Many financial experts consider life insurance to be the cornerstone of sound financial planning. It can be an important tool in the following situations: Show
1. Replace income for dependents 4. Pay federal “death” taxes and state “death” taxes 6. Create a source of savings Types of Life InsuranceThere are two major types of life insurance—term and whole life. 2. Whole Life/Permanent Life In the case of traditional whole life, both the death benefit and the premium are designed to stay the same (level) throughout the life of the policy. The cost per $1,000 of benefit increases as the insured person ages, and it obviously gets very high when the insured lives to 80 and beyond. The insurance company keeps the premium level by charging a premium that, in the early years, is higher than what is needed to pay claims, investing that money, and then using it to supplement the level premium to help pay the cost of life insurance for older people. By law, when these “overpayments” reach a certain amount, they must be available to the policyholder as a cash value if he or she decides not to continue with the original plan. The cash value is an alternative, not an additional, benefit under the policy. 3. Universal Life 4. Variable Life Which type of life insurance policy allows a policy owner to pay more or less than the plan premium?What is universal life insurance? Universal life insurance policies offer flexible premiums that may allow you to adjust how much you'll pay each year by accessing some of the policy's cash value (though you will need to pay the minimum premium amount or the policy will lapse).
Which of the following policies is characterized by a flexible premium and death benefit and allows the policy owner control of the investment aspect of the plan?Universal life, a form of permanent life insurance provides policyholders with flexibility on paying premiums, a cash savings component, and a death benefit. Premium costs may change with interest rates and as the policyholder grows older.
How do Level Term policies provide level premiums?With level-premium term life insurance, the policy pays a benefit if the policyholder passes away during a fixed period (whatever the term of the insurance is). If death occurs outside of this term timeframe, there is no payout.
Which product category will provide a high risk cover with low premium?Term Life Insurance
In case the life assured passes away during the policy period, the life insurance company pays the death benefit to the nominee. It is a pure risk cover plan that offers high coverage at low premiums.
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