Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 383

Some examples of term life policies would be a $250,000 coverage over on a 10-year term, or $1 million coverage over a 25-year term. The higher your risk of mortality and the higher the amount of coverage, the more you would pay in premiums. For example, if you are a 60-year old man, smoker, with a desired 10-year coverage of $500,000, you can be certain that your premiums (perhaps around $3,500 annually) would be a lot higher than a non-smoking, 30-year old woman with a 10-year $100,000 coverage (perhaps around $70 annually). One of the greatest features of life insurance, and specifically term life, is that the benefits are paid in full (and generally tax-free) when you die, regardless of how much you have paid into the policy. In other words, you are covered for the full amount of benefits from day one. This is unlike an investment, where the amount of benefit depends on how much you have contributed and how well your investments have done. The flip side however is that if you do not die while the policy is active, the amount paid towards the premium is gone forever.

Whole (Permanent) Life - Whole life insurance is designed to address not only the life insurance concerns of the policyholders, but also to address their desire to build a savings with their premiums. In that regard whole life can be considered a hybrid product. It is partly life insurance and partly life savings. The premiums are usually fixed for the duration of the policy which normally continues until the age of 100 or death, whichever comes first. Here is how whole life works. A part of the premium is used for the death (mortality) coverage. This is the part that cannot be recovered just like regular term life. However, the other part of the premium goes to build a savings known as cash value. As the policyholder continues to pay the premiums, the cash value continues to build up. Since it is normally invested in fixed income securities (chosen by the life insurance company) it also collects interest which, by the way, is not taxed while the policy is in effect. Now if the person dies before the age of 100, the benefit which is paid out to the beneficiary

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Table of Contents Copyright and Disclaimer Foreword Money
Bonds Futures Stocks Options
Mutual Funds Retirement Final Words Appendix A

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