whole Life Insurance. 
  • Once the term period expires, unless you renew your policy, the insurance coverage ceases and the policy has no further value.


What is Permanent Life Insurance? Permanent insurance, including Whole Life Insurance, Universal Life Insurance and Variable Universal Life Insurance, can provide protection for your entire lifetime, or in certain instances up to a specific age—at which point the insurer pays the policy owner the cash value. Permanent life insurance policies can build a cash value—money that you can borrow against and in some instances, withdraw to help meet future goals, such as paying for a child’s college education.1

Permanent life insurance policies enjoy favorable tax treatment. Cash value generally grows on an income-tax deferred basis; that means that you pay no taxes on any earnings in the policy so long as the policy remains in force.  Withdrawals or loans against the cash value are, in many cases, tax-free.1

Who’s it for?

People who…

  • May need life insurance for a long term. 
  • May be interested in accumulating policy cash value to provide funds for education, retirement or other future goals. 
  • Want to take advantage of the tax-favored treatment of cash value life insurance policies.


  • Over time, permanent insurance may be more economical than term   insurance since premiums do not increase with age and the policy can build a cash value. 
  • Policy loans and withdrawals provide access to your cash value.
  • Earnings, and certain withdrawals and loans, may qualify for tax-favored treatment. 
  • If you cancel the policy, the accumulated cash value, minus any surrender charges, is yours to use as you wish.

Things You Should Consider:

  • Permanent insurance is initially more expensive than term insurance.  
  • Loans, including any unpaid loan interest, and cash-value withdrawals generally reduce the death benefit, which could leave beneficiaries inadequately protected. 
  • If you cancel or surrender the policy, or it lapses, you may have taxable income to the extent that the total of cash value and/or distributions or withdrawals exceed your basis in the policy.



What is Whole Life?
Whole Life is the most basic type of permanent life insurance. Depending on your age and health, your premium will purchase a specific face amount and accumulate cash value, as long as your premiums are paid. Generally, Whole Life premiums, while higher than term premiums, especially for younger individuals, are guaranteed not to increase. In addition, Whole Life policies can earn annual dividends which are based on MetLife’s investment, mortality, and expense experience. Dividends are not guaranteed.
Who’s it for?
People who:

  • Have a lifetime need for insurance protection
  • Prefer the high degree of safety provided by the policy’s guarantees
  • Are attracted by the policy’s ability to build tax-deferred cash values
  • Like to know that their premiums will never increase

Over time, whole life insurance may be more economical than term insurance since premiums do not increase with age and the policy builds cash value.

  • Earnings, and certain withdrawals and loans, may qualify for tax-favored treatment.
  • Policy loans and withdrawals provide access to your cash value. Loans, withdrawals and any unpaid loan interest generally reduce the death benefit, which could leave beneficiaries inadequately protected. Loans reduce the cash value and death benefit by the amount of the loan outstanding plus interest and may affect them permanently.
  • If you cancel the policy, the accumulated cash value is yours to use as you wish. Taxes may apply.
  • Dividends can be taken in cash or used to increase the policy’s cash value and death benefit. This means that certain “dividend options” may be used to purchase additional insurance coverage each year, regardless of your health.
  • Premiums are initially more costly than term premiums, although they remain level for the life of the policy. Premiums are guaranteed not to increase over the life of the policy.
  • A minimum death benefit is guaranteed.
  • The cash value is guaranteed to grow at a specified, minimum rate.
FRIENDS COME AND GO BUT FAMILY IS FOREVER. You have the power to make a difference in the lives of people who matter the most – your family. Guarantee Advantage ULSM can protect your family’s future.

Why Guarantee Advantage ULSM ?*

Guarantee Advantage UL can offer you and your loved ones the following:


  • Lifetime guaranteed protection for you
  • Lifetime guaranteed monthly income for your family


  • Custom built around your life
  • Adapts as your life changes


  • Focused on affordable protection
  • Competitively priced




What is Variable Universal Life Insurance?

Equity Advantage VUL is a variable universal life insurance policy that offers a choice of death benefit guarantees and investment opportunities. Although the primary purpose of this product is to provide your selected beneficiaries with a death benefit, it also allows for access to available money within the policy while you’re alive.* Equity Advantage VUL gives you the choice of allocating your net premiums to one or more of more than 50 funding options, including a Fixed Account. Since the policy’s cash value will vary with the performance of the particular funding option(s) chosen, there are no cash value guarantees; however, there is a greater potential for growth with exposure to the market. The more conservative Fixed Account does provide cash value guarantees backed by the issuing insurance company. This product is currently available in all states.

*Withdrawn or borrowed amounts do not participate in the performance of the funding options. Poor performance of the funding options may necessitate additional premium payments, without which the policy may lapse.

Who’s it for?

People who:

  • Have a need for Life Insurance
  • Have longer time frames and a risk tolerance to weather the market
  • Want control over where their net premium dollars are allocated
  • Are interested in the potential for higher, tax-deferred cash value returns and are willing to accept risk from market fluctuations.


  • There is no set schedule for premium payments after the first policy year, so as your needs and goals change you may be able to increase, decrease or stop premium payments
  • Since the amount of coverage (face amount) can generally be adjusted, you may never need to purchase another life insurance policy
  • Metropolitan Life Insurance Company guarantees that the interest rate credited to the cash value in the Fixed Account will never be less than 3%
  • A minimum death benefit is guaranteed regardless of funding option performance if you maintain Guaranteed Minimum Death Benefit premium payments at specified levels
  • You can purchase a Disability Waiver of Specified Premium Amount rider for an additional cost. In the event that the insured becomes disabled, this rider applies a predetermined amount of premium to the policy, within limits so that you can maintain coverage and continue to accumulate cash value
  • The potential for your cash value to accumulate more rapidly over fixed products
  • A selection of professionally managed funding options
  • The flexibility to change the funding options in which your net premiums are invested at any time
  • The ability to transfer money among the funding options at any time, currently without charge (some restrictions may apply)

Some Drawbacks to Consider:

  • Increases in amounts of coverage require you to submit satisfactory health information to MetLife.
  • If funding option performance is poor and you have not maintained target premium payments, your death benefit could decrease depending on the death benefit option chosen, which could leave your beneficiaries inadequately protected or you may have to pay additional premium to keep the policy in force. Failure to make these additional premium payments could cause the policy to lapse with significant tax consequences
  • Equity Advantage VUL has limitations. There is no guarantee that any of the variable options in this product will meet their stated goals or objectives. The amount allocated to the variable investment options of your account balance are subject to market fluctuations so that, when withdrawn the cash surrender value may be worth more or less than the sum of premiums paid.





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