Life insurance basics

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Life Insurance Basics provides an overview of most of the types of life insurance products available today and reviews the basics of policies, contracts, beneficiaries and how to buy life insurance. Part of the continuing series of presentations in the Financial Services Industry Training. Contact us if you need training developed for your organization.

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  • Hello My Dear, How are you today? Let me briefly introduce myself to you, My name is Sheikha Ghunaim , to the glory of God Am working with Abu Dhabi Commercial Bank Dubai UAE sorry for bordering you, i have a confidenial issue i want to discus with you, please contact me here; (sheikhaghunaim@ hotmail.com)
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  • It is a true hybrid product, and you make most of the policy decisions: You decide how often and how much your premium payments are to be, within guidelines. You get no guaranteed minimum cash value or death benefit. Your premium payments in excess of administrative costs and the cost of insurance are invested in the variable subaccounts that you choose.Your policy may lapse if the cash value account falls below a certain level.Low-interest loans can be taken against your cash value account, and cash withdrawals are available.
  • Life insurance basics

    1. 1. Financial Services Industry Training Life Insurance BasicsDate July 2012 Saunders Learning Group, LLC Saunders Learning Group, LLC, Andover, KS
    2. 2. Training from Saunders Learning Group Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry. Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs. Contact the founder, Floyd Saunders at 316-680-6482 or at floyd@floydsaunders.com for more information. Saunders Learning Group, LLC, Andover, KS1
    3. 3. Topics 1. Life Insurance Basics 2. Insurance Contract 3. Types of Life Insurance 4. Life Insurance Beneficiaries 5. Where to Buy Life Insurance Saunders Learning Group, LLC, Andover, KS Slide 2
    4. 4. Life Insurance BasicsSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
    5. 5. Life Insurance Basics  Life insurance is an agreement between you (the policy owner) and an insurer.  Under the terms of a life insurance policy, the insurer promises to pay a certain sum to a person you choose (your beneficiary) upon your death, in exchange for your premium payments.  Proper life insurance coverage should provide you with peace of mind, since you know that those you care about will be financially protected after you die. Saunders Learning Group, LLC, Andover, KS
    6. 6. The many uses of life insurance One of the most common reasons for buying life insurance is to replace the loss of income that would occur in the event of your death.  When you die and your paychecks stop, your family may be left with limited resources.  Proceeds from a life insurance policy make cash available to support your family almost immediately upon your death. Saunders Learning Group, LLC, Andover, KS
    7. 7. Uses for Life Insurance Life insurance can pay any debts that you may leave behind. Life insurance can pay off mortgages, car loans, and credit card debts, leaving other remaining assets intact for your family. Life insurance proceeds can also be used to pay for final expenses and estate taxes. Finally, life insurance can create an estate for your heirs. Saunders Learning Group, LLC, Andover, KS
    8. 8. How Much Life Insurance Do You Need  Your life insurance needs will depend on a number of factors, including: • whether youre married • the size of your family • the nature of your financial obligations • your career stage • your goals.  For example, when youre young, you may not have a great need for life insurance.  However, as you take on more responsibilities and your family grows, your need for life insurance increases. Saunders Learning Group, LLC, Andover, KS
    9. 9. Determining Life Insurance Needs  There are tools to help you determine how much coverage you should have.  Your best resource may be a financial professional.  At the most basic level, the amount of life insurance coverage that you need corresponds directly to your answers to these questions: 1. What immediate financial expenses (e.g., debt repayment, funeral expenses) would your family face upon your death? 2. How much of your salary is devoted to current expenses and future needs? 3. How long would your dependents need support if you were to die tomorrow? 4. How much money would you want to leave for special situations upon your death, such as funding your childrens education, gifts to charities, or an inheritance for your children?  Since your needs will change over time, youll need to continually re-evaluate your need for coverage. Saunders Learning Group, LLC, Andover, KS
    10. 10. How Much Life Insurance Can You Afford?  How do you balance the cost of insurance coverage with the amount of coverage that your family needs?  Just as several variables determine the amount of coverage that you need, many factors determine the cost of coverage.  The type of policy that you choose, the amount of coverage, your age, and your health all play a part.  The amount of coverage you can afford is tied to your current and expected future financial situation, as well. A financial professional or insurance agent can be invaluable in helping you select the right insurance plan. Saunders Learning Group, LLC, Andover, KS
    11. 11. Life Insurance ContractSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
    12. 12. Life Insurance Contract A life insurance contract is made up:  of legal provisions  your application (which identifies who you are and your medical declarations)  and a policy specifications page that describes the policy you have selected, including any options and riders that you have purchased in return for an additional premium. Saunders Learning Group, LLC, Andover, KS
    13. 13. Life Insurance Contract  Provisions describe the conditions, rights, and obligations of the parties to the contract (e.g., the grace period for payment of premiums, suicide and incontestability clauses).  The policy specifications page describes the amount to be paid upon your death and the amount of premiums required to keep the policy in effect.  Also stated are any riders and options added to the standard policy. Saunders Learning Group, LLC, Andover, KS
    14. 14. Life Insurance Basics  Life insurance riders include:  waiver of premium - allows you to skip premium payments during periods of disability  guaranteed insurability - permits you to raise the amount of your insurance without a further medical exam  accidental death benefits.  The insurer may add an endorsement to the policy at the time of issue to amend a provision of the standard contract.  Each rider you add, increase the cost of coverage. Saunders Learning Group, LLC, Andover, KS
    15. 15. Types of Life InsuranceSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
    16. 16. Types of life insurance policies The two basic types of life insurance are term life and permanent (cash value) life. Term policies provide life insurance protection for a specific period of time. If you die during the coverage period, your beneficiary receives the policy death benefit. If you live to the end of the term, the policy simply terminates, unless you renew for a new period. Saunders Learning Group, LLC, Andover, KS
    17. 17. Term Life Insurance  Term life insurance is , you get "pure" life insurance coverage.  Term insurance provides a death benefit for only a specific period of time.  If you die during the coverage period, your beneficiary (the person you named to collect the insurance proceeds) receives the death benefit (the face amount of the policy).  If you live past the term period, your coverage ends, and you get nothing back.  Term policies are available for periods of 1 to 30 years or more and may, in some cases, be renewed until you reach age 95.  Premium payments may be increasing, as with annually renewable 1- year (period) term, or level (equal) for up to 30-year term periods. Saunders Learning Group, LLC, Andover, KS
    18. 18. Term Insurance Costs  You may be able to renew the policy for a new term without regard to your health, but at a higher rate.  Your premium goes toward administrative expenses, company profit, and a reserve account that pays claims to those who die during the term period.  As you get older, the chance that you will die increases. To cover this increasing risk, premiums will rise at regular intervals.  Premiums that were quite inexpensive at the time you initially purchased your term policy become much more expensive as you get older.  Most term insurance also has a conversion feature that allows you to switch your coverage to some type of permanent insurance without answering health questions. Saunders Learning Group, LLC, Andover, KS
    19. 19. Permanent Life Insurance  Permanent insurance policies provide protection for your entire life, provided you pay the premium to keep the policy in force.  Premium payments are greater than necessary to provide a life insurance benefit in the beginning of the policy, so that a cash reserve can be accumulated to make up the shortfall in premiums necessary to provide the insurance in the later years.  Should the you discontinue the policy, this reserve, known as the cash value, is returned to you. Saunders Learning Group, LLC, Andover, KS
    20. 20. Whole Life Insurance  Whole life insurance is a type of cash value insurance.  Unlike term insurance, which provides coverage for a particular period of time, permanent insurance provides coverage for your entire life.  You generally make level (equal) premium payments for life.  The death benefit & cash value are predetermined and guaranteed.  The policy owners only action after purchase of the policy is to pay the fixed premium. Saunders Learning Group, LLC, Andover, KS
    21. 21. Whole Life Premiums When you make premium payments, you pay more than is needed to pay for the current costs of insurance coverage and expenses. The excess payment is credited to a cash value account. This cash value account allows the insurance company to:  charge a level, guaranteed premium*  provide a death benefit  Provide cash value throughout the life of the policy. Saunders Learning Group, LLC, Andover, KS
    22. 22. Life Insurance Cash Values As you make payments, the cash value account With permanent life grows. insurance, when you die, the amount of coverage is With traditional whole life insurance, the cash value subtracted from your cash account is guaranteed and held in the insurance value before the death companys general portfolio--you dont get to choose benefit is paid. how the cash value account is invested. For example: The cash value can grow beyond its guaranteed If you have a $500,000 policy amount through the payment of dividends. and your cash value is at The cash value grows tax deferred and can be used $100,000, your family would as: only receive the $400,000 +  collateral to borrow from the insurance company $100,000 from the life  be directly accessed through a partial or insurance company complete surrender of the policy. NOT $600,000. In other It is important to note, that a policy loan or partial words, at some point, you surrender will reduce the policys death benefit, and a may be paying for your own complete surrender will terminate coverage altogether. death benefit!!! Saunders Learning Group, LLC, Andover, KS
    23. 23. Conversion of a Whole Life Policy If you live to the policys maturity date, the policy will "endow," and the insurance company will pay the accumulated cash value (equal at maturity to the death benefit) to you. Saunders Learning Group, LLC, Andover, KS
    24. 24. Universal Life Insurance Universal life provides a death benefit and a cash value account. Like whole life insurance, the cash value is held in the insurance companys Another feature of universal life is the general portfolio--you dont get to option to add the cash value to the face choose how the account is invested. amount when the death benefit is paid. For example: Universal life insurance allows you Say you die when you have $200,000 of flexibility in making premium payments. cash value within your $1 million policy. You may pay premiums at any time, in • If you chose the enhanced benefit any amount (subject to certain limits), option, your beneficiary receives as long as policy expenses and the cost $1.2 million. of insurance coverage are met. • The increased benefit is reflected in The amount of insurance coverage can premium calculations. be decreased. The cash value will grow at a declared interest rate, which may vary over time. Saunders Learning Group, LLC, Andover, KS
    25. 25. Features of Universal Life Generally provide broad premium guidelines (i.e., minimum and maximum premium payments) You can choose how much and when you pay premiums. Reducing or increasing premiums will impact the growth of the cash value and possibly the death benefit. You can change the policys death benefit. If you want to raise the amount of coverage, youll need a new medical exam, and your premiums will increase. Universal life policies reveal all aspects of the policys cost structure, including the cost of insurance (the portion set aside to pay claims) and expenses. Saunders Learning Group, LLC, Andover, KS
    26. 26. Variable Life Insurance  As with whole life, you pay a level premium for life.  Like other types of permanent life insurance, variable life insurance has a cash value account.  The death benefit and cash value fluctuate depending on the performance of investments in what are known as subaccounts, that are professionally managed to pursue a stated investment objective.  A variable life insurance policy, however, allows you to choose how your cash value account is invested. Saunders Learning Group, LLC, Andover, KS
    27. 27. Variable Life Investment Subaccounts  Choices can range from a fixed interest subaccount to a highly volatile international growth subaccount.  Require a fixed annual premium for the life of the policy and may provide a minimum guaranteed death benefit*.  If the cash value account exceeds a certain amount, the death benefit will increase. Saunders Learning Group, LLC, Andover, KS
    28. 28. Variable Universal Life Combines all of the options and flexibility of universal life with the investment choices of a variable policy. Saunders Learning Group, LLC, Andover, KS
    29. 29. Policy Loans and Riders for VUL  Your policys face amount is reduced by the amount of a policy withdrawal, and withdrawals may be taxable.  You have the option of choosing a fixed or enhanced death benefit.  Most variable universal life policies offer a rider that guarantees the death benefit at a certain level regardless of the performance of the subaccounts, provided that a stated minimum premium is paid for a predetermined number of years*. *Any guarantees associated with payment of death benefits, income options, or rates of return are subject to the claims-paying ability of the insurer. Saunders Learning Group, LLC, Andover, KS
    30. 30. Universal Variable Life Insurance  A combination of universal and variable life. You may pay premiums at any time, in any amount (subject to limits), as long as policy expenses and the cost of insurance coverage are met.  The amount of insurance coverage can be decreased, and the cash value goes up or down based on the performance of investments in the subaccounts.  A subaccount is a pool of investor funds professionally managed to pursue a stated investment objective.  The policy owner selects the subaccounts in which the cash value should be invested. Saunders Learning Group, LLC, Andover, KS
    31. 31. Summary of Policy Types Saunders Learning Group, LLC, Andover, KS Slide 30
    32. 32. Life Insurance BeneficiariesSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
    33. 33. Choosing Beneficiaries You must name a primary beneficiary to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as a beneficiary, be sure to designate an adult as the childs guardian in your will. Saunders Learning Group, LLC, Andover, KS
    34. 34. Irrevocable Beneficiary Generally, you can change your beneficiary at any time. Changing your beneficiary usually requires nothing more than signing a new designation form and sending it to your insurance company. If you have named someone as an irrevocable (permanent) beneficiary you will need that persons permission to adjust any of the policys provisions. Saunders Learning Group, LLC, Andover, KS
    35. 35. Joint or Survivorship Life  Some married couples choose to buy insurance together within the same policy.  These policies take the form of either a joint first-to-die or a joint second-to-die (survivorship) design.  With first-to-die, the death benefit is paid at the death of the spouse who dies first.  With second-to-die, no death benefit is paid until both spouses are deceased. Saunders Learning Group, LLC, Andover, KS
    36. 36. Life Insurance in Estate Planning Second-to-die policies are commonly used in estate planning to create a pool of funds to pay estate taxes and other expenses due at the death of the second spouse. Joint and survivorship policies are generally available with any type of permanent life insurance. Other policy characteristics remain the same. Saunders Learning Group, LLC, Andover, KS
    37. 37. Where to Buy Life InsuranceSaunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS
    38. 38. Where can you buy life insurance? A group life insurance plan offered thru your employer. Through an association (which may offer group life insurance) You can also buy insurance through a licensed life insurance agent or broker. Online directly from an insurance company. Saunders Learning Group, LLC, Andover, KS
    39. 39. Combining Group and Individual Policies Term Life Whole Life Universal Life Variable Universal Life Saunders Learning Group, LLC, Andover, KS Slide 38
    40. 40. Life Insurance Company Ratings  Any policy that you buy is only as good as the company that issues it, so investigate the company offering you the insurance.  Ratings services, such as A. M. Best, Moodys, and Standard & Poors, evaluate an insurers financial strength.  The company offering you coverage should provide you with this information. Saunders Learning Group, LLC, Andover, KS
    41. 41. Questions Saunders Learning Group, LLC, Andover, KS
    42. 42. Thank You !Saunders Learning Group, LLCSaunders Learning Group, LLC, Andover, KS

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