All Life Insurance Tips

Life Insurance Policies?

Can anyone help me with my homework regarding Life Insurance? these are the following: 1. Taylor is divorced with two small children. His salary is P100,000 per year, and he has no group life insurance. Should Taylor buy any life insurance? If so, should he buy term or whole life? 2. Other things than equal, explain how each of the following would likely to affect the growth of a universal life policy's cash value: --- The policy holder reduces the annual premium payment by 50% after five years. --- Market interest rates are stable for five years and then decline sharply and remain at the lower level. --- Researchers discover a cure for cancer five years after the policy is issued. thanks!

Public Comments

1. 1. Taylor should get a term policy which is cheap because he has kids to support. 2. If you reduce the premium (which is correctly called a deposit) you would reduce the cash value earned. And, if interest rates go down then you would earn less money on the cash value.
2. Girl, in future homework assignments, please break up the question into four or more parts. Reason: We only have a CHANCE to get ten points, not an assurance. For two points, these long questions are far too much of an investment of time & effort. For this question: 1. Taylor could buy insurance for the ex. This would allow him to receive the cash to hire people to care for his kids...should the ex pass. Taylor could buy insurance on each of his kids who will never again be able to have insurance at their current age and rate. Taylor could obtain insurance on himself so his kids could be take care of since he will not be around to provide for them. The insurance for the kids can be through a Children's Trust so that the kids are protected from a wife who could go errant. It is his money for the benefit of the children, not the wife who could get a young lover and handle the policy values inappropriately. He could also own each pollicy in his own name. This prevents the wife or the kids who will grow up from going against the purpose of the policy values. Term is less expensive at first, but the confiscatiory rates come later. If he can, buy whole life!!! After only a few years the build up of cash values offsets the price of the 'cheaper' term insurance. 2. a. Expect the values to reduce by over 50%. Compound interest is the key. Mention Einstein's Rule of 72. b. Returns will be much lower. c. Lower mortality rates, higher returns for DIVIDENDS, but no change for the guaranteed cash value. The dividends can be employed in Dividend Option Three. The dividends are useful, of course, but they are not to be included as cash value (which is a guarantee). Dividends are not guaranteed.
3. 1) You need more info to clearly answer what type of coverage he needs. Does he have a mortgage? Does his ex have policies on the children? What is his debt to income ratio? The facts are: term is cheaper in the early stages and usually balloon later on. It has no cash value. Whole Life has a static premium that also can build cash value. Depending on if the WL is participating or non-participating he may get Dividends with the WL. 2) a) If the Po reduces the premium payment hes not putting as much money into the policy to earn interest on or Cover the COI that's deducted on a monthly basis. b) While market rates are a factor in determining the rate that is paid on ULs, its not certain. But in general lower interest rates equal less money earned. c) If a cure for a terminal disease is discovered the actuaries would go back and readjust the rates, which would mean lower COI charges on a monthly basis, allowing for more cash value to earn interest on.