Personal Financial Planning Guide, Ch 7

1
Personal Financial Planning Guide, Ch 7

• Life Insurance

2
Life Insurance

• Learning Goals
• Types of life insurance
• Advantages and disadvantages

3
Life Insurance

• The main purpose of life insurance is to protect
  your dependents against your premature death by
  providing an instant ____________________.

4
Life Insurance

• Types of life insurance
• ___________________ insurance
• _______________________, or permanent, insurance

5
Term Life Insurance

• Characteristics of term insurance
• Provides coverage for a specific period of time
• Typically renewable
• Premiums ____________________ over time

6
Term Life Insurance

• Advantage of term insurance
• cheap
• Disadvantages of term insurance
• Premiums increase over time
• No cash value the only way to collect is to die

7
Cash Value Life Insurance

• Cash value insurance combines life insurance with
  investing. The cash value of a policy is what
  you receive if you cancel the policy. Various
  types of cash value insurance differ primarily in
  the nature of the investment component.
• Types of cash value insurance
• Whole life
• Universal life
• Variable life

8
Whole Life Insurance

• Characteristics of whole life insurance
• Fixed premiums some policies are fully paid by a
  certain age
• Provides coverage over your lifetime
• Accumulates cash value.
• Policy holder can borrow against the cash value,
  or cash in the policy.

9
Whole Life Insurance

• Advantages
• Premiums dont increase
• Accumulates cash value
• Disadvantages
• More expensive than term insurance
• Long-term commitment

10
Universal and Variable Life Insurance

• Universal and variable life insurance are more
  __________________________ than traditional whole
  life insurance and place more emphasis on the
  _________________________________.

11
Life Insurance

• The investment aspects of cash value insurance
  are most beneficial to high income, wealthy
  individuals.
• Generally speaking, cash value insurance
• Earns lower returns than other investments
• Benefits are tax-free

12
Life Insurance

• How much life insurance is enough?
• The answer depends on
• The income requirements of your heirs
• Your assets
• Your liabilities