Questions and Answers
What is the purpose of life insurance?
To pay out money to beneficiaries upon the policy holder's death
Who typically receives the death benefit from a life insurance policy?
The beneficiaries chosen by the policy holder
What is the main difference between Term Life Insurance and Permanent Life Insurance?
Term Life Insurance has a limited coverage period, while Permanent Life Insurance has a lifetime coverage
Who needs life insurance?
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What is a consideration when determining how much life insurance you need?
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Why might a company not honor a life insurance policy?
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What is a key feature of variable life insurance?
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Who is guaranteed life insurance typically suitable for?
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What is a factor that affects the cost of a life insurance policy?
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What is the consequence of lying about risk factors on a life insurance application?
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What is the main difference between variable life insurance and other types of life insurance?
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Why is it important to shop for a life insurance policy when you're younger?
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What is the main difference between Term Life Insurance and Permanent Life Insurance?
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What is the primary benefit of Term Life Insurance?
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Who may consider purchasing Term Life Insurance?
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What is Group Life Insurance typically a type of?
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What happens to Group Life Insurance coverage if you quit your job?
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Why is shopping for another policy on your own a good idea if you have Group Life Insurance?
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Study Notes
Term Life Insurance
- Lasts for a defined period of time (10, 20, or 30 years) specified at purchase
- Pays beneficiaries a fixed amount if death occurs during the covered period
- No payment is made if the policyholder outlives the term
- Popular due to large payouts at a lower cost than permanent life insurance
- Often chosen by young people with mortgages or young children
Group Life Insurance
- Provided by employers as a benefit to employees
- A type of term life insurance with low coverage amounts
- Coverage ceases when the employee leaves the company
- Policyholders may need to purchase additional coverage to meet their needs
Permanent Life Insurance
- Covers the policyholder until death, as long as premiums are paid
- Includes variable life and whole life insurance
Variable Life Insurance
- A permanent life insurance policy with premiums invested in chosen assets
- Fixed premium, but payout may vary based on investment performance
Guaranteed Life Insurance
- Suitable for older people or those with health issues
- No health questions asked, but premiums are higher and payouts are lower
- A good option for those who delayed buying a policy and now face higher prices
How Life Insurance Works
- A contract between the policyholder and the insurance company
- Policyholder pays premiums, and the company pays beneficiaries upon death
- Beneficiaries are typically family members
- Most companies do not honor policies if the policyholder commits suicide
Who Needs Life Insurance
- Anyone with dependents who rely on their income
- Provides financial support for dependents in the event of the policyholder's death
Determining Life Insurance Needs
- Consider funeral costs, mortgage/rent, schooling, bills, and lifestyle
- Aim to cover expenses and maintain dependents' lifestyle
Factors Affecting Life Insurance Cost
- Age
- Health issues
- Activity interests (hazardous vs. low-risk)
- Tobacco use
- Lying about these factors can void the policy
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Description
Test your knowledge of life insurance contracts, including how they work and the benefits they provide to beneficiaries. Learn about the exchange of regular payments for a death benefit and more!
