Question

1. What is the difference between term life insurance and whole life insurance?

2. What are non-forfeiture provisions? (Google: life insurance settlement options.   http://www.investopedia.com/exam-guide/cfp/life-insurance/cfp6.asp (Links to an external site.)Links to an external site. )

3. Name three settlement options.

4. What is the difference between a primary and a secondary beneficiary?

5. Name two ways to determine how much life insurance is appropriate for Petunia?

Answer 1

Answer(1): Difference between term life insurance and whole life insurance- Are as following:

Term Life Insurance- It is the insurance policy, that provides coverage for a specific period or term. There are many term insurance policies available that have a term of 10, 20 or 30 years. If the Insured person dies during the term of the policy, death benefits are given to his family.

It is less expensive than whole life insurance policy, there is no guaranteed cash value but the guaranteed death benefits are there. It is easier to take and can be converted to whole life insurance policy.

Whole life insurance policy- As the name suggests, it is taken for whole life. It does not have a specific term, it covers you your whole life with guaranteed death and cash benefits both. It is more expensive than term life insurance.

Answer(2): Non-forfeiture clause is when insured party can receive full or partial benefits due to non payment. It can include, returning some portions of the total premium paid, the cash surrender value of the policy, before the policy lapsed. This option is available when owner of whole life insurance policy opts to surrender the policy.

Answer(3): Three settlement options: Are as following:

Interest income option- Insurance company deposits the amount of policies into debt and other securities and pays interest to the beneficiary, this can be paid monthly, quarterly, semiannually and annually basis.

Life income option- In this option, beneficiary is promised to get income for the balance of his life.

Joint and survivor life annuity option- In this option, beneficiary will be permitted to annualized death benefits payment structure upon two or more individuals.

Answer(4): Difference between a primary and a secondary beneficiary:

Primary beneficiary will receive the benefits of insurance policy at first. If primary beneficiary dies then benefits will be given to secondary beneficiary.