Chapter 10
In-Class Notes
Background on Life Insurance• Parties to a life insurance contract• Beneficiary, life insured, policy owner• Life and health insurance company
• Types of temporary life insurance• Term insurance
• Consider the implications of owning Term10 versus Term20
• Renewability• Creditor insurance
• Who is the beneficiary?• Should I buy creditor insurance or personally
owned term insurance?• Group life insurance
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Permanent Insurance• Types of permanent life insurance• Whole life
• Fixed premiums
• Source of liquidity (you can borrow from the cash value)
• Limited payment policies available
• Investments made at the discretion of the life insurance company
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Permanent Insurance (Continued)• Universal life• Flexible premiums• Cost of insurance options
• Level term• Yearly renewable term (YRT)
• Company expenses will vary • Investment returns are based on the
performance of the investments selected by the policy owner
• Term to 100• No cash value
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Determining the Amount of Life Insurance Needed• Income method
• Multiple of your annual income
• Does not consider age or household circumstances (children vs. no children)
• Budget method
• Allows you to consider your household’s future expected expenses
• Does not account for unexpected expenses10-5Copyright © 2009 Pearson Education Canada
Contents of a Life Insurance Policy
• Features• Beneficiary• Grace period• Reinstatement• Living benefits• Premium schedule• Loans• Suicide clause• Incontestability date• Misstatement of age or sex• Renewability and conversion options
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Contents of a Life Insurance Policy (Continued)• Riders• Waiver of premium• Guaranteed insurability• Accidental death• Child term coverage• Term insurance coverage
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Selecting a Life Insurance Company• Other types of insurance offered?• Group insurance• Living benefits
• Provides the specific policy desired?• Settlement options available?
• Services available?• Online services• Convenient office location
• Relatively low premiums?• Financial condition?• What rating is assigned by services such as A.M. Best,
Moody’s, and Standard & Poor’s?10-8Copyright © 2009 Pearson Education Canada