1. Life Insurance Research Project

2. What is life insurance? Life insurance- is insurance that pays out a sum of money either on the death of the insured person or after a set period. A life insurance policy is a contract with an insurance company. In exchange for premiums (payments), the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries in the event of the insured's death.  

3. Why do people purchase life insurance?
-Whether you live by yourself, with a spouse or significant other, you may want to buy life insurance as mortgage protection.
-You and your significant other may have planned for a future based on two incomes − but what if one of you passes away unexpectedly? Life insurance can be used to replace the lost income so the survivor can maintain the same standard of living.
- Funeral expenses, burial costs and medical bills can add up to a hefty amount. The last thing you want is for your loved ones to shoulder this extra burden.
- If you have kids, Life insurance can help fund their college education. If you die, the death benefit may be invested and potentially grow to the needed amount by the time your children reach college age. Feel better knowing that you helped prepare for their future – even if you are not there to see it.

4. What is a beneficiary?
A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor For example: The beneficiary of a life insurance policy is the person who receives the payment of the amount of insurance after the death of the insured.

5. Who is life insurance meant to benefit?
Life insurance generally covers the person who is insured but also his or her loved ones. Life insurance pays for funeral expenses, provides a replaced income of your lost spouse. And It can even pay for your children’s college education.

6. What is term life insurance?
Term life insurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term.

7. Advantages and Disadvantages of Term life insurance?
Advantages- During the early years of a term policy, the premium will usually be significantly lower than for cash value insurance.
It's simple to understand.
It may be purchased to meet a specific financial obligation, such as repayment of a loan.
Many term policies can be converted to cash value life insurance if your insurance needs change.
Disadvantages
Term insurance provides coverage only for a limited period of time, although some term policies can be renewed indefinitely.
Premium rates are guaranteed only until the end of the term. Depending on the policy, premiums may be level for a period of 1, 5, 10, 15, 20, 25, or 30 years and then cease without any renewal option, or offer continual renewals at a higher premium rate.
Deteriorating health can trap you in a policy with rapidly increasing premiums.

8. What is whole life insurance?
 Whole life insurance- (insurance on the life of the insured for a fixed amount at a definite premium that is paid each year in the same amount during the entire lifetime of the insured)

9. What is universal insurance?
Universal insurance  is a type of permanent life insurance, primarily in the United States of America. Under the terms of the policy, the excess of premium payments above the current cost of insurance are credited to the cash value of the policy. The cash value is credited each month with interest, and the policy is debited each month by a cost of insurance (COI) charge, as well as any other policy charges and fees which are drawn from the cash value, even if no premium payment is made that month.

10. What are the advantages and disadvantages of permanent life insurance?
Advantages- With a whole life policy, premium payments are locked in and will be the same from the time you sign the application until the policy is no longer in force. This policy also builds cash value over time in a tax-deferred account. The account is funded by premiums and the performance of the insurance company's investments. There is a guaranteed minimum interest rate given by the insurer but the returns can be greater if investments do well. Because this account is tax deferred, the money will grow tax-free, making it a great way to save for college tuition or even retirement. Also you can access the money in cases of emergencies. Disadvantages-Sometimes, important whole life insurance policy details are not disclosed to you, the policy owner. Insurance costs, such as mortality charges, administration fees and how the return rate was calculated ,are not explained in the illustrations. The insurer's investment choices are also not disclosed. Also, this policy does not allow flexibility in its payment amounts and schedules that were agreed upon during the application process. If you experience financial problems, you may have to use your reserves in the cash value account or risk surrendering your insurance policy.

11. The difference between term life, whole life, and universal life insurance
Term life insurance is claimed to be the easiest of the life insurances to understand and is named “term” because you are protected for a certain period of time – a term. The idea behind this insurance is that you can cover a small period of time with a lot of coverage and little cost. The idea is that you could use this insurance to protect yourself if you take on a large debt, such as a mortgage. For example, let’s say you just signed up for a 30 year mortgage and you are the sole source of income for your family. You could use term life insurance to cover the balance of the loan for a set period of time so that your family wouldn’t be in trouble if something were to happen to you.
Whole life insurance means coverage for your entire life, as long as you continue to pay the premiums on time. Sometimes you can convert a term life insurance policy into a whole life insurance policy, so that’s always an option if you want to. As for the premiums, this is where the companies try to get you in early so that the payments stay pretty level as you grow older. Since you are less riskier when you’re young, the earlier payments essentially offset your later payments as you become older and riskier. The other main difference is that there is a guaranteed cash value for the policy that you can actually borrow from. As you pay premiums, a portion of that goes into the guaranteed cash value bucket that is available to you if you decide to surrender the policy later. How much and how quickly that accrues depends on the type of policy you have and other factors.
Another name for this is Flexible Premium Adjustable Life Insurance (universal life just sounds better). This is a flexible version of whole life insurance where you get the savings element of whole life. The insurance company will invest your savings, offer a guaranteed minimum, and you get those funds tax deferred. What’s flexible is that there are two death benefit options. The first is that they pay out the policy’s cash value. The second option is that they pay out the face amount of the contract plus any cash value you accumulated. The first option is cheaper because the company pays out less insurance and the second is more expensive because they pay out more. I’ll be entirely honest, I don’t fully understand this and this article is designed as a brief overview.

12. What are different types of permanent policies?
Whole life Whole life insurance is the most basic type of permanent insurance. It has a savings component and a death benefit. The savings component is called the cash value. "Whole life is more expensive than term insurance, but it has more built-in guarantees with regard to your death benefit -- the guarantee of a cash value at a future date. Because of all those guarantees, you have a higher ongoing cost or premium," says Russell Fox, a Certified Financial Planner with Apex Wealth Management Group in Oxnard, Calif. Universal life insurance "Universal life insurance is a blend between whole life and term. It does have cash value accumulation, and it can be tied to a fixed interest rate like a CD that will adjust annually," says Fox. Because it has an investment component, universal life is a more aggressive approach than whole life, but it generally offers fewer guarantees than whole life. Because of that, it can be less expensive. Universal life offers consumers some flexibility in the amount they pay toward the premium, and they can also use the savings portion toward paying for the insurance coverage. Variable life insurance A third main type of permanent life insurance, variable life insurance, offers life insurance protection for the duration of your life with more investment options, including equities. Its structure is like that of universal life, but the value of your policy can go up or down with the value of the underlying investment choices. After a particularly brutal bear market, like the most recent one, these types of policies look extremely unattractive.

13. What is the death benefit for life insurance policies?
Definition of 'Death Benefit'
The amount on a life insurance policy or pension that is payable to the beneficiary when the annuitant passes away. 

14. Life insurance can provide numerous benefits to both individuals and businesses. It should be included as a part of any good financial plan. Should an individual pass away, a life insurance policy can provide a variety of important benefits to that person’s loved ones, including paying off debts, covering funeral and other related expenses, making up for lost income, or paying for a child’s future education.
In addition, life insurance is also used by many for the purpose of paying estate taxes that are due. The purchase of life insurance should be considered by anyone who has loved ones and / or business associates that are depending upon them for financial support.
There are essentially two primary types of life insurance policies on the market today – these include term and permanent. Term life insurance is considered to be temporary coverage. Every year the policy holder pays a premium in order to cover the cost of this pure death benefit protection.
Although term life insurance typically starts out with a lower premium in relation to permanent insurance with a similar death benefit, term policies build no cash value and, after a predetermined number of years, it must be renewed – pending the health of the insured.

15. Value upon cancelation of policy
What ever the cash value of that policy is, represents the cash you will receive.

16. Factors to consider in determining the amount of life insurance coverage needed
You are probably aware of the importance of having enough life insurance coverage to handle the financial contingencies that may affect your family in the event of your death. Determining the necessary amount of life insurance can be complicated. One general rule of thumb is that you should have enough coverage to equal five to ten times your annual salary. However, you should determine the “right” amount of life insurance coverage for you and your family with a careful “needs analysis” rather than using an arbitrary formula.
The needs analysis approach incorporates an evaluation of your family’s most important financial obligations and goals. This leads to planning insurance coverage to help address mortgage debt, college expenses, and future family income, as well as to provide liquidity for meeting future estate tax liabilities.
Mortgage Debt The first point worthy of consideration is whether your life insurance proceeds will be sufficient to help pay the remaining mortgage on your home. If you are carrying a large mortgage, you may need a sizable amount. If you own a second home, that mortgage should also be factored into the formula.
College Expenses Many people want life insurance proceeds large enough to help cover their children’s college, and possibly graduate school, expenses. The amount needed can be roughly calculated by matching the ages of your children against projected college costs adjusted for inflation. This calculation should be revised periodically as your children get closer to college age, and it may be a good idea to be as conservative as possible when estimating long-term financial goals.
Continuing Income for Your Family The amount of income you will need to help provide for your surviving spouse and dependents will vary greatly according to your age, health, retirement plan benefits, Social Security benefits, other assets, and your spouse’s earning power. Many surviving spouses may already be employed or will find employment, but your spouse’s income alone may not be sufficient enough to cover the monthly expenses of your family’s current lifestyle. Providing a supplemental income fund can help your family maintain its standard of living.
Estate Taxes Life insurance has long been recognized as an effective method for establishing liquidity at death to pay estate taxes and maximize asset transfers to future generations. However, this use of life insurance requires qualified legal expertise to help ensure the proper results.
Existing Resources If your current assets and retirement plan death benefits are sufficient to cover your financial needs and obligations, you may not need additional life insurance for these purposes. However, if they are inadequate, the difference between your total assets and your total needs may be funded with life insurance.