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LIFE INSURANCE PLANS

Life insurance policies are intended to provide a cash benefit to an individual's dependents in the event that they should die. Individuals purchase life insurance to cover specific debts $($e$.$g$.,$ a mortgage or college tuition$)$ or to provide income to replace what would have been earned by the deceased. Life insurance policies vary along several important dimensions. This exercise is designed to help you understand the key differences between benefits plans. For each type of life insurance policy, indicate which features apply using the terms provided $(\frac{N}{A}=$ Not Applicable$).$

$\backslash$table$[[$FEATURES OF LIFE INSURANCE POLICIES,,$],[($Explanotions of each of the features can be found at the bottom of this document.$),,,,,],[$FEATURES$,$TERM,WHOLE,VARIABLE,UNIVERSAL,$\backslash$table$[[$VARIABLE$],[$UNIVERSAL$]]],[$Limited term $($Yes$,$ No$,$ N$/$A$),,,,,],[$Guaranteed Face Amount $($Yes$,$ No$,$ N$/$A$),,,,,],[$Fixed Premium $($Yes$,$ No$,$ N$/$A$),,,,,],[$Equity$/$Cash Value $($Yes$,$ No$,$ N$/$A$),,,,,],[$Guaranteed Rate of Return $($Yes$,$ No$,$ N$/$A$),,,,,],[$Investment decisions by $($Individual$,$ Company, N$/$A$),,,,,],[$Restricted Investment $($Yes$,$ No$,$ N$/$A$),,,,,],[$Invest in multiple accounts $($Yes$,$ No$,$ N$/$A$),,,,,],[$Withdrawals or loans okay $($Yes$,$ No$,$ N$/$A$),,,,,],[$Returns offset premium $($Yes$,$ No$,$ N$/$A$),,,,,],[$Tax advantages $($What kind?$),,,,,],[$Risk $($Low$,$ Medium, High$),,,,,],[$Designed for low cost $($Yes$,$ No$),,,,,]]$

For each type of insurance plan, describe the sort of situation$($s$)$ that it is well$-$sulted to address:

$\backslash$table$[[$PLAN TYPE,BEST SUITED FOR...$],[$TERM$,],[$WHOLE$,],[$VARIABLE$,],[$UNIVERSAL$,],[$VARIABLE UNIVERSAL,$]]$

TERMS

Limited term: Does the insurance plan last "forever" or is it in effect for only a limited time after which it must be renewed for further coverage?

Guaranteed Face Amount: Does the insurance plan pay out a guaranteed amount or does the amount paid out vary depending upon the investment of the insurance plan?

Fixed Premlum: Each insurance plan carriers a premium, or a price, that the insured must pay. Does the insurance plan's premium vary over time or is it fixed for the life of the insurance plan?

Equity$/$Cash Value: Does the plan allow the insured to "cash in$"$ the plan at a given date $($i$.$e$.,$ cancel the plan and receive a check for the cash value of the plan?$)$

Guaranteed Rate of Return: If the plan allows the insured to invest a portion of their premiums, does that investment have a guaranteed rate of return or does the insured bear all the risk of bad investment decisions?