Introduction to Life Insurance for Kids and Teens
This video explains the concept of life insurance in a simple, concise way for kids and beginners.
It could be used by kids & teens to learn about life insurance, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Kindergarten
- Elementary School
- Middle School
- High School
Table of Contents
Interactive Learning Experience: How Much Life Insurance
How much life insurance you need isn’t a feeling, it’s a calculation. Work out what your family would actually need to cover, then compare the two main types of policies.
How Much Life Insurance
Life insurance replaces an income that somebody else was depending on. So the question is not what feels like a big number. It is what your dependants would actually have to cover, and for how long.
What they would need
Usually below 100%, because you are no longer one of the people being fed
Until the youngest child is independent, or your partner reaches retirement
What already exists
Including anything through work, which usually ends when the job does
For the term vs whole comparison
Term or whole life
Term, plus investing the difference
Whole life
Whole life cash value Term, with the difference invested
The premiums here are invented. Real quotes depend on your age, health, family history, whether you smoke and which insurer you ask, and they can differ by a factor of two for the same person. Nothing here is a recommendation. Two things the arithmetic cannot capture: whole life keeps paying out whenever you die rather than only during the term, which matters if somebody depends on you permanently, and term cover normally becomes unnecessary once the mortgage is gone and the children have left. A policy is not an investment, and an investment is not a policy, which is the real reason the two are usually better kept apart.
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Quiz: Life Insurance
Life insurance comes in a few flavors that confuse most people. Test your grasp of life insurance policies.
Howdy Wall St. Willy! Sometime ago you told me about insurance and one of the kinds of insurance was life insurance. But…
What is life insurance?
Well, life insurance is insurance that covers somebody’s life, which means that if they die, the life insurance company pays a certain amount of money to the person designated by them called the beneficiary.
Well, who could be the beneficiary?
The beneficiary could be anyone, but it’s usually someone from your family.
Well how much money is paid by the insurance company if we die?
It depends on the type of the insurance policy but that is decided at the time you buy the policy.
This is called the death benefit.
Well what is an insurance policy anyway?
You get into a contract with the insurance company which contains many details like:
- How much insurance premium you would pay
- How frequently would you pay the premium
- How long the insurance is valid for
- How much money would be paid out if you die
- And many more things
This contract, with all these details, is called the insurance policy.
Well, how long is life insurance valid for?
It depends on the kind of policy and how long you need the life insurance for.
But it’s usually taken for 5 to 30 years.
Death after life insurance policy runs out / expires
Is there any money that is paid by the life insurance company if the life insurance policy holder does not die before the life insurance policy runs out?
It depends on the type of insurance policy. Certain kinds of life insurance policies do not pay anything if the policy holder survives the term of the policy.
But some other kinds of life insurance policies pay out a certain amount in such a case.
Well who should buy life insurance?
Anyone that has other people dependent on them financially.
Because the idea behind life insurance is that if you die and your income stops, your dependents can use the money received from the life insurance company instead of your income so that they can still cover their financial needs.
What should be the term of the life insurance policy?
How long should I buy life insurance for?
It depends on your financial situation and your dependents. You’d want the life insurance policy to last till your dependents, like you kids, become financially independent.
Also, if you have major debt like a mortgage, your life insurance policy should last till the mortgage is fully repaid.
How much life insurance should I buy and what should be the death benefit?
Again, it depends on your financial situation.
But it should generate enough money for your dependents to live on in case of your death and should be equal to or a little more than the amount on your mortgage or other major debt.
Are there different kinds of life insurance?
Yes, there are many different kinds of life insurance and some major ones are term life insurance, whole life insurance and universal life insurance.
But discussing that in detail is a topic for another time.
Thank you very much for telling me about life insurance, Wall St. Willy.
You are welcome, Sooper Cooper. Remember, Finance is Your Friend!
Video Featured in the Below Financial Literacy Course for Kids & Teens
Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens
Podcast: What is Life Insurance?
Fun, informative and concise episodes by a 16-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
Everything you need to know about Life Insurance: What is Life Insurance, who could be the beneficiary, how much money is paid by the insurance company in case of death, what is a policy, how long is life insurance valid for, is any money paid by the life insurance company if the policy holder outlives the policy term, who should buy life insurance, how long should you buy life insurance for, how much life insurance should you buy – what should be the death benefit, are there different kinds of life insurance – Term Life Insurance, Whole Life Insurance and Universal Life Insurance, and more.
Show notes and transcript at: https://easypeasyfinance.com/what-is-life-insurance/
