1. Life Insurance The Basics

2. Life Insurance: The Basics What is the one guarantee in life?

3. Life Insurance: The Basics You buy health insurance in case you get sick You buy automobile insurance in case you have an accident You buy homeowners insurance in case your property gets damaged You do not buy life insurance to plan for your death

4. Life Insurance: The Basics You buy Life Insurance to protect the people who depend on you and would suffer a financial loss when you die.

5. Life Insurance: The Basics Usually people buy life insurance to protect their children, a surviving spouse, a disabled relative, or elderly parents It ensures that the dependent family members will be able to afford and maintain their lifestyle or receive the care they had before your death

6. Life Insurance: The Basics When you buy life insurance, you must designate a beneficiary. A beneficiary is the person or legal entity, such as a charity, designated to receive the death benefit.

7. Life Insurance: The Basics The death benefit is the sum paid to the beneficiary by the insurance company, upon the death of the insured.

8. How Life Insurance Works Legally binding contract between an insurance company (insurer) and an individual (insured) In exchange for payment of premiums, the insurer agrees to pay a specified death benefit The premiums collected from all policy holders are placed in an insurance pool The Insurance Company can invest the money in the pool but must have enough on hand to pay out a large number of claims

9. Life Insurance: The Basics Buy Life Insurance to Cover These Expenses To provide immediate cash to pay for a funeral, any other costs arising from the death, or pressing debts.To provide immediate cash to pay for a funeral, any other costs arising from the death, or pressing debts. To provide inheritance funds that are income tax-free.To provide inheritance funds that are income tax-free. To pay off a mortgage or other debts.To pay off a mortgage or other debts. To provide housekeeping and child care services so that the surviving spouse can enter the workforce.To provide housekeeping and child care services so that the surviving spouse can enter the workforce. To provide the surviving spouse sufficient funds to stay at home or reduce work hours.To provide the surviving spouse sufficient funds to stay at home or reduce work hours. To provide dependents with funds for college, etc.To provide dependents with funds for college, etc.

10. Life Insurance: The Basics How insurers reduce risk Insurance companies want to enroll low-risk people If a person dies shortly after they are insured the company has not had enough time to collect enough premiums to cover the loss.

11. Life Insurance: The Basics Underwriting Life Insurance Underwriting is the process of assessing applicants to determine whether they are good risks for life insurance An underwriter’s job is to minimize the risk the company takes Factors in underwriting: Present healthPresent health Medical historyMedical history Family medical historyFamily medical history LifestyleLifestyle OccupationOccupation

12. Life Insurance: The Basics Mortality Tables Sophisticated statistical averages of how long a person of a certain age, gender, ethnic background and so on can be expected to live Tables also consider your health, medical history, occupation Premium Class Insureds are placed into classes based on results from underwriting The better the class the lower the premiums

13. Life Insurance: The Basics How much life insurance should a person have? Factors to consider: Number of dependentsNumber of dependents Ages and needs of dependentsAges and needs of dependents Balance on mortgage or monthly rent paymentsBalance on mortgage or monthly rent payments Balance of loansBalance of loans Cost of future health insuranceCost of future health insurance Future tuition for dependentsFuture tuition for dependents Basic future necessities: buying a new car, doing household repairs, etc.Basic future necessities: buying a new car, doing household repairs, etc.

14. Life Insurance: The Basics Where do you buy life insurance? Some employers offer it as a benefitSome employers offer it as a benefit Insurance companies sell insurance through experienced agentsInsurance companies sell insurance through experienced agents Organizations and financial institutions sometimes offer it to their membersOrganizations and financial institutions sometimes offer it to their members You can buy life insurance from companies over the internetYou can buy life insurance from companies over the internet