Section 3. The Life Insurance Policy - contract between insurance company and insured -major...
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Transcript of Section 3. The Life Insurance Policy - contract between insurance company and insured -major...
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