Life Insurance Basics

Questions and Answers

To provide financial protection for loved ones in the event of the policyholder's death

Term life insurance provides coverage for a specified period, while permanent life insurance provides lifetime coverage

The lump sum paid to the beneficiary upon the policyholder's death

To add additional features or benefits to the policy Signup and view all the answers

To help pay estate taxes and ensure the distribution of wealth according to the policyholder's wishes Signup and view all the answers

The accumulated value of the policy, which can be borrowed against or used to pay premiums Signup and view all the answers

To protect business partners or key employees Signup and view all the answers

To replace the policyholder's income to support dependents Signup and view all the answers

Study Notes

A contract between an insurance policyholder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (death benefit) upon the death of the policyholder
Provides financial protection for loved ones in the event of the policyholder's death

Term Life Insurance:
- Provides coverage for a specified period (e.g., 10, 20, or 30 years)
- Pays a death benefit if the policyholder dies during the term
- Generally less expensive than permanent life insurance
Permanent Life Insurance:
- Provides lifetime coverage as long as premiums are paid
- Accumulates a cash value over time, which can be borrowed against or used to pay premiums
- Includes whole life, universal life, and variable life insurance

Death Benefit: The lump sum paid to the beneficiary upon the policyholder's death
Premium: The regular payment made by the policyholder to maintain coverage
Cash Value: The accumulated value of a permanent life insurance policy, which can be used while the policyholder is still alive
Riders: Additional features or benefits that can be added to a policy, such as accidental death benefit or waiver of premium

Income Replacement: Replaces the policyholder's income to support dependents
Funeral Expenses: Covers funeral and burial costs
Debt Repayment: Pays off outstanding debts, such as a mortgage
Estate Planning: Helps to pay estate taxes and ensures the distribution of wealth according to the policyholder's wishes
Business Protection: Protects business partners or key employees

A contract between the policyholder and insurer that provides a death benefit to the beneficiary upon the policyholder's death
Provides financial protection for loved ones in the event of the policyholder's death

Provides lifetime coverage as long as premiums are paid
Accumulates a cash value over time, which can be borrowed against or used to pay premiums
Includes whole life, universal life, and variable life insurance

Death Benefit: The lump sum paid to the beneficiary upon the policyholder's death
Premium: The regular payment made by the policyholder to maintain coverage
Cash Value: The accumulated value of a permanent life insurance policy, which can be used while the policyholder is still alive
Riders: Additional features or benefits that can be added to a policy, such as accidental death benefit or waiver of premium

Income Replacement: Replaces the policyholder's income to support dependents
Funeral Expenses: Covers funeral and burial costs
Debt Repayment: Pays off outstanding debts, such as a mortgage
Estate Planning: Helps to pay estate taxes and ensures the distribution of wealth according to the policyholder's wishes
Business Protection: Protects business partners or key employees