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Life and HealthInsuranceLife InsuranceLife insurance is an insurance contract that provides monetarycompensation for losses suffered as a result of someone’s death. Premiumsfor life insurance are based on several factors, including the ageand health of the insured, coverage, and type of policy. It is less expensiveto buy life insurance when you are young because the death ratefor young people is very low, and their health is usually at its peak (seeFigure 35.2).Straight Life InsuranceStraight life insurance , also called ordinary life insurance andwhole life insurance, requires the payment of premiums throughout theinsured’s life. The premiums remain constant throughout the policy.Upon the insured’s death, the beneficiary is paid the face value of thepolicy. Because straight life insurance builds up a cash and loan value,it provides savings as well as protection.Universal life insurance , a form of straight life insurance, allowspolicyholders to change the terms of the policy as their needs change.Coverage can be increased or decreased, and cash can be withdrawnwithout canceling the policy. The premiums vary according to thechanges in the policy.Limited-Payment Life InsuranceLimited-payment life insurance allows you to stop paying premiumsafter a stated length of time—usually 10, 20, or 30 years. Thebeneficiary will receive the amount of the policy upon the death of theinsured, whether it occurs during the payment period or after.Endowment InsuranceEndowment insurance provides protection for a stated time, generally20 to 30 years. The face value of the policy is paid to the insuredat the end of the agreed period. If the insured dies before the end of theagreed period, the full amount is paid to the beneficiary at the time ofdeath.Example 2. Don Ray purchased a $10,000, 20-year endowmentpolicy naming his wife, Rose, as beneficiary. He died after thepolicy had been in force only three years, at which time Rosel How to describe themain types of lifeinsurancel How to recognize risksthat are not coveredby insurancel How to explain themain types of healthinsurance and theplans that areavailableKnowing how todetermine your life andhealth insurance needswill help you handle yourfinances when dealingwith unexpected events.l life insurancel straight life insurancel universal life insurancel limited-payment lifeinsurancel endowment insurancel annuityl term insurancel Medicarel MedicaidChapter 35: Insurance Protection 755