Finance: What is Life Insurance (Term v. Variable)?

What is term life insurance, and variable life insurance? Hit play to find out, and, uh...let's hope you live long enough to figure out the answers.

College and CareerPersonal Finance
CoursesFinance Concepts
FinanceFinance Definitions
Financial Responsibility
Personal Finance
Finance and EconomicsTerms and Concepts
LanguageEnglish Language
Life SkillsFinance Definitions
Personal Finance
SubjectsFinance and Economics
Terms and ConceptsAccounting
Bonds
Company Management
Credit
Education
Entrepreneur
Financial Theory
Insurance
Investing
Marketing
Metrics
Real Estate
Regulations
Retirement
Stocks
Tax
Trading
Trusts and Estates
Wealth

Transcript

00:24

insurance The easiest kind of insurance on the planet tau

00:27

understand Meet don vannucci He has a wife and two

00:31

new kids Twins babies Same hairstyle is their dad Don

00:35

is a contract assassin with the nsa as a big

00:39

client And he knows that one day there probably is

00:42

a bullet with his name on it Or worse So

00:44

he buys for fifty bucks a month Term life insurance

00:48

which pays his wife three hundred grand if he dies

00:51

pretty much for any reason Unless she is the one

00:54

who kills him and that can be proved in a

00:56

court of law And well you know with his snoring

00:59

and you never know You know i've been there So

01:01

a month goes by He pays the fifty bucks term

01:03

life insurance and does not die So what happens Well

01:07

the insurance company keeps all the money and yes there

01:10

Were brokerage fees in here but they're relatively small for

01:13

this very competitive easy to understand kind of insurance Well

01:16

the year goes by in twelve payments of fifty bucks

01:19

or six hundred dollars He's not dead yet and the

01:22

insurance company keeps all the dough Yeah huge profit margins

01:26

And in fact with don at thirty two years old

01:29

well in any normal career like you know being a

01:32

dia trist or a stockbroker realtor something like that his

01:37

life expectancy would be for some fifty more years or

01:40

more than that of paying that term life policy So

01:44

if he lives that fifty years while that would be

01:46

six hundred payments at fifty bucks a month for a

01:50

very long time with then escalating payments as he gets

01:53

older and you know more likely to die that month

01:57

Well the key determining feature in term life however is

02:00

that should don ever stop paying his monthly premiums because

02:04

he chose not to not because he is dead Then

02:07

the policy is just cancelled all of those previous payments

02:11

which he could have invested in the stock market and

02:13

let compound away growing it in his percent a year

02:17

Well they're all owned by the insurance company which took

02:20

his six hundred dollars a year each year for decades

02:23

and grew it to be worth hundreds of thousands of

02:25

dollars by investing it But since don didn't do that

02:29

in all fairness at thirty two it didn't seem like

02:32

he'd last all that long especially having been given the

02:35

afghanistan well then he loses all his back payments when

02:39

he cancels at age seventy two just in time for

02:43

the assassin who's been contract id to take him out

02:47

you know finds him so that's term life terminal life

02:50

All right well then what's variable life Well variable life

02:54

views that fifty bucks a month in payment as a

02:57

kind of sort of investment albeit not necessarily a great

03:01

one Had don gotten a variable life policy instead of

03:05

a term life policy and then paid into it for

03:08

forty or fifty years and then stopped Well he might

03:11

have accumulated cash surrender value of some forty fifty sixty

03:16

grand or so that is he would have assumed some

03:19

market risk as the insurance company invested the money and

03:23

he would have at least gotten back some of his

03:25

hard earned after tax dough that he invested for so

03:28

many years between you know assignments A shame Never heard 00:03:33.47 --> [endTime] the big guy coming