Life Insurance

A New Lease On Life

Life insurance is a contract with an insurance company where you make payments over a period of time. In return, the insurance company provides money to your family after you die.

Life insurance is a way to ensure the financial security of your family after your death. Like all other types of insurance, it is a financial tool used to minimize a specific risk—the risk that your family will be left in poverty if you die and are unable to provide for them.

Four components:

  • Insured—the person who takes out the insurance policy
  • Death Benefit—the amount of money the insurance company will pay in the event of the insured’s untimely death
  • Designated Beneficiary—the person who will benefit from the life insurance payout, normally the insured’s spouse or children
  • Premium—the amount of money that the insured pays monthly to secure a life insurance policy

Options

Many different forms of life insurance are available. In general, these can be divided into four categories:

 

Whole Life (Permanent) Universal Life Variable Life Term Life
Coverage Period Life of Insured Life of Insured Life of Insured Specified Period, Max 30 Years
Guaranteed Death Benefit? Yes Yes Yes Yes, If Insured Passes During Policy Term
Secondary Benefit? Interest-Earning Cash Account, Tax Deferred Interest-Earning Cash Account, Tax Deferred Investment Account; May Include Bond, Money Market, or Equity Funds No
Secondary Benefit Amount Fixed Interest Rate Guaranteed Changeable Based on Premiums, Interest Rate Not Guaranteed Investment Account Value is Variable Due to Market Changes, Rate of Return Not Guaranteed N/A
Flexibility Fixed Premiums and Benefits Flexible Premiums, Death Benefit, and Cash Investment at Insured’s Discretion Flexible Premiums, Death Benefits, and Investment Contributions at Insured’s Discretion Fixed Premium, Benefits, and Term. Some Policies May Be Extended or Renewed.
Cost Most Expensive Less Expensive than Variable Life Less Expensive than Whole Life Least Expensive

 

Fun Facts:

  • 41% of the U.S. population doesn’t have life insurance.
  • 93% of Americans say that life insurance is something most people need.
  • Life insurers pay out $1.5 billion every day.

Works Cited

https://www.metlife.com/individual/life-advice/personal-insurance/life-insurance-policies/index.html

http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2014/02/18/3-things-you-should-know-about-life-insurance

http://visual.ly/life-insurance-facts-figures

http://www.investopedia.com/terms/u/universallife.asp

http://www.investopedia.com/terms/l/lifeinsurance.asp

https://www.thebalance.com/compare-term-universal-variable-whole-life-insurance-1289668

http://www.investopedia.com/university/insurance/insurance8.asp

http://www.investopedia.com/ask/answers/08/variable-life-insurance.asp

http://www.investopedia.com/terms/u/universallife.asp