Life Insurance: Basic Policy Types Life Insurance Insurance that is paid out to a person or people designated to receive the funds when the insured person dies.Insurance that is paid out to a person or people designated to receive the funds when the insured person dies. Why Buy Life Insurance? To protect the standard of living of the survivorsTo protect the standard of living of the survivors

Life Insurance: Basic Policy Types What Do We Mean By “Standard of Living” Pay for immediate expenses such as a funeral, the deceased debts, etc.Pay for immediate expenses such as a funeral, the deceased debts, etc. Provide for childcare if young childrenProvide for childcare if young children College tuitionCollege tuition Mortgage paymentsMortgage payments

Life Insurance: Basic Policy Types Term Insurance Covers for a specific period of timeCovers for a specific period of time Terms are 1, 5, 10, 15, 20, 35 or 30 yearsTerms are 1, 5, 10, 15, 20, 35 or 30 years SimplestSimplest Low costLow cost Does not accumulate cash valueDoes not accumulate cash value It can be renewed, but at a higher premiumIt can be renewed, but at a higher premium

Life Insurance: Basic Policy Types Term Insurance Only pays benefit if insured dies during the term of the policyOnly pays benefit if insured dies during the term of the policy How Does It Work: Sarah buys a five-year, $10,000 policy. She has protection for 5 years. If she dies during the term, the beneficiary receives $10,000. If she is still alive, she will have to renew at a higher premium.

Life Insurance: Basic Policy Types Cash-Value or Permanent Life Insurance Provides both savings and death benefit Covers the insured for a lifetime or until age 100; receive a pay out if you live to 100 Cash Value Cash reserves accumulate in the policyCash reserves accumulate in the policy You can take a loan out on the policyYou can take a loan out on the policy You can cancel policy and receive the cash valueYou can cancel policy and receive the cash value

Life Insurance: Basic Policy Types Cash-Value or Permanent Life Insurance Three types of Permanent Insurance: Whole lifeWhole life Universal lifeUniversal life Variable lifeVariable life

Life Insurance: Basic Policy Types Whole Life Insurance Policyholder pays the same premium throughout the policyholder’s lifetimePolicyholder pays the same premium throughout the policyholder’s lifetime Premiums are initiallyhigher than term, but in the long run they may become less since they stay the samePremiums are initially higher than term, but in the long run they may become less since they stay the same If you plan on having insurance for more than 20 years it is usually more advantageous to have whole life insuranceIf you plan on having insurance for more than 20 years it is usually more advantageous to have whole life insurance

Life Insurance: Basic Policy Types Universal Life Flexibility: You can adjust the premiums you pay and the death benefit amount as financial situations changeFlexibility: You can adjust the premiums you pay and the death benefit amount as financial situations change Premium payments are applied to:Premium payments are applied to: Insurance protectionInsurance protection interest-earning investments (build a savings)interest-earning investments (build a savings)

Life Insurance: Basic Policy Types Variable Life Both life insurance and an investment tool (not savings)Both life insurance and an investment tool (not savings) Cash-value is used for investments in stocks, bonds and mutual funds rather than savingsCash-value is used for investments in stocks, bonds and mutual funds rather than savings The cash-value is “variable” because it can change in value depending on the market and if the investments go up or downThe cash-value is “variable” because it can change in value depending on the market and if the investments go up or down

Life Insurance: Basic Policy Types What Determines the Cost of Your Premium? Amount of coverageAmount of coverage AgeAge HealthHealth GenderGender OccupationOccupation

Life Insurance: Basic Policy Types Factors You Should Consider When Buying Number of dependentsNumber of dependents Ages and needs of dependentsAges and needs of dependents Balances on mortgage/monthly rentBalances on mortgage/monthly rent Balance of loansBalance of loans Tuition costs for dependents/spouseTuition costs for dependents/spouse Basic necessitiesBasic necessities