Life Insurance

Section 3

The Life Insurance Policy-contract between insurance company and

insured-major elements of a life insurance policy

-name of the insured-amount of coverage-cost of insurance-name of the beneficiary

Life Insurance Principles

Beneficiary Selection-beneficiary

-the person named in the policy to receive the insurance benefits

-you can also insure the life of a person in whom you have an insurable interest

-to have insurable interest, you must receive some kind of financial benefit from the person’s continued life

Life Insurance Principles

Term Life Insurance-insurance that provides financial protection from

losses resulting from a death during a definite period or term

-least expensive form of life insurance-only type of life insurance that’s purely life

insurance-all other insurances hav savings or

investment features

-term can run from 1 to 20 yrs or more-protection ends when term ends

Types of Insurance

Term Life Insurance continued…-you can purchase Renewable Term Insurance

-don’t have to take another physical

-you can purchase Level Term Insurance-amount of protection and premiums remain

the same

-you can purchase Decreasing Term Insurance-amount of protection gradually goes down

but premium remains the same-appropriate for adults w/ children

Types of Insurance

Permanent Life Insurance-has cash value and an investment feature-insurance companies invest remaining part of

premium that’s not need to pay for coverage-this money is added to the cash value of the

insurance policy

-cash value refers to amount of money the insurance will pay if the policyholder decides the insurance is not needed

-longer you keep a policy the higher its cash value

-you can also borrow money up to your cash value

Types of Insurance

Permanent Life Insurance Continued…-permanent life insurance can be scene as a

savings plan-return on cash value on your money is not large-this plan has a built-in savings feature

encouraging saving-permanent life comes in the form of

-whole life-variable life-universal life

Types of Insurance

Permanent Life Insurance-Whole Life Insurance

-permanent insurance that expands over a lifetime

-ordinary life insurance remains the same each yr

-limited-payments policies can be designated by the number of yrs the policyholder agrees to pay

Types of Insurance

Permanent Life Insurance-Variable Life Insurance

-investment plan that resembles an investment portfolio

-Lets policy holder choose investments-both death benefit and cash value rise and

fall depending on success of investment-might guarantee a minimum death benefit-strong rate of return on invested account and

could increase cash value and death benefit

Types of Insurance

Permanent Life Insurance-Universal Life Insurance

-provides both insurance protection and a substantial savings plan

-Payment is split 3 ways-pays for insurance protection-expenses-goes into interest-earning investments

-investment portion earns a variable rate return

-this could rise or fall depending on economy

Types of Insurance

Group Life Insurance-an insurance policy that covers a group of

people-is less than buying individual -most group insurance offers term rather than

permanent-the whole company buys then individuals from

the company can decide if they want to join and pay their share

Types of Insurance

Coverage Amount-anyone with dependents needs life insurance

-a dependent is a person who must rely on another for financial support

-questions to help determine the need for life insurance

-how much money is required for your dependents’ financial stability if your income is lost

-how much income will you need when you retire and what will be the source of your income

-what can you afford to pay for your life insurance needs

Buying Life Insurance

Life Insurance Application-to buy individual life insurance you have to

complete this application

-apply through insurance agent-may have to take a physical exam

-if no serious problems you pay premium and receive coverage

-if work at a high risk job or have poor health you might be able to get insurance but will have to pay a much higher rate

Buying Life Insurance

Premium Payments-type of policy and age affects cost

-older you are higher the cost

-example-in purchasing a whole life policy, life

insurance is higher than those for term insurance, but annual premium stays the same throughout insured life

Buying Life Insurance