Life Insurance By: Tyler, Maisie, Kenny, & Nikolai
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: • have dependents (children, spouse, partner, parents living with you, etc.) • have a mortgage or other large debts • have a large or complex estate • 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Savings for your Spouse or Family Members: • Some types of life insurance create a cash value (can be borrowed or withdrawn on the owner’s request) • To pay your final expenses: • funeral, estate costs, and medical costs not covered by health insurance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
Term: PROS AND CONS PROS CONS • 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
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
WhoLE: Pros and Cons Pros Cons • 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
Variable Life insurance • Also called Variable Appreciable Life Insurance • Variable life polices build up cash reserve • invest in any choice by insurance company.
Variable: Pros and cons PROS CONS • 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.
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
Universal: PROS AND CONS PROS CONS • 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.
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… • Licensed insurance agent • Internet • Direct mail • Bank
Choosing The right one • Three questions present difficulty for most life insurance buyers: • How big of a death benefit do I need? • How long do I need coverage? • 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: $98.00Female: 71.00 • 60 year old $500,000 coverage- Male: $290.00 Female: $190.00
WHOLE LIFE COST • 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 • Male • Age 40 • 250000 • Whole life • AIG direct • $15.23 a month • Female • Age 40 • 250000 • Whole life • AIG direct • $12.23 a month
Real Life Stories The 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." GenworthFinacial. 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>.