Question

Understand the different types of life insurances.

Term life, whole life, guarantee universal life, index universal life.

1. Plan that earns tax-deferred interest income and has high risk.
2. Plan that builds wealth and pays a death benefit.
3. Plan that covers a family while the person is employed.
4. Plan that covers someone for his or her entire life.
Options:
a) Plan that earns tax-deferred interest income and has high risk.
b) Plan that builds wealth and pays a death benefit.
c) Plan that covers a family while the person is employed.
d) Plan that covers someone for his or her entire life.

Answer 1

Life insurance types include Term life for a specific period, Whole life which builds wealth and provides a death benefit, Guaranteed Universal Life for lifelong coverage, and Indexed Universal Life which involves higher risk but potential for tax-deferred earnings.

Step-by-step explanation:

Understanding the different types of life insurance is crucial for financial planning and protecting beneficiaries. The various life insurance products available cater to different needs and financial objectives:

• Term life insurance (Option c) is designed to cover someone for a specific period, usually aligning with their employment years. It is often used to cover a family while the person is employed, with no wealth accumulation feature.
• Whole life insurance (Option b) is a permanent insurance policy that not only pays a death benefit but also builds cash value over time, acting as a tool to build wealth.
• Guaranteed Universal Life insurance (Option d) provides lifelong coverage with a focus on death benefits rather than cash value accumulation, thus offering coverage for someone's entire life.
• Indexed Universal Life insurance (Option a) is a more complex product that earns tax-deferred interest income based on a stock market index, which means it may have a higher risk compared to other life insurance products.