1. Objective 08.02 Interpret the nature, theory, and different types of insurance LIFE INSURANCE

2. Life Insurance Provides income to dependents or other named beneficiaries in the event of the insured person’s death. Face value- the amount of protection stated in the policy –Example: Marla buys a $100,000 face value life insurance policy. Marla dies. Marla’ s beneficiaries will get $100,000 in proceeds.

3. Beneficiaries The policyholder names a beneficiary Can be an individual or business Beneficiary receives proceeds from a life insurance claim. Proceeds is the money paid to a survivor by a life insurance policy. Contingent beneficiaries named in the policy are second in line if the beneficiary is deceased.

4. Life Insurance Advantages Face amount is paid as proceeds to beneficiary Proceeds are NOT taxable by income, estate or inheritance tax laws. Proceeds are paid direct to beneficiaries. Proceeds avoid probate.

5. Term Life Insurance Term life is temporary insurance. –Only pays if insured dies during policy period –Purchased for a specific term (one year or multiple years) –Usually renewable for another term –Least expensive premium for most coverage –Pure insurance, no savings add up

6. Whole Life Insurance Permanent insurance for lifetime of insured. Premium is more. Excess premium creates savings called cash value. Cash value can be: –Withdrawn by policyholder as loan –Used to buy more paid up insurance –Used to pay current premium

7. Other Types of Life Insurance Supplemental Information Limited pay life - stop paying after a specified # of years without lapse Universal life - blend of term and whole Endowment - lump sum paid in advance Variable life - cash value builds in investment chosen by policyholder Accidental death & dismemberment - for deaths due to accident or loss of limb

8. Cost Factors for Life Insurance Type of insurance Age of insured Health of insured Gender (sex) of insured Face amount – Dollar amount of coverage provided by the life policy Company