Mr. Peterson

Life Insurance“Protecting Your Family”

ReviewWhich of the

following is NOT a major type of health insurance?

A. Workers’ CompB. Government Health

Insurance PlansC. Managed Care

PlansD. Private InsuranceE. None of the Above

Which of the following is a factor that would affect the cost of health care?

A. Previous job experience

B. GenderC. EducationD. Both A and BE. All of the above

To protect you and your dependents from the financial consequences of losing assets or income when an accident, illness, or death occurs.

Basic Purpose of Life Insurance

PolicyholderFace Value

Amount for which the policy is writtenBeneficiary

Vocab

Financial protection for dependents Protection from creditors Before death, cash value in life insurance

policies usually protected against legal judgments and bankruptcy proceedings.

After death, possible to keep benefits out of estate and away from creditors.

Tax free unless withdrawnMedium for savings

Benefits

Consider life insurance…If you have dependents who count on your

financial support.If you have debts you would like to clear, like a

home mortgage.You may not need life insurance…

If no one depends on your supportIf you are a child

Do You Need Life Insurance?

Discuss these factors on how to evaluate an insurance company. Why do you think it is important to ask these questions?Is the company respected?Is the company financially sound? How do you

know?Do the benefits and options work for you?Are the insurance agents certified?Is the agent knowledgeable of the services?What are the amounts and due dates of

coverage?

Activity

TermProtection for a specific period of timeWhen time is up, so is policy (cash value)

PermanentProtection as long as premium is paid

Main Categories

LevelPremium stays the sameLonger term, higher premium

DecreasingPremiums remain the same while value

decreases.“Mortgage loan term”

Term Life Insurance

RenewableAllows insured to renew policy without

evidence of insurabilityPay higher premium

ConvertibleAllows insured to convert to whole life policy

without evidence of insurability

Why do companies usually ask for evidence of insurability?

Term Life

Economical way for young families to purchase large amounts of life insurance.

Provides for needs that will disappear over time.

Premiums become more costly as you get older.

Does not build cash value.

Why buy term insurance?

Advantages/Disadvantages

http://www.youtube.com/watch?v=gvjir8yxPUI

Video!

Whole LifeProvides death protection plus a savings

feature called cash value.Builds

If policy canceled prior to death, insured has right to cash value; this is the nonforfeiture right

Can borrow againstBenefits are reduced

Would you use this as a retirement plan?

Permanent

Provides death protection plus a savings, or cash value feature

Fixed premiumCash value can be invested in a variety of

mutual funds for greater possible returnCan’t fall below the original amount

What are the advantages/disadvantages?

Variable Life

Permits adjustmentsPremium, face value, level of protection

Invested to earn interest at current market rates

Annual statementLevel of protection, cash value, interest

earned, premium allocationFlexible

Universal Life

http://www.youtube.com/watch?v=5JtVAl6f8ro

Video

Multiple-of-Earnings MethodMultiply annual earnings by an arbitrary

number (usually 5-10)Needs Analysis Method

Estimate needs and examine available resources

Estimating Life Insurance Needs

Key FeaturesChart