5. Understanding term life insurance Aa Aa E Deborah is a 60-year-old female who has recently become the legal guardian and sole caretaker of her three-year-old grandson. Ideally, she would like to purchase permanent insurance coverage, but her primary concern is making sure her grandson will be taken care of financially if she dies before he begins college. Given her current financial situation, she is interested in a term life insurance policy that will last 15 years. Deborah goes to an insurance broker to purchase a policy and is shown the following two rate tables to help her choose between annual renewable and level premium term life insurance. Yearly Rates on Term Life Insurance Policies Annual Renewable Term Life Rates Level Premium Term Life Rates Policy Year 5 Year 15 Year 20 Year Age 25 Age 25 $119 $147 $176 $259 Age 60 $252 $562 $1,313 $2,989 35 Age 40 $139 $219 $507 $1,054 $897 $6,205 $8,287 15 20 40 50 $102 $101 $119 $136 $245 $84 $84 $102 $167 $295 $95 $95 $113 $195 $394 Total Cost 5 Years: Total Cost 15 Years: Total Cost 20 Years: $625 $2,135 $3,777 $2,100 $11,987 $22,346 Given her age and desired policy term, she can purchase an annual renewable term life policy and pay in the first year and a total of over the course of the policy. Alternatively, she can purchase a level premium term life policy and pay a premium of per year for a total of over the course of the policy. This example is representative of why, in general, people today purchase term life insurance