Chapter 13
With decreasing term insurance
A relatively high level of insurance is provided in the earlier years when it is most needed
Term insurance
Does not grow in cash value
One element that must be considered in making this calculation according to the budget method is the
Special future expenses
The disadvantage of this method is that it does not consider your
age or your household situation.
Life insurance
allows individuals to eliminate or substantially reduce the financial consequences of their deaths on dependents.
The loan clause
allows the policyholder to borrow at a lower rate than that offered by financial institutions.
Settlement options represent
alternate ways in which a beneficiary can receive life insurance benefits in the event the insured person dies
The installment settlement option provides the beneficiary with
an equal stream of payments over a specified number of years.
The income method of determining the amount of life insurance needed specifies the life insurance amount
as a multiple of the insured's annual income.
Purchasing term insurance with benefits large enough to pay off the mortgage is often ? than purchasing mortgage life insurance
cheaper
Life insurance needs should be based on a family's
current standard of living and include some improvement in the future standard of living
The budget method to determine the amount of life insurance needed is based on a household's
future expected expenses and the individuals' current financial situation
Universal life insurance
has a saving component like whole life insurance
A term insurance policy
has increasing premiums are you get older
The factors that determine the premium for term insurance includes
health
Under the interest payments option, the amount owed to the beneficiary will be
held by the life insurance company for a specified number of years
Variable life insurance
is related to universal life insurance
Universal life insurance differs from whole life insurance in that:
it allows policyholders to skip premium payments and have the amount withdrawn from their saving plan
Whole life insurance
it is also called cash value life insurance
Does anyone need life insurance?
no, because only does with dependents need life insurance
An advantage of variable life policies is that
policyholders have flexibility in making their own investments.
An alternative approach to purchasing whole life insurance is to
purchase term life insurance and invest the premium difference in other investments.
Individuals avoid the high fees of variable life insurance by
purchasing lower-cost term insurance and investing the cost difference
Mortgage life insurance is a
special form of decreasing term life insurance that pays off the mortgage if the insured dies.
An insured individual would choose this option when they anticipate
the beneficiary might quickly spend the total amount to be received
The settlement option should be selected with an understanding of
the needs and characteristics of the beneficiary
The premium paid for a whole life policy is higher than the premium for term life because
whole life insurance provides both insurance protection and savings.
