Life insurance Questions

1. Explain how term life insurance works.

Term life insurance is life insurance that provides coverage at a fixed rate of payments for a limited period of time. After that period expires, coverage is  no longer guaranteed and the client must obtain further coverage with different payments or conditions. If the life insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.

2. Explain how whole life insurance works.

Whole life insurance is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid, or to the maturity date. Premiums are pre-determined and do not increase with age.  Normally you pay premiums until death.

3. Explain how variable life insurance works.

A form of permanent life insurance, Variable life insurance provides permanent protection to the beneficiary upon the death of the policy holder. This type of insurance is generally the most expensive type because it allows you to allocate a portion of your premium dollars to a separate account comprised of various instruments and investment funds within the insurance company's

4. What are the advantages and disadvantages of variable life insurance?

Advantages are that your can contribute as much money that you want, and you can borrow and withdraw the money you contributed without fees or penalties. A disadvantage is that it is very expensive so you will have a hard time affording it.

5. Compare term life and whole life insurance. What are their advantages and

disadvantages?

Term Life advantages include that it is much cheaper than whole life and variable. All you have to do is pay your premiums. But a drawback is that it doesn't last for life. You will have to continuously have to renegotiate your contract and terms.

Whole life on the other hand, does last for life. You will never have renegotiate the terms as long as you pay your premium. The contract is also pre-determined so no matter how old and crippled your are, the price won't go up.

6. If you die, the insurance company has to pay your beneficiaries a lot of money.

How do life insurance companies make money?

Insurance companies have teams of accounts that calculate life expectancies, companie expenses, etc.They do this so that they calculate the amount of money to charge clients so that they make a profit.

7. Which life insurance is right for you and your family? Which one will you choose

and why? For the purpose of this class, use either term life or whole life.

I will chose whole life insurance simply because it’s cheaper. I feel like spending tons of money on certain life insurance plans if pretty much like throwing away money because I will never see it. Yah sure, my family will, but do they really need that money? why should they get paid for simply not having a father or a husband. They should make their own money and earn it.

8. Deduct the monthly expense from your budget.  Update your budget with the cost

of life insurance. Your teacher has the fees for you.

9. Calculate the amount of money you will spend after twenty years.

Amount of money per year: $250 x 12= $3000

Amount of money after 20 years: $3000 x 20= $60,000