1. Explain how term life insurance works.
Term life insurance is a type of life insurance that is very affordable. It gives insurance for a certain period of time. For certain periods of time money is invested monthly and when that term is up the plan needs to be renewed. The longer a person live the higher the premiums will be. It covers thing like mortgages and college expenses.
2. Explain how whole life insurance works.
Whole life insurance is a type of life insurance that is kind of expensive. The insurance is covered until death. It does not have to be renewed like term life insurance.
It will also provide money in the event of death.
3. Explain how variable life insurance works.
Variable life insurance is the most expensive life insurance. Money is put into an account. The money comes from stocks, bonds, equity funds, and other things. This causes high risks, which is why there are federal security laws.
4. What are the advantages and disadvantages of variable life insurance?
Variable life insurance is a permanent life insurance. It gives the option of getting money from bonds and stocks where a lot of money can be made. The problem is that it is risky and laws are put in place for more security.
5. Compare term life and whole life insurance. What are their advantages and disadvantages?
Term life is a very affordable so only a small amount of money has to be invested each month. On the other hand, a person can only be insured for a certain period of time, which is why it has to be renewed after the term ends. Another problem is that the premiums will go up because the longer a person lives the more like a person is going to die.
Whole life is permanent, it gives insurance until the person actually dies. The premiums also don’t go up it remains constant. The problem with whole life is that is expensive. More money has to be invested each month.
6. If you die, the insurance company has to pay your beneficiaries a lot of money. How do life insurance companies make money?
The Life insurance companies make money if a person dies before their term ends. If someone buys a 30-year term life for $500,000 and that person dies before the 30 years is up the company has made a profit. The companies also make money from underwriting income. As long as the company pays less than the premiums it collects it will make a profit. The companies also do well if the stock market does well. So if the stock market does badly the company will have to raise premiums to get more money. Lapse coverage give companies more money if the term is up and the person has not died. This lets the company keep the premiums.
7. Which life insurance is right for you and your family? Which one will you choose and why? For the purpose of this class, use either term life or whole life*.
Term life insurance is right for me and my family. I will choose term life insurance because it is cheaper and it seems like things will be okay if I can pay the premiums. In the long run term life seems better and I’ll just have to make sure that I pick a 30-year plan and remember to renew the plan when it ends.
8. Deduct the monthly expense from your budget. Update your budget with the cost of life insurance. Your teacher has the fees for you.
100,000/1000=100
100*12.72=1272
1272/12=106
I would be paying $106 each month.
Spending
|
Income
|
Gas $40.00
|
Monthly Salary: $6,369.83
|
Electricity $200.00
| |
Food $500.00
| |
Credit Card $50.00
| |
Home Mortgage $1783
| |
Car Maintenance $$100.00
| |
Cable TV $400
| |
Water $70
| |
Term Life insurance $106
| |
Roth IRA $1150
| |
401k $1150
| |
Total Spending $5549
|
Total Income $6,369.83
|
Total $820
| |
9. Calculate the amount of money you will spend after twenty years.
After twenty years I will spend $41,604 on life insurance. Since , the rate changes each year I have a different value for year year.
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