Download Whole Life Insurance

Life Insurance Basics
Continuing Education Course
Course #COM-593-9, Part A
1
Life Insurance Defined
 Life insurance is a contract that pays a
death benefit to a beneficiary upon the
demise of the insured insured person
 Death benefits are common to all types
of life insurance
2
Life Insurance Defined
 The insuring of a life is termed life
insurance
 The loss of life initiates the death benefit
3
Life Insurance
 The purpose of life insurance is to
provide income replacement to
beneficiaries
 The risk of premature death motivates
most purchases of life insurance
4
Life Insurance
 Term Life Life

Defined as temporary insurance
 Whole Life

Defined as permanent insurance
5
Life Insurance
 Universal Life

Provides flexible benefits
 Variable Life

The amount of coverage varies
6
Term Insurance
 There are four variations of term
insurance




Annual renewable
Level term
Decreasing term
Increasing term
7
Term Insurance
 Death benefit is paid to the beneficiary
upon the insured’s demise during the
term of the policy
 Term policies contain an expiration date
terminating all coverage
8
Annual Renewable Term
 Issued for a period of one year
 Has limited applications for individuals
because the premium rises with age
 Appropriate for immediate short-term
insurance protection
9
Level Term
 Provides a level death benefit through out
the policy term
 Provides a fixed amount of temporary
insurance
 Appropriate for known obligations or
contingencies
10
Level Term
 Often issued as renewable and
convertible policies
 All coverage ceases if it is not renewed
after the expiration of the policy
 The premium will be based on the
insured’s age at the time or renewal
11
$100,000 20-Year Level Term
Policy
Amount of Protection
$100,000
Year
0
Year
5
Policy
Inception
Year
10
Year
15
Year
20
Policy
Expiration
12
Decreasing Term Insurance
 Provides coverage for a specified period
of time
 The death benefit decreases to zero at the
expiration of the policy
13
$100,000 20-Year Decreasing
Term Policy
Amount of Protection
$100,000
$75,000
$50,000
$25,000
$0
Year
0
Year
5
Policy
Inception
Year
10
Year
15
Year
20
Policy
Expiration
14
Term Insurance Advantages
 Term insurance provides the lowest
premium cost per unit of protection
 Low premiums allow greater coverage
for younger persons when their needs are
the greatest
15
Increasing Term Insurance
 Premiums remain level
 Death benefit starts small and increases
over the term of the policy
 Increasing term is used less than other
types of policies
16
$100,000 20-Year Increasing
Term Insurance
Amount of Protection
$100,000
$50,000
$25,000
$0
Year 0
Policy
Inception
Year 5
Year 10
Year 20
Policy
Expiration
17
Term Insurance Advantages
 Allows people with low incomes to buy
adequate amounts of protection
 It is used to cover temporary obligations,
such as the balance remaining on long
term debts
18
Term Insurance Advantages
 It is a low-cost option to provide for
future insurability for a person whose
future insurance needs may change.
 It allows people with lower incomes to
purchase adequate amounts of immediate
protection
19
Term Insurance Disadvantages
 It is temporary protection only.
 Coverage may terminate or become too
expensive to continue a the end of the
term.
20
Term Insurance Disadvantages
 Generally premiums increase at periodic
intervals, such as every five or ten years
21
Whole Life Advantages
 Provides insurance for the insured - until
death or age 100
 The death benefit remains the same
throughout the life of the insured
 The premium remains level
22
Whole Life Advantages
 Builds cash value
 The maturity date is age 100
 The insurance will not terminate as long
as the premiums are paid on time
23
Whole Life Advantages
 Protection is guaranteed for life as long
as the premium is paid
 Premiums do not increase because the
insured grows older
 Policy owner always knows exactly the
cost of the insurance
24
Whole Life Disadvantages
 The amount of premiums may make it
difficult to buy required protection
 It may be more expensive than term
insurance if it is terminated early
25
Whole Life Disadvantages
 Premiums may continue longer than the
insured’s income-producing years
 The cash value at retirement age may be
much less than the face value of the
policy
26
Whole Life Disadvantages
 It is conservative producing lower
interest income than other investments
 Protection per dollar is less than term
insurance
27
Universal Life
 Designed for flexibility
 Premiums are often lower than whole life
insurance
 You have more control over the amounts
of the face value and premiums
28
Variable Life
 Variable death benefit and premiums are
based upon performance of investments
 Cash value accumulates through
investment in bonds, stocks and real
estate funds offered through the insuror
29
Life Insurance Policy Riders
 Multiple Indemnity (Accidental Death)
 Accidental Death and Dismemberment
(AD&D)
 Waiver of Premium (if insured is unable
to pay)
30
Life Insurance Policy Riders
 Waiver of Premium with Disability
Income
 Guaranteed Insurability
 Return of Premium
31
Life Insurance Policy Riders
 Return of Cash Value
 Cost of Living
 Additional Insureds
32
Life Insurance Policy Riders
 Living Need (partial advance payment of
insurance amount)
 Long Term Care (LTC)
33
Summary
Once you have an idea of what you are
looking for, shopping for the right policy
or combination of policies gets a lot
simpler.
34
Thank You
For Attending!