Calculating the Cost of the Policy

Oct 13, 2025 by talynt.org 31 views

DeShawn's Retirement Planning: A Case Study on Term Life Insurance

As people age, their priorities shift from building a career to securing their financial future. DeShawn, a 38-year-old married man with three young children, is no exception. With a modest income of $45,000 per year, he is planning for a comfortable retirement. One of the key factors in his retirement plan is securing his family's financial well-being in the event of his untimely death. In this article, we will explore DeShawn's decision to purchase a $900,000, 20-year term life insurance policy and its implications for his family's financial security.

Term life insurance is a type of life insurance that provides coverage for a specified period, known as the term. In DeShawn's case, he has chosen a 20-year term, which means that the policy will remain in effect for 20 years from the date of purchase. During this period, the insurance company will pay a death benefit to DeShawn's beneficiaries if he passes away. The death benefit is the amount of money that the insurance company will pay to DeShawn's beneficiaries in the event of his death.

Why DeShawn Chose a $900,000 Policy

DeShawn's decision to purchase a $900,000 policy may seem excessive, but it is based on his financial goals and priorities. As a married man with three young children, DeShawn wants to ensure that his family is financially secure in the event of his death. The $900,000 policy will provide his family with a significant amount of money to cover their living expenses, pay off debts, and maintain their standard of living.

Calculating the Cost of the Policy

The cost of the policy will depend on several factors, including DeShawn's age, health, and lifestyle. Based on his income and expenses, DeShawn's monthly premium for the policy will be approximately $500. This amount will be deducted from his income each month, and he will receive a death benefit of $900,000 in the event of his death.

The Benefits of Term Life Insurance

Term life insurance offers several benefits to DeShawn and his family. Some of the key benefits include:

Financial Security: The death benefit will provide DeShawn's family with a significant amount of money to cover their living expenses, pay off debts, and maintain their standard of living.
Peace of Mind: Knowing that DeShawn's family will be financially secure in the event of his death will give him peace of mind and allow him to focus on his career and family.
Flexibility: Term life insurance is a flexible product that can be adjusted to meet DeShawn's changing needs and priorities.
Affordability: The monthly premium for the policy is relatively affordable, especially considering the significant amount of money that DeShawn's family will receive in the event of his death.

The Drawbacks of Term Life Insurance

While term life insurance offers several benefits, it also has some drawbacks. Some of the key drawbacks include:

Limited Coverage: Term life insurance only provides coverage for a specified period, which means that DeShawn's family will not receive a death benefit if he passes away after the term expires.
No Cash Value: Term life insurance does not accumulate a cash value over time, which means that DeShawn will not be able to borrow against the policy or receive a payout if he surrenders the policy.
Renewal Challenges: If DeShawn wants to renew the policy at the end of the term, he may face challenges due to his age and health.

DeShawn's decision to purchase a $900,000, 20-year term life insurance policy is a thoughtful and responsible one. The policy will provide his family with a significant amount of money to cover their living expenses, pay off debts, and maintain their standard of living in the event of his death. While term life insurance has some drawbacks, the benefits it offers make it an attractive option for DeShawn and his family.

Based on DeShawn's situation, we recommend that he:

Review and Update His Policy: DeShawn should review his policy regularly to ensure that it remains aligned with his changing needs and priorities.
Consider Increasing the Death Benefit: If DeShawn's income or expenses increase, he may want to consider increasing the death benefit to ensure that his family is financially secure.
Explore Other Insurance Options: DeShawn may want to explore other insurance options, such as permanent life insurance or disability insurance, to provide additional protection for his family.

DeShawn's decision to purchase a $900,000, 20-year term life insurance policy is a thoughtful and responsible one. The policy will provide his family with a significant amount of money to cover their living expenses, pay off debts, and maintain their standard of living in the event of his death. By understanding the benefits and drawbacks of term life insurance, DeShawn can make informed decisions about his financial security and provide peace of mind for his family.
DeShawn's Retirement Planning: A Q&A on Term Life Insurance

In our previous article, we explored DeShawn's decision to purchase a $900,000, 20-year term life insurance policy. As a 38-year-old married man with three young children, DeShawn wants to ensure that his family is financially secure in the event of his death. In this article, we will answer some of the most frequently asked questions about term life insurance and provide additional insights into DeShawn's decision.

Q: What is term life insurance, and how does it work?

A: Term life insurance is a type of life insurance that provides coverage for a specified period, known as the term. In DeShawn's case, he has chosen a 20-year term, which means that the policy will remain in effect for 20 years from the date of purchase. During this period, the insurance company will pay a death benefit to DeShawn's beneficiaries if he passes away.

Q: What is the death benefit, and how is it calculated?

A: The death benefit is the amount of money that the insurance company will pay to DeShawn's beneficiaries in the event of his death. The death benefit is typically calculated based on DeShawn's age, health, and lifestyle. In DeShawn's case, the death benefit is $900,000.

Q: How much does term life insurance cost?

A: The cost of term life insurance depends on several factors, including DeShawn's age, health, and lifestyle. Based on his income and expenses, DeShawn's monthly premium for the policy will be approximately $500.

Q: What are the benefits of term life insurance?

A: Some of the key benefits of term life insurance include:

Financial Security: The death benefit will provide DeShawn's family with a significant amount of money to cover their living expenses, pay off debts, and maintain their standard of living.
Peace of Mind: Knowing that DeShawn's family will be financially secure in the event of his death will give him peace of mind and allow him to focus on his career and family.
Flexibility: Term life insurance is a flexible product that can be adjusted to meet DeShawn's changing needs and priorities.
Affordability: The monthly premium for the policy is relatively affordable, especially considering the significant amount of money that DeShawn's family will receive in the event of his death.

Q: What are the drawbacks of term life insurance?

A: Some of the key drawbacks of term life insurance include:

Limited Coverage: Term life insurance only provides coverage for a specified period, which means that DeShawn's family will not receive a death benefit if he passes away after the term expires.
No Cash Value: Term life insurance does not accumulate a cash value over time, which means that DeShawn will not be able to borrow against the policy or receive a payout if he surrenders the policy.
Renewal Challenges: If DeShawn wants to renew the policy at the end of the term, he may face challenges due to his age and health.

Q: Can I convert my term life insurance policy to a permanent life insurance policy?

A: Yes, in some cases, you may be able to convert your term life insurance policy to a permanent life insurance policy. However, this is typically only possible if you are within a certain age range and have a certain level of coverage. It's best to consult with an insurance professional to determine if this is an option for you.

Q: How do I choose the right term life insurance policy for me?

A: Choosing the right term life insurance policy involves considering several factors, including your age, health, and lifestyle. You should also consider the level of coverage you need, the term length, and the premium costs. It's best to consult with an insurance professional to determine the right policy for you.

Term life insurance is a valuable tool for individuals who want to ensure that their family is financially secure in the event of their death. By understanding the benefits and drawbacks of term life insurance, DeShawn can make informed decisions about his financial security and provide peace of mind for his family. If you have any questions or concerns about term life insurance, be sure to consult with an insurance professional.

Based on DeShawn's situation, we recommend that he:

Review and Update His Policy: DeShawn should review his policy regularly to ensure that it remains aligned with his changing needs and priorities.
Consider Increasing the Death Benefit: If DeShawn's income or expenses increase, he may want to consider increasing the death benefit to ensure that his family is financially secure.
Explore Other Insurance Options: DeShawn may want to explore other insurance options, such as permanent life insurance or disability insurance, to provide additional protection for his family.