5. Understanding term life insurance Crystal is a 40-year-old female whose husband recently stopped working to attend law school. They expect that he will begin earning money as a lawyer within five years, but until then, Crystal will be the provider for their two children. Given her current financial situation, she is interested in a term life insurance policy that will last 5 years. Crystal 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 Policy Year Age 25 Age 40 Age 60 1 $119 $139 $252 5 $147 $219 $562 15 $176 $507 $1,313 20 $259 $1,054 $2,989 Total Cost 5 Years: $625 $897 $2,100 Total Cost 15 Years: $2,135 $6,205 $11,987 Total Cost 20 Years: $3,777 $8,287 $22,346 Level Premium Term Life Rates Age 5 Year 15 Year 20 Year 25 $102 $84 $95 35 $101 $84 $95 40 $119 $102 $113 50 $136 $167 $195 60 $245 $295 $394 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