We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published bySophia Stonehouse
Modified about 1 year ago
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill 12-1 C HAPTER 12 Personal Finance Life Insurance Kapoor Dlabay Hughes 6e
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill An Introduction to Life Insurance Life insurance is obtained by purchasing a policy, with the insurance company promising to pay a lump sum at the time of the policy holder’s death, or sometimes while they are still alive. The purpose of life insurance is to protect someone who depends on you from financial loss related to your death. Other reasons are. To make charitable bequests upon your death. To save money for retirement or children’s education. To leave as part of your estate. To pay off a mortgage or debts at the time of death. 12-2
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill The Principle of Life Insurance Mortality tables provide odds on your dying, based on your age and sex. Your premium is based on your life expectancy and the projections for the payouts for persons who die. 12-3
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Determining Your Life Insurance Needs - Ask Yourself... Do you need life insurance? Do you have people you need to protect financially? Do you have a partner who works? What are your objectives for life insurance? How much money do you want to leave your dependents should you die today? When you retire what income do you need? How much will you be able to pay for your insurance program? 12-4
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Estimating Your Life Insurance Requirements The Easy Method. Typically, you will need 70% of your salary for seven years while family adjusts. The DINK (dual income, no kids) Method. 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. 12-5
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Two Types of Life Insurance Companies Stock life insurance companies are owned by the shareholders. 95% are of this type. Sell non-participating policies. Amount of premium stays the same. 12-6
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Two Types of Life Insurance Companies Mutual life insurance companies. Owned by the policyholders. 5% of policies are from this type of company. With participating policies the premiums are higher than non-participating policies. However part of the premium is refunded to the policyholders annually. This is called a policy refund. (continued) 12-7
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Types of Life Insurance Policies Term life insurance. Protection for a specified period of time. If you don’t pay premiums, coverage stops. A renewability option means that at the end of the term you can renew the policy without having a physical. Conversion option allows you to change your policy from term to whole life without a physical. With decreasing term insurance your premium stays the same, but the amount of coverage decreases as you age. 12-8
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Types of Life Insurance Policies 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. (continued) 12-9
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Whole Life Policy Options 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. A minimum death benefit guaranteed, but the death benefit can rise above it depending on yield of the dollars invested in a separate fund
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Whole Life Policy Options Adjustable. You can change your policy as your needs change. For example, you can change your premium payments or the period of coverage. Universal life. Lets you pay premiums in almost any amount. Combines term insurance and investment elements. (continued) 12-11
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Types of Policies Issued 10% 8% Term 22% Whole Life 45% Other Variable Universal Universal 11% Variable 2% Decreasing 2.0% Insurance Facts book
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Other Types of Life Insurance Policies Group life insurance. Term insurance. Often provided by an employer. No physical is required. Credit life insurance. Debt is paid off if you die. Mortgage, car, furniture. Also protects lenders. Expensive protection
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Life Insurance Contract Provisions 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. 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
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Life Insurance Contract Provisions Policy loan provision to borrow against cash value. A rider to a policy modifies it coverage by adding or excluding conditions or altering benefits. Nonforfeiture clause prevents the forfeiture of accrued benefits if you choose to drop the policy. Waiver of premium disability benefit. Accidental death benefit - double indemnity. Guaranteed insurability option. Cost of living protection. Accelerated benefits. (continued) 12-15
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Buying Life Insurance Look at your present and future sources of income, savings, group life insurance, and Social Security benefits. Determine from whom to buy your policy. Examine both private and public sources. Look up the company’s rating. Talk to friends or colleagues
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Choosing Your Insurance Agent Ask friends, parents and neighbors for recommendations. Find out if the agent belongs to professional groups or is a CLU. Is the person willing to take the time to answer your questions and find a policy that is right for you? Do they ask about your financial plan? Do you feel pressured? Are they available when needed? 12-17
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Buying Life Insurance (continued) 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
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Obtaining and Examining a Policy The first step is to apply. The second step is to 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
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Choosing Settlement Options Options are the choices for how you want the money paid out. Lump-sum payment is most common. Limited installment plan. 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
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Should You Switch Policies? Switch if benefits exceed costs of getting another physical, and paying policy set up costs. Are you still insurable? Can you get all the provisions you want? 12-21
© The McGraw-Hill Companies, Inc., All Rights Reserved. Irwin/McGraw-Hill Financial Planning with Annuities An annuity is a 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. Those who expect to live longer than average benefit most from annuities. Annuities are tax-deferred investment plans. You pay taxes on the interest when you draw the money out
,. What is an Insurance Policy? A contract with an insurance company that spells out what losses are covered, what the policy costs, and who receives.
© 2012 VSA, LP Valid only if used prior to January 1, The information, general principles and conclusions presented in this report are subject to.
1 Personal Finance: A Gospel Perspective Insurance: Basics, Life and Disability Insurance.
When money earns interest on interest, it is said to be compounding.
Copyright, 1996 © Dale Carnegie & Associates, Inc. YOUR OWN HOME Money Smart Course Indiana Department of Financial Institutions.
Welcome to the Personal Management Merit Badge Day 2 Objective of this Presentation: To help you pass off as many of the requirements as you can during.
For Those Who Are Retired Or May Be Retiring in 10 – 15 years Presented by NMIN Alliance Working with public and private groups and individuals for over.
Chapter Nineteen The American Economy Personal Finances ~~~~~ Insurance Against Hardship.
1 Ins301 Chp15 –Part1 Life Insurance and Annuities Terminology Types of life insurance products Tax treatment of life insurance Term insurance Endowment.
1 Life Insurance Financial Protection for your family EN-1077 (10-10)
The chief function of life insurance is to create an estate - that is, a definite sum of money. Some of the money paid to a beneficiary normally is used.
Personal Finance: Insurance Insurance is to provide financial protection against different kinds of risks we face in life. Insurance Policy: Your policy.
Life Insurance in the Estate Plan and Incapacity Planning Session 9 DePaul University CFP® Program.
Take Charge and Reach Your Goals. Insurance The PICPA The Pennsylvania Institute of Certified Public Accountants The PICPA is a professional association.
Protects the standard of living of the survivors Policyholder dies = ins. co. pays survivors Proceeds: the money paid to survivors Beneficiary: each person.
Chapter 3 Financial Planning Investment products Mandatory Provident Fund (MPF) Credit cards 1.
7.01 Life Insurance. Term Insurance Provides insurance for a specific period of time Relatively low cost Policy benefits: young person can buy a large.
Reverse Mortgage Presented to. What is a Reverse Mortgage? o Without Income or Credit Qualification o Without Making Monthly Mortgage Payments o Without.
Chapter 2 Life Insurance Policies Whole Life Insurance.
Chapter 32, 33, 24, 35, and 36. the possibility of incurring a loss Risk.
Trieschmann, Hoyt & Sommer Employee Benefits: Life and Health Benefits Chapter 19 ©2005, Thomson/South-Western.
FOR BROKER/DEALER AND GENERAL AGENT USE ONLY. 1 Business Planning Using Life Insurance Retain, Recruit, and Reward Manulife Financial and the block design.
Merit Badge ID#: 11 Source: Boy Scout Requirements, #33215, revised 2004 Objective #1: Complete the Course and Merit Badge Objective #2: Actually Learn.
Insurance Jeopardy ® Joan Koonce, Ph.D., AFC ® Extension Financial Planning Specialist.
Test this Thurs 9/27 Competition Competition Money (all aspects) Money (all aspects) Banking Banking Insurance Insurance.
© 2013 Rockwell Publishing Washington Real Estate Practices Lesson 9: Loan Qualifying.
Washington Real Estate Fundamentals Lesson 11: Applying for a Residential Loan © 2011 Rockwell Publishing.
Copyright, 1996 © Dale Carnegie & Associates, Inc. STUDENTS AND CREDIT CARDS MINI-LESSON INDIANA DEPARTMENT OF FINANCIAL INSTITUTIONS CONSUMER EDUCATION.
Principal Life Insurance Company Disability Buy-Out Insurance Presented By: Name Principal Life Title.
© 2016 SlidePlayer.com Inc. All rights reserved.