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Finance: What is Life Insurance (Term v. Variable)? 45 Views
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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.
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Transcript
- 00:00
Finance allah shmoop What is life insurance Term versus variable
- 00:08
The smackdown and there's A reason that warren buffett is
- 00:12
one of the wealthiest men in the world He sells
- 00:15
insurance great industry great profits usually And great record of
- 00:21
no complaints from the dead Let's Start with term life
Full 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
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