By: Tyler, Maisie, Kenny, & Nikolai

LIFE INSURANCE

WHAT IS LIFE INSURANCE?

• What is Life Insurance?

• Sum of money received by a beneficiary

• Based on monthly payments

• How Life Insurance Works

• The Insurance Company

• Give the beneficiary money when holder passes away

• Policy Holder

• Makes monthly payments to insurance company

• Beneficiary

• Receive money after holder passes away

WHO NEEDS LIFE INSURANCE?

• MAY NOT NEED:• no financial dependents and probably will not in the

foreseeable future• retired and living off investments or other income sources • A young child, unless child is earning income

• NEED:1. have dependents (children, spouse, partner, parents living

with you, etc.)2. have a mortgage or other large debts3. have a large or complex estate4. own a business or have a partner in a business

WHY DO WE NEED LIFE INSURANCE?

• Providing replacement income for your dependents• Create an inheritance for your heirs• Fund a retirement• As an employment benefit

• To protect a business against the loss of a key employee

• Create Savings for your Spouse or Family Members:• Some types of life insurance create a cash value (can be borrowed or withdrawn on the

owner’s request)

• To pay your final expenses:• funeral, estate costs, and medical costs not covered by health insurance

RISK FACTORS• Age• Gender• Height & weight• Medical record• Personal habits (smoke, drink, drugs)• Occupation• Credit Rating• Amount of coverage wanted

TERM LIFE INSURANCE• Less $ buys you a larger amount (affordable for young

policyholders)• Set period of coverage called “term”• Policies can be cancelled or renewed at end of term• More expensive after each renewal• Does not earn cash value• Can be converted to permanent policy

• difficult or impossible to get if you are in poor health.

• some policies guarantee renewability until specific age.  

• high monthly payment if smokes, serious health problems, obese.

• at a young age ensures long coverage

• low monthly payment

TERM: PROS AND CONSPROS CONS

WHOLE LIFE INSURANCE• Whole Life Insurance=permanent life insurance protection• Less complicated options• Premiums do not change• Benefits do not change• Earns an accumulates cash value slowly• Offers lifetime coverage• Cannot be converted to a different policy• More costly

• not allowed to choose separate investment accounts

• Not good at adapting insurance/retirement plans that change

• Savings element (cash value) which grows tax-deferred.

• Premiums won’t increase during lifetime

WHOLE: PROS AND CONSPros Cons

VARIABLE LIFE INSURANCE• Also called Variable Appreciable Life Insurance • Variable life polices build up cash reserve • invest in any choice by insurance company.

• You assume the investment risks.

• Can’t withdraw from cash value during lifetime.

• Can apply interest earned on investments toward premiums

• Potentially lowering the amount you pay.

VARIABLE: PROS AND CONSPROS CONS

UNIVERSAL LIFE INSURANCE• The most costly• Offers lifetime coverage• Cannot be converted to different policy• Flexible payments• Can make changes to benefits based on needs and

lifestyle• Earns and accumulates cash value at guaranteed rate• The most options to tailor needs

• You assume the investment risks.

• Can’t withdraw from cash value during lifetime.

• You assume the investment risks.

• Can’t withdraw from cash value during lifetime.

UNIVERSAL: PROS AND CONSPROS CONS

WHAT DOES LIFE INSURANCE COVER?

• Beneficiary• The money that is paid out from the policy will go to the beneficiary: an

estate, spouse, or children.• Charitable causes

• Some build a lump sum of money up to donate to a charity.• Final expenses

• Covers burial and funeral costs, as well as medical bills not covered under health insurance.

• Death taxes• Some use to pay their estate taxes, so that their family doesn't have to

liquidate any property to pay the tax bill.• Inheritance

• An inheritance is started by naming your policy after the beneficiary. The money earned on this policy will go to the heir.

• Dependents• Life insurance is important to your dependents, especially if they solely

depend on you financially.

WHERE DO I PURCHASE LIFE INSURANCE?

•Life insurance may be purchased from an insurance company through…

1. Licensed insurance agent2. Internet3. Direct mail4. Bank

CHOOSING THE RIGHT ONE• Three questions present difficulty for most life insurance buyers:

1. How big of a death benefit do I need?2. How long do I need coverage?3. Where should I buy life insurance?

TERM COSTS• 25 year old $500,000 coverage- Male: $20.00

Female: $18.00

• 40 year old $500,000 coverage- Male: $40.00 Female: $32.00

• 50 year old 500,000 coverage- Male: $98.00 Female: 71.00

• 60 year old $500,000 coverage- Male: $290.00 Female: $190.00

• Male • Age 40• 250000• Whole life• AIG direct• $15.23 a month

• Female• Age 40• 250000• Whole life• AIG direct• $12.23 a month

• Male• Age 50• 1,390,000 coverage• Whole life• Gensworth Financial• $169 a month

• Female • Age 50• 1,390,000 coverage• Whole life• Gensworth financial• $149 a month

WHOLE LIFE COST

REAL LIFE STORIESThe John Darwin Story- The John Darwin disappearance case was an investigation into the

faked death of a former teacher and prison officer John Darwin, who turned up alive in December 2007, five years after he was thought to have died in a canoeing accident.

SOURCES• "Understanding and Choosing Life Insurance." Financial Planning: A Comprehensive Guide to Personal Finance . Web. 19 Dec. 2011.

<http://financialplan.about.com/cs/insuranc1/a/LifeInsurance.htm>.

• "Why Do We Need Insurance - Life, Auto, Disability | Cheap Auto Insurance." Cheap Insurance HQ - Your Cheap Insurance Headquarters | Auto Insurance | Home | Life | Health . Web. 19 Dec. 2011. <http://www.cheapinsurancehq.com/Why-Do-We-Need-Insurance.html>.

• "What Is Life Insurance?" Life Insurance - Term Life Insurance - Whole Life Insurance - Life Insurance Quotes . Web. 19 Dec. 2011. <http://www.lifeinsurancewiz.com/LifeInsurance/what.htm>.

• "HowStuffWorks "Who Needs Life Insurance?"" HowStuffWorks "Business & Money" Web. 19 Dec. 2011. <http://money.howstuffworks.com/personal-finance/financial-planning/life-insurance2.htm>.

• "Life Insurance Calculator." Genworth Finacial. n.d. Web. 16 Dec. 2011. <http://www.genworth.com/content/products/lifeinsurance/how_much_life_insurance_do_i_need/life_insurance_calculator.html?action=calculateMonthly&age=50&gender=female&qualident=CenterContent.31026>.

• "Life Insurance." Wikipedia. n.d. Web. 16 Dec. 2011. <http://en.wikipedia.org/wiki/Life_insurance>.

• "Life Insurance ." statefarm. n.p., n.d. Web. 16 Dec. 2011. <http://www.statefarm.com/insurance/life_annuity/life/life.asp>.

• "How Much Will Life Insurance Cost Me?" CNNMoney - Business, Financial and Personal Finance News . 04 Sept. 2008. Web. 19 Dec. 2011. <http://money.cnn.com/retirement/guide/insurance_life.moneymag/index9.htm>.

• Term4Sale - Instant Term Life Insurance Comparisons . Web. 19 Dec. 2011. <http://www.term4sale.com/>.

• "Still A Colliery And Not A Town." Three Score Years And Ten. Web. 19 Dec. 2011. <http://threescoreyearsandten.blogspot.com/2011/01/still-colliery-and-not-town.html>.