1 life insurance basics continuing education course course #com-593-9, part a
TRANSCRIPT
2
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
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Life Insurance Defined
The insuring of a life is termed life insurance
The loss of life initiates the death benefit
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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
5
Life Insurance
Term Life Life Defined as temporary insurance
Whole Life Defined as permanent insurance
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Life Insurance
Universal Life Provides flexible benefits
Variable Life The amount of coverage varies
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Term Insurance
There are four variations of term insurance Annual renewable Level term Decreasing term Increasing term
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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
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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
10
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
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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
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$100,000 20-Year Level Term Policy
$100,000
Year0
Year 5
Year10
Year15
Year20
Amount of Protection
PolicyInception
PolicyExpiration
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Decreasing Term Insurance
Provides coverage for a specified period of time
The death benefit decreases to zero at the expiration of the policy
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$100,000 20-Year Decreasing Term Policy
$0
$25,000
$50,000
$75,000
$100,000
Year0
Year 5
Year10
Year15
Year20
Amount of Protection
PolicyInception
PolicyExpiration
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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
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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
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$100,000 20-Year Increasing Term Insurance
$0
$25,000
$50,000
$100,000
Year 0 Year 5 Year 10 Year 20
Amount of Protection
PolicyInception
PolicyExpiration
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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
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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
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Term Insurance Disadvantages
It is temporary protection only.
Coverage may terminate or become too expensive to continue a the end of the term.
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Term Insurance Disadvantages
Generally premiums increase at periodic intervals, such as every five or ten years
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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
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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
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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
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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
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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
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Whole Life Disadvantages
It is conservative producing lower interest income than other investments
Protection per dollar is less than term insurance
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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
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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
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Life Insurance Policy Riders
Multiple Indemnity (Accidental Death)
Accidental Death and Dismemberment (AD&D)
Waiver of Premium (if insured is unable to pay)
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Life Insurance Policy Riders
Waiver of Premium with Disability Income
Guaranteed Insurability
Return of Premium
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Life Insurance Policy Riders
Living Need (partial advance payment of insurance amount)
Long Term Care (LTC)
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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.