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1 What Happens When…












13 Chapter 10 Property and Motor Vehicle Insurance
WHAT IS INSURANCE? Insurance is protection against possible financial loss; it gives you peace of mind An insurance company, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from an insured risk People purchase a policy. The firm assumes a risk for a fee called the premium, which the insured policyholder pays periodically 10-13

14 Insurance and Risk Management: An Introduction
TYPES OF RISKS Risk: Uncertainty or lack of predictability, such as to loss that a person or property, covered by insurance, faces. Peril is the cause of a possible loss, such as fire, windstorm, robbery, disease, or death. Hazard increases the likelihood of a loss, such as driving drunk, or defective house wiring. Risk management: Organized, planned strategy to protect your assets and family. 10-14

15 Insurance and Risk Management: An Introduction
Pure Risk Personal risks, property risks, and liability risks are types of pure risk Insurable, chance of loss, not gain Accidental, unintentional Nature and financial loss of the risk can be predicted Speculative Risk Chance of loss or gain, such as starting a business Uninsurable 10-15

16 Risk Avoidance Risk Shifting Risk Assumption Risk Reduction
Risk Management Techniques

17 Insurance and Risk Management: An Introduction (continued)
PLANNING AN INSURANCE PROGRAM To put your risk management plan to work ask yourself… What should be insured? For how much? What kind of insurance? From whom? 10-17

Auto Insurance Life Insurance Health Insurance Dental Insurance Vision Insurance Disability Insurance Renter’s Insurance Flood Insurance Homeowners Insurance Long-term Care Insurance Cancer Insurance Cell Phone Insurance Umbrella Insurance Wedding Disaster Insurance Title Insurance Mortgage Insurance Pet Insurance GAP Insurance Business Insurance Medical Insurance Water Craft Insurance Volcano Insurance Travel Insurance Professional Liability Insurance Earthquake Insurance Kidnap & Ransom Insurance Alien Abduction Insurance


20 If you live in Hawaii..

21 Insurance and Risk Management: An Introduction (continued)
PLANNING AN INSURANCE PROGRAM Four step process: Set your insurance goals and prioritize them Develop a plan to reach your goals Put plan into action Review results 10-21

22 Property and Liability Insurance
***In recent years there have been major losses due to natural disasters. Fires, hurricanes, tornadoes and floods in various areas of the United States have caused billions of dollars worth of damage. 10-22

23 Property and Liability Insurance (continued)
Potential Property Losses Home, automobiles, furniture, clothing, and personal belongings Physical damage Hazards such as fire, wind, water and smoke. Destruction of property or temporary loss of use Loss of Use Due to robbery, burglary, vandalism, or arson 10-23

24 Property and Liability Insurance (continued)
LIABILITY PROTECTION Liability: Legal responsibility for cost of another person’s losses or injuries Negligence Failure to take ordinary, reasonable care, such as failure to supervise children in a pool Strict Liability When a person is held responsible for intentional and unintentional acts. Vicarious Liability When you are held responsible for the actions of another person, such as your child throwing a ball through a neighbor’s window 10-24

25 Assignment

26 Home and Property Insurance
HOMEOWNER’S INSURANCE COVERAGES Damage to or destruction of your house and other structures, plus trees, shrubs and plants Additional living expenses Personal property in or away from home Personal property floater - high value items Household inventory with documentation 10-26

27 Home and Property Insurance (continued)
PERSONAL LIABILITY AND RELATED COVERAGES Medical payments coverage for minor injuries caused by you, your family members, or pets, occurring on your property or away from home Personal liability- $100,000 or more Umbrella policy - also called a personal catastrophe policy-supplements basic personal liability coverage $1,000,000 or more in liability coverage 10-27

28 Property and Liability Insurance (continued)
SPECIALIZED COVERAGE Endorsements add coverage for things such as earthquake damage, or damage from floods EXCLUSIONS: Articles insured separately (jewelry & art) Animals, birds, fish, other pets Motorized land vehicles, (lawn mowers) Stereos, CD/DVD players in vehicles, cell phones Aircraft Property of renters, or other tenants Business Property 10-28

29 Property and Liability Insurance
RENTER’S INSURANCE Personal property loss or damage Additional living expenses Personal liability A building owner’s insurance usually won’t cover renter’s personal property Many renters do not have insurance 10-29

30 Home Insurance Cost Factors
Look for a policy with full coverage rather than a coinsurance clause, where you have to pay for part of a loss Which type of claim settlement method is used? Actual cash value cost less depreciation Replacement value Cost to repair or replace the damaged or lost item, without considering depreciation of the item May limit replacement cost to 400% of actual cash value of item Costs 10-20% more than actual cash value coverage 10-30

31 How Much Coverage do you Need?

32 Home Insurance Cost Factors
FACTORS THAT AFFECT HOME INSURANCE COSTS Location of home Type of structure Coverage amount and policy type Deductibles 10-32

33 Home Insurance Cost Factors
REDUCING HOME INSURANCE COSTS Home insurance discounts Alarm system, smoke detector, if you insure your car with the same company Company differences Compare costs and coverage at sites such as Customer satisfaction index information is available at 10-33

34 Automobile Insurance Coverage
Insurance 101 Video Financial responsibility law State legislation. Nearly all states have compulsory automobile liability insurance laws Requires drivers to prove their ability to cover the cost of damage or injury caused by them in an automobile accident 10-34

35 Ohio State Minimum Coverage
In Ohio, the required minimum limits for Bodily Injury Liability Coverage is $25,000 per person injured in any one accident and $25,000 for all persons injured in any one accident. The required minimum limits for Property Damage Liability Coverage is $7,500 for injury to or destruction of property of others in any one accident. Look in the book at page 333 – Ohio had one of the lowest compulsory minimum limits for automobile insurance. They just increased for the 1st time in 44years to 12,500/25,000 (Bodily Injury) & 25,000 from $7,500 In 2013 Ohio increased from 12,500/25,000 Bodily Injury and $7,500 Property

36 Automobile Liability Insurance Coverages
Property Damage Liability Bodily Injury Liability 10-36


38 Automobile Insurance Coverage (continued)
MOTOR VEHICLE BODILY INJURY COVERAGES Bodily Injury Liability Bodily injury liability covers the risk of financial loss due to legal expenses, medical expenses, lost wages and other expenses associated with injuries caused by an accident for which you were responsible Medical Payments Coverage Medical payments covers the cost of health care for persons injured in your automobile, including yourself 10-38

39 Automobile Insurance Coverage (continued)
Uninsured Motorist’s Protection Pays for the cost of injuries to you and your family if your vehicle is hit by a person without insurance, however, it does not cover property damages No-Fault Insurance System is intended to provide fast, smooth methods of paying for damages without taking the legal action frequently necessary to determine fault 10-39

40 Automobile Insurance Coverage (continued)
MOTOR VEHICLE PROPERTY DAMAGE COVERAGES Property damage liability covers damage to others person’s car when you are at fault. It also includes damage to such things as street signs and buildings Collision When your car is in an accident, collision coverage pays for damage to your automobile, regardless of who is at fault If you are not at fault, your insurer will try and collect from the other driver’s property damage liability first Coverage is limited to the retail value of your vehicle 10-40

41 Automobile Insurance Coverage (continued)
Comprehensive Physical Damage Covers damage to your vehicle that is not caused by a collision, such as... Fire, theft or vandalism Glass breakage Hail, sand, or wind storm Falling objects or hitting an animal Some things in your car, like some radios and stereo equipment are not covered 10-41

42 Automobile Insurance Coverage (continued)
OTHER AUTOMOBILE INSURANCE COVERAGES Wage loss insurance Reimburse you for any salary or income lost due to injury in an automobile accident Towing and Emergency Road Service Pays for the breakdowns and mechanical assistance 10-42

43 Automobile Insurance Costs
AMOUNT OF COVERAGE Legal concerns include having enough coverage if you were sued $100,000/$300,000 is recommended for bodily injury liability, with an additional $1,000,000 or more umbrella liability policy recommended Property values of vehicles have gone up $50,000-$100,000 is usually suggested for property damage liability 10-43

44 Automobile Insurance Costs (continued)
AUTOMOBILE INSURANCE PREMIUM FACTORS Automobile type Year, make, model, and theft rate Rating territory Accident, auto theft, and vandalism rates in the area where you live Driver classification Age, sex, marital status, credit history, driving record, and driving habits Assigned risk pool for people who are unable to obtain insurance 10-44

45 Automobile Insurance Costs (continued)
REDUCING AUTOMOBILE INSURANCE PREMIUMS Compare companies - Have larger deductibles Premium discounts Establish and maintain a good driving record Non-smoker Install security devices such as a car alarm If you have more than one vehicle, insure them both with the same company Drive less than 5k miles per year High School student with at least a B average 10-45

46 Question? Erica and Juan, both 17 years old, find it difficult to get car insurance in their own names. Many companies will not accept them as risks. Their insurance has to be a part of their parents’ policies. Both sets of parents have the same insurance company and similar makes and models of cars. They also have the same insurance coverages, and each pays an annual premium of about $600 a year. When the parents ask about adding their children to the policies, they learn that the annual cost for Erica will be $967, and the cost for Juan will be $1,400. Why do you think there is such a big difference between the premiums for Erica and Juan, and why are their premiums so much higher than their parents’?

47 Insurance representatives will tell you that insurance premiums decline considerably at age 25 for both males and females. Why do you think this is true? Do you think it is fair that younger people pay higher premiums than people in the 25-to-74 age range? Do you think it is fair that men pay more than women for car insurance?

48 Chapter 11 Health Insurance
The US has the highest per capita medical expenditures of any industrialized country in the world $13,375 health care costs per person in 2009 This amount is twice as much spent on health care as the average for the 24 industrialized countries in Europe and North America Medical expenditures were 6% of the GDP in 1965, but rose to 13.6 of our GDP in 1997 and further increased to 17.3 in This is expected to continue growing to 20% in the next 6 years. High administrative costs 11% of health care dollar vs. 1% in Canada 11-48

49 Health Care Reform Patient Protection and Affordable Care Act-3/23/10
Health Care and Education Reconciliation Act-3/30/10 The Obama Administration believe that the health care reform provided in the above Act’s will: Reduce long-term growth of health care costs Protect families from bankruptcy or debt due to health care costs Guarantee choice of doctors and health plans Invest in prevention and wellness Improve patient safety and quality of care Assure affordable, quality health coverage for all Americans Maintain coverage upon losing or changing jobs. Eliminate barriers due to pre-existing medical conditions 11-49

50 Health Care Costs (continued)
WHY DOES HEALTH CARE COST SO MUCH? Use of sophisticated, expensive technologies Duplication of tests and technologies Increases in the variety and frequency of treatments Increasing number and longevity of elderly people Regulations that result in cost shifting rather than cost reduction Increasing number of accidents, crimes that require emergency services Limited competition, restrictive work rules in the health care delivery system Labor intensiveness, rapid earnings growth for health care professionals Innovative treatments for AIDS, cancer Built in inflation in health care delivery system Malpractice Insurance Aging baby boomers 11-50

51 Health Care Costs (continued)
WHAT IS BEING DONE ABOUT THE HIGH COSTS OF HEALTH CARE? Careful review of fees and charges Establish incentives for... Preventive care Services provided out of the hospital where medically acceptable Involve community in balancing health care needs, health care resources Encourage prepaid group practices Support community health education programs so people take better care of themselves 11-51

52 Health Care Costs (continued)
WHAT CAN YOU DO TO REDUCE PERSONAL HEALTH CARE COSTS? Consider participating in a flexible spending account. Consider a high-deductible health plan Ask for less expensive generic drugs Use a mail-order or on-line pharmacy for long term drugs Review free or low-cost coverage for uninsured children Review state plans for prescription drug assistance Review follow-up procedures with doctor Investigate non-urgent procedure Review billing statements for errors Appeal unfair decisions by your health plan 11-52

53 Health Care Costs (continued)
WHAT CAN YOU DO TO REDUCE PERSONAL HEALTH CARE COSTS? (continued) Stay well - focus on prevention Eat a balanced diet, keep your weight under control Avoid smoking, don’t drink to excess Get enough rest, relaxation, and exercise Drive carefully, watch out for accident and fire hazards in the home 11-53

54 Health Insurance and Financial Planning
Over 45 million Americans have no health insurance An older student population is not covered by their family’s policy. 40% are older than age 25 Health insurance limits the financial burdens people suffer due to illness or injury It’s part of your overall risk management plan to safeguard your family’s economic security Disability income insurance protects your most valuable asset - your ability to earn an income 11-54

55 Health Insurance and Financial Planning (continued)
GROUP HEALTH INSURANCE Group plans comprise more than 90% of all health insurance Most group plans are employer sponsored; employer pays part or most of the cost 1996 Health Insurance Portability and Accountability Act provides federal portability standards, nondiscrimination in health insurance, and guaranteed renewability If you changes jobs you need not lose your health insurance Individual insurance is also available 11-55

56 Health Insurance and Financial Planning (continued)
COBRA requires many employers to offer employees and dependents the option to continue their group coverage for a set period of time following a divorce The American Recovery and Reinvestment Act of 2009 (part of the government’s economic stimulus package) Requires employers to provide health insurance to employees terminated between 9/1/08 and 12/31/09. Employees pay 35% of the premium. Employer subsidizes 65% of the premium for up to 9 months in exchange for a tax credit. 11-56

57 A Good Health Insurance Plan Should...
Offer basic coverage for hospital and doctor bills. Cover at least 120 days hospital room and board. Provide at least $1,000,000 lifetime maximum for each family member. Pay at least 80% of out-of-hospital expenses after yearly deductible of $500-$1,000/person is met . Impose no unreasonable exclusions. Limit your out-of-pocket expenses to no more than $3,000 to $5,000 in a year, excluding dental, optical, and prescription costs. 11-57

58 Types of Health Insurance Coverage
TYPES OF MEDICAL COVERAGE Hospital expense insurance - Hospital room and board and other charges Surgical expense insurance - Surgeon's fee for an operation Physician expense insurance - Pays for physician’s care such as office visits, lab tests and X-rays. It does not include surgery. Major medical expense insurance Covers expenses for a serious injury or long-term illness. Has a deductible, coinsurance, and a stop-loss provision 11-58

59 Types of Health Insurance Coverage (continued)
Comprehensive major medical insurance Low deductible offered without a separate, basic plan. Covers hospital, surgical, and other bills Dread disease and cancer insurance policies Focus on unrealistic fears, and only pays out for very specific conditions. Often sold by people working on commission, and poor value 11-59

60 Types of Health Care Coverage (continued)
Hospital indemnity Pays a fixed amount for each day you are in a hospital. Best for people in high-risk groups Dental expense insurance Covers exams, cleaning, x-rays, fillings, root canals, and oral surgery Vision care Exams, contact lenses, and glasses 11-60

61 Types of Health Care Coverage (continued)
Long term care insurance Virtually unknown 35 years ago Growing faster than any other form of insurance In 2010, estimated that 9 million men and women over 65 years old will need long term care insurance Long term care insurance can be very expensive National Average: 1 year in nursing home=$72,000 Premiums $1,000 to $16,000 per year 11-61

62 Types of Health Care Coverage (continued)
MAJOR PROVISIONS IN A HEALTH INSURANCE POLICY Eligibility Varies with age, marital status, and dependency Assigned benefits Insurance pays your doctor or hospital directly Internal limits Fixed amount per day for a hospital room Co-payment Cost sharing in the form of a flat dollar amount you pay, such as $15.00-$30.00 per office visit or $10.00-$25.00 per prescription Service benefits vs. fixed $ amount 11-62

63 Patient Protection and Affordable Care Act of 2010
Process: set aside $635 Billion over the next 10 years for reform. Key provisions of the Act are: Offering tax credits for small businesses to make coverage more affordable To prohibit denying coverage due to pre-existing medical conditions for children To provide access to affordable insurance for those with pre-existing medical conditions Prohibiting insurance companies from dropping coverage when people are sick. Eliminating co-payments for preventive services Requiring new health plans to allow persons up to age 26 to remain on their parent’s insurance policy Prohibiting health insurance from placing lifetime caps on coverage Restricting the use of annual limits Ensuring consumers have appeal options with the plan Providing funds to states to set up consumer assistance offices Increasing money for community health centers Increasing investment for increases the number of health care workers Requiring health insurance companies to justify all premium increases 11-63

64 Disability Income Insurance
Disability is more likely than death at any age Young, healthy people don’t think about risks related to all their future earning potential Provides regular cash income lost as the result of an accident, illness or pregnancy If you become disabled your income drops but your expenses go up Carefully read a policy’s definition of disability May only pay if you can’t work at any job Look for a policy that pays if you are unable to work at your regular job Aim for a benefit that when added to your other income will equal 60-70% of your gross pay How long do benefits last? To age 65? For life? How long is the waiting period? 30 days? 90 days? Look for a policy that is both non-cancelable and guaranteed renewable. 11-64

65 Disability Income Insurance (continued)
SOURCES OF DISABILITY INCOME Employer Group disability policy may be short or long term Social Security Covers total disability that lasts more than twelve months Workman’s Compensation If you are injured at work or your injury is a result of your type of employment Disability insurance Benefits limited to 70-80% of your take home pay 11-65

66 Chapter 12 Life Insurance
WHAT IS LIFE INSURANCE? Life insurance - Purchase policy; insurance company promises to pay a lump sum at the time of the policy holder’s death, or sometimes while they are still alive 12-66

67 Life Insurance Pretest
People should buy life insurance primarily to pay for their funerals. Policyholders can take loans against some life-insurance policies. Some life-insurance policies have a savings/investment feature. Some life-insurance policies allow the insured person to get the full amount of the policy before he or she dies. Most experts in personal finance say that almost everyone should have life insurance. Generally, the wage earner in a family with small children should have more life insurance than a wage earner without any children to support. A young working parent can get the most inexpensive life-insurance coverage with a term-life instead of a cash-value policy. When you shop for life insurance, you should consider only the cost or premium you will pay. 67

68 Life Insurance Pretest Answers
People should buy life insurance primarily to pay for their funerals. FALSE Policyholders can take loans against some life-insurance policies. TRUE Some life-insurance policies have a savings/investment feature. TRUE Some life-insurance policies allow the insured person to get the full amount of the policy before he or she dies. TRUE Most experts in personal finance say that almost everyone should have life insurance. FALSE Generally, the wage earner in a family with small children should have more life insurance than a wage earner without any children to support. TRUE A young working parent can get the most inexpensive life-insurance coverage with a term-life instead of a cash-value policy. TRUE When you shop for life insurance, you should consider only the cost or premium you will pay. FALSE 68

69 Life Insurance: An Introduction (continued)
Purpose of life insurance: Protect someone who depends on you from financial loss related to your death. Other reasons are: Pay off a home mortgage or other debts at the time of death To leave as part of your estate To save money for retirement or for income or education for children To cover medical expenses and funeral costs 12-69

70 Life Insurance: An Introduction (continued)
THE PRINCIPLE OF LIFE INSURANCE Mortality tables provide odds on your dying, based on your age and sex HOW LONG WILL YOU LIVE? Your premium is based on your life expectancy and the projections for the payouts for persons who die 12-70

71 Determining Your Life Insurance Needs
DO YOU NEED LIFE INSURANCE? Do you have people you need to protect financially Do you have a partner who works? How much money do you want to leave your dependents should you die today? When do you want to retire, and what income do you think you’ll need? How much will you be able to pay for your insurance program? 12-71

72 Question A. Single working person with no dependents
Who is in the most need of having life insurance? A. Single working person with no dependents B. Student in high school who are saving for college C. Single parent with two elementary school children D. A family with two parents, one of whom is a wage earner, and two elementary school children 72

73 C. Single parent with two elementary school children
Answer 73

74 Determining Your Life Insurance Needs (continued)
ESTIMATING YOUR LIFE INSURANCE NEEDS The Easy Method You will need 70% of your salary for seven years while your family adjusts The DINK (dual income, no kids) Method ½ debts + funeral expenses The “Nonworking” Spouse Method Multiply the number of years until the youngest child reaches 18 by $10,000 The “Family Need” Method More thorough than the first three because it also considers employer provided insurance, Social Security benefits, and income and assets 12-74

75 Types of Life Insurance Companies and Policies
Stock life insurance companies are owned by the shareholders 75% are of this type. Sell non-participating policies If you want to pay the same premium each year, choose a non-participating policy with its guaranteed premiums Mutual life insurance companies 25% are of this type Owned by the policyholders With participating policies the premiums are higher than non-participating policies Part of the premium is refunded to the policyholders annually. This is called the policy dividend 12-75

76 Types of Life Insurance Companies and Policies (continued)
TYPES OF LIFE INSURANCE POLICIES Term life insurance Protection for a specified period of time If you stop paying premiums, coverage stops Renewability: You can renew the policy without having a physical at the end of the term 12-76

77 Types of Life Insurance Policies (continued)
Term life insurance Multiyear level term: Most popular form of term insurance Conversion option: Can exchange term policy for whole life policy without having a physical Decreasing term insurance: Premium stays the same, but the amount of coverage decreases as you age – mortgage insurance Return on Premium: Policy refunds every penny of the premiums if one outlives the defined term 12-77

78 Types of Life Insurance Policies (continued)
Whole life insurance - Also called straight life You pay a premium as long as you live Amount of premium depends on your age when you start the policy Provides death benefits and accumulates a cash value You can borrow against the cash value or draw it out at retirement Look carefully at the rate of return your money earns 12-78

79 Types of Life Insurance Policies (continued)
Limited payment policy Pay premiums for a stipulated period, usually 20 or 30 years, or until you reach a specified age (65) Your policy then becomes “paid up” and you remain insured for life Variable life policy Minimum death benefit guaranteed, but the death benefit can be greater than the minimum depending on earnings of the dollars invested in a separate stock or bond fund 12-79

80 Types of Life Insurance Policies (continued)
Adjustable life policy Whole life insurance policy, but you can change your policy as your needs change. You can change your premium payments to increase or decrease coverage. Universal life Gives you more direct control Can pay premiums at any time in almost any amount. Amount of insurance can be changed more easily than a traditional policy The increase in the cash value of the policy reflects the interest earned on short-term investments 12-80

81 Types of Life Insurance Policies (continued)
OTHER TYPES OF LIFE INSURANCE POLICIES Group life insurance Term insurance Often provided by an employer No physical is required Endowment life Insurance Provides coverage from the beginning of the contract to maturity and guarantees payment of a specified sum to the insured Credit life insurance Debts such as car loan is paid off if you die Also protects lenders Expensive protection 12-81

82 Important Provisions in a Life Insurance Contract
Naming your beneficiary, and contingent beneficiaries Length of grace period for late payments Reinstatement of a lapsed policy if it has not been turned in for cash Nonforfeiture: Keep accrued benefits if you drop the policy Incontestability clause: After the policy has been in force for awhile (2 years), the company can’t dispute its validity for any reason Suicide clause during first two years Automatic premium loans Uses the accumulated cash value to pay the premium if you do not pay it during the grace period Misstatement of age provision Policy loan provision to borrow against cash value 12-82

83 Important Provisions in a Life Insurance Contract (continued)
A rider to a policy modifies the coverage by adding or excluding conditions or altering benefits Waiver of premium disability benefit Accidental death benefit - double indemnity Guaranteed insurability option Cost of living protection Accelerated benefits, also called living benefits, pay to those who are terminally ill before they die Second-to-die option, also called survivorship, insures two lives 12-83

84 Buying Life Insurance FROM WHOM TO BUY? SOURCES
Examine both private and public sources Look up the company’s rating, in A. M. Best or other rating agencies Talk to friends or colleagues RATING INSURANCE COMPANIES Research ratings on the web, 12-84

85 Buying Life Insurance (continued)
CHOOSING YOUR INSURANCE AGENT? Can friends or parents make recommendations? Does the agent have professional designations such as Chartered Life Underwriter (CLU)? Is the agent willing to find a policy that is right for you or does he push a certain type of policy? Do they ask about your financial plan? Do you feel pressured? 12-85

86 Buying Life Insurance (continued)
COMPARING POLICY COSTS Compare policy costs which are affected by: How selective they are in whom they insure Their cost of doing business Return on their investments Mortality rate among policyholders Policy features and competition from other firms Use interest-adjusted index to compare policies Takes into account the time value of money Helps you make cost comparisons among insurance companies See sites such as 12-86

87 Buying Life Insurance (continued)
OBTAINING A POLICY Apply Provide medical history Usually no physical for a group policy Read every word of the contract After you buy it, you have ten days to change your mind Give your beneficiaries and lawyer a photocopy 12-87

88 Buying Life Insurance (continued)
CHOOSING SETTLEMENT OPTIONS Lump-sum payment is most common Limited installment payment In equal installments for a specific number of years after your death Life income option Payments to the beneficiary for life Proceeds left with the company Pays interest to the beneficiary SWITCHING POLICIES Switch if benefits exceed costs of getting another physical, and paying policy set-up costs The older you are the higher the premium will be Are you still insurable? Can you get all the provisions you want? 12-88

89 Financial Planning with Annuities
Annuity: Financial contract written by an insurance company that provides you with a regular income People buy annuities to supplement retirement income and to shelter income from taxes. Annuities are tax-deferred investment plans. The Health Care and Education Reconciliation Act of 2010 imposes a 3.8% income tax on high income individuals starting in The tax will be applied on interest, dividends, and capital gains. Those who expect to live longer than average benefit most from annuities 12-89

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