Life Insurance15.5

What is life insurance?Helps replace lost income for a family who is financially dependent upon another person. Protects against financial loss.

Policy states: name of insured amount of coverage cost of insurance who benefits

The beneficiary

This is the person who will receive the payout from the policy.

Note: You can insure more than your own life. You may also insure any person in whom you have an insurable interest

Types of insurance:Term Life

Least expensive form the only pure form of life insurance (ie. No investment piece) Coverage ends when the term you have chosen ends May choose renewable type of insurance for higher premium

Note: There is level term and decreasing term insurance.

Level: coverage and premiums remain the same

Decreasing: protection becomes less over time (useful as children grow up and no longer rely on parents to survive)

Types of insurance:Permanent Life

has cash value may be used as an investment offers protection same as term company invests portion of premium and adds it to the cash value of the policy

Note: cash value is less than death benefit amount

may borrow against up to cash value (unpaid amount upon death is taken from face value of policy)

Permanent Life Type:Whole Life

extends over lifetime ordinary life policy premiums remain the same over whole life limited payment premiums are paid only until a particular age is reached (prevents having to pay premiums when retired)

Permanent life type:Variable life

lets holder choose among investments death benefits vary with the value of investments made portion of premium cover cost of insurance, remaining goes into investmentsUsually guarantees a minimum death benefit

Permanent life type:Universal life

offers both insurance and savings plan premium split 3 ways: insurance protection, expenses, investments investments earn at a variable rate

Group Life Insurance

Usually offered through employer cost is lower typically term life is used

Buying Life InsuranceHow to make sure it fits your needs

How much coverage do you need? (ie. dependents, lifestyle) How much income do you need for retirement (if you are investing)? What can you afford?

Must use an agent to purchase and submit an application, which often requires a physical exam.

Things that will affect your premium: type of insurance chosen health risk of job age