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1、Life insuranceFrom Kenneth BlakeTypes of life insurance may be divided into two basic classes - temporary and permanent or following subclasses - term, universal, whole life and endowment life insurance.Term Insurance Term assurance provides life insurance coverage for a specified term of years in e
2、xchange for a specified premium. The policy does not accumulate cash value. Term is generally considered pure insurance, where the premium buys protection in the event of death and nothing else.There are three key factors to be considered in term insurance:Face amount (protection or death benefit),P
3、remium to be paid (cost to the insured), andLength of coverage (term).Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or inc
4、rease. Common types of term insurance include Level, Annual Renewable and Mortgage insurance.Level Term policy has the premium fixed for a period of time longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long term planning and asset ma
5、nagementbecause premiumsremain consistent year to year and can be budgeted long term. At the end of the term, some policies contain a renewal or conversion option. Guaranteed Renewal, the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability
6、 of the insured and with a premium set for the insureds age at that time. Some companies however do not guarantee renewal, and require proof of insurability to mitigate their risk and decline renewing higher risk clients (for instance those that may be terminal). Renewal that requires proof of insur
7、ability often includes a conversion options that allows the insured to convert the term program to a permanent one that the insurance company makes available. This can force clients into a more expensive permanent program because of anti selection if they need to continue coverage. Renewal and conve
8、rsion options can be veryimportant when selecting a program.Annual renewable term is a one year policy but the insurance company guarantees it will issue a policy of equal or lesser amount without regard to the insurability of the insured and with a premium set for the insureds age at that time.Anot
9、her common type of term insurance is mortgage insurance, which is usually a level premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner s residence so the mortgage will be paid if theinsured dies.A policy holder insures his life for
10、 a specified term. If he dies before that specified term is up (with the exception of suicide see below), his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. However, in some European countries (notably Serbia), insurance policy is such t
11、hat the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in the past years. Suicide used to be excluded from ALL insurance policieswhen?, however, after a number of court judgments against the industry, payouts do occur on death by suici
12、de (presumably except for in the unlikely case that it can be shown that the suicide was just to benefit from the policy). Generally, if an insured person commits suicide within the first two policy years, the insurer will return the premiums paid. However, a death benefit will usually be paid if th
13、e suicide occurs after the two year period.Permanent Life InsurancePermanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled
14、by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This
15、means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value.The four basic types of permanent insurance
16、 are whole life, universal life, limited pay and endowment.Whole life coverage whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. The primary disadvantages of whole life a
