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Life Insurance: Term Life & Permanent Insurance

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Life insurance is simple, pay your premiums and if you die while the policy is in-force, a death benefit (amount of money) is paid to your survivors. It gets more complex when we look at different types of insurance. This slideshow looks at low-cost options like term life insurance and higher-cost options like whole life, universal life, and variable life insurance policies.

Publicado en: Economía y finanzas
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Life Insurance: Term Life & Permanent Insurance

  1. 1. Types of Life Insurance Term Insurance & Permanent Insurance (Whole Life)
  2. 2. Term Life Insurance • Simplest • Usually most inexpensive • A policy limited to a specific length of time, or term • Does not accumulate cash value • Usually term is 1, 5, 10, 15, 20, 25, or 30 years
  3. 3. • Pays the same death benefit throughout the term • Premium usually remains level • Decreasing Term Insurance • Death benefit decrease throughout the term • Premiums remain level • One use is to pay off a mortgage Term Life Insurance
  4. 4. Term Life Insurance • Increasing Term Insurance • Death benefit increases over time • Premiums increase over time
  5. 5. Term Life Options • Term Policy Options • Convertibility Option • Permits policyholder to convert to permanent insurance • Does not require proof of insurability
  6. 6. • Renewability Option • After the term has expired you can choose to renew your policy • Don’t have to prove insurability • Will pay a higher premium Term Life Options
  7. 7. • Level: Premium remains the same • Increasing: Premium increases by a specified amount at a specified time • Level/Increasing: Stays level for a certain period and then increases • Indeterminate: Has a minimum and maximum rate Term Premium Options
  8. 8. • Covers the insured for a lifetime or until age 100 • If you live to 100 insurer pays individual the death benefit • Three types of Permanent Insurance:  Whole life  Universal life  Variable life Permanent Life
  9. 9. • Cash reserves accumulate in the policy • You can take a loan out on the policy • You can cash in your policy • Dividends • The proportion of a company’s profit that it pays to its policyholders Permanent Life
  10. 10. • Policyholder pays the same premium amount for a certain number of years • Annual premiums are initially higher than term, but in long run they may become less since they stay level • If you plan on having insurance for more than 20 years it may be more advantageous to have whole life insurance Whole Life Policies
  11. 11. Whole Life Policies Advantages:  Absolutely predictable with zero risk  Return is guaranteed Disadvantage:  Relatively inflexible
  12. 12. • Takes advantage of high interest rates and yields higher returns on the cash value • You can adjust the premiums you pay and the death benefit amount Universal Life Policies
  13. 13. Advantages:  Flexibility  You can increase the amount of money you put in Disadvantages:  Risks of investment market are transferred to the policyholder  You may end up having to pay more in premiums than expected Universal Life Policies
  14. 14. • Both life insurance and an investment tool • Subject to regulation from the Securities and Exchange Commission • The funds in the policy have to be managed Variable Life Policies
  15. 15. Advantages: Policy owners knowledgeable about stock market may yield high returns Disadvantages: Investment risk passed on policyholder Only guarantee is a specified minimum death benefit Policyholder could lose most of the principal Variable Life Policies
  16. 16. What’s Best for YOU?