Personal Financial Planning 13th Edition by Lawrence Gitman,Michael Joehnk,Randy Billingsley

Exercise 13

Ya Gao, a 38-year-old widowed mother of three children (ages 12, 10, and 4), works as a product analyst for Proctor Gamble. Although she's covered by a group life insurance policy at work, she feels, based on some rough calculations, that she needs additional protection. Ray Stickley, an insurance agent from Frontier Insurance, has been trying to persuade Ya to buy a $150,000, 25-year, limited payment whole life policy. However, Ya favors a variable life policy. To further complicate matters, Ya's father feels that term life insurance is more suitable to the needs of her young family.
Critical Thinking Questions
1. Explain to Ya the differences between (a) a whole life policy, (b) a variable life policy, and (c) a term life policy.
2. What are the major advantages and disadvantages of each type of policy
3. In what way is a whole life policy superior to either a variable life or term life policy In what way is a variable life policy superior How about term life insurance
4. Given the limited information in the case, which type of policy would you recommend for Ms. Gao Defend and explain your recommendations.