Question

What type of Life insurance such as term, whole life, variable, etc. would you recommend for each of these clients and why? Think these scenarios through based on what you learned in chapter 11. Be sure to explain how each policy works and why it is right for them.

A highly successful risk taking widow age 50 with 4 kids ages 14, 20, 23, and 24. She has a high income ($200k) but few assets saved. She is in great health and expects to live to be in her 90s. Her needs approach shows $1 million dollars, but she doesn't want to spend all her money on life insurance she may not need cause she is worried about her retirement.

Answer 1

Term insurance is a personal life insurance policy which insures the insurers life for a particular term as specified by the terms of the policy.

Whole life insurance is a life insurance that insures the person's life for the whole life of the insurer (not for any particular term)

Variable insurance is a variant of life insurance with different types of features life cash value, variable premium, investment options etc.

Here the widow is entrepreneurial in nature with high risk appetite (considering the ability and willingness to take risk). But she has less assets saved up and the family of 5 is depending on her earnings. Thus it is essential for the family to take an insurance for protecting against early death of primary earning member. Generally a term insurance is less costly than whole life insurance and flexible insurance due to the simplicity, lesser term covered and less available options of reinvestment. From the details in case, she does not wish to spend too much. Also the insurance cover is essential as long as she is working. Thus a term insurance is probably the best option in this case.