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Your Life Insurance: Is It Enough?


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Protecting Your Most Valuable Asset

Published in: Economy & Finance

Your Life Insurance: Is It Enough?

  1. 1. What is Life Insurance?<br />Life Insurance is a means of providing security for one's dependents and one's self.<br />When a person's application for life insurance is accepted by the life insurance company, he pays the premium and receives a policy. That policy is a contract whereby the insurance company promises to pay one's beneficiaries or the insured himself or herself, according to the agreement and/or conditions as stated in the policy, a sum of money either upon the occurrence of some specified event or at some definite date in the future.<br />In the beginning, life insurance was thought of- only as money for the dependents at the death of the insured. This, of course, is still its main purpose. However, there are various other uses for it today that makes the service of life insurance is much broader.<br />Life insurance is bought not so much because people die but, rather, because incomes die. Income may stop because people may die too soon, or, on the other hand, may live too long past the time they are able to work. Life insurance affords protection in either event. It can be used as a reserve against emergencies arising in life, as well as emergencies resulting form death. Men and women now buy life insurance not only because they expect to die, but because they expect someone to live, themselves included.<br />Research & Review Service of America<br />
  2. 2. What is Life Insurance?<br />It’s a substitute for the money you still don’t have but are trying to accumulate.<br />It provides you sufficient time to complete your plan<br />In the event you run out of it.<br />
  3. 3. LIFE INSURANCE<br /><ul><li>is the “hostage” which a man gives to a selfish world for the security of himself and his family.
  4. 4. is the “bond” a man gives that when he dies, he will not be a defaulter.
  5. 5. is the “supplement” a wise man adds to his marriage vow- it goes further than "until death do us part."</li></ul>3<br />
  6. 6. Friends Are Like Life Insurance<br />They build up valuable reserves for you.<br />They pay off when you least expect them to.<br />They help you when you need them most.<br />Their cost is low. <br />They're renewable and sometimes have the loan privilege.<br />They're for the whole of life.<br />Some are substandard.<br />The longer you keep them, the more value they have.<br />You generally get back more than you put into them.<br />They give you a steady income of smiles.<br />They're endowed with patience and understanding.<br />They make wonderful beneficiaries for your family.<br />Friendships end when you cash in on them.<br /> - Author Unknown<br />4<br />
  7. 7. Economic Value<br />Mutt & Jeff - Reprint Permission from King Features Syndicate<br />by J. Cavett, Hearst Corporation 11-20-2000 <br />
  8. 8. Economic Value Calculation<br />Life insurance is bought not so much because people die but, rather, because incomes die. <br />Replacement of human life value still remains as the fundamental reason for the purchase of life insurance<br />
  9. 9. What’s the Worth of a Man’s Life?<br />there is an elderly bachelor with no close relatives, those relatives he has may get little more than enough to bury him. After all, the law reasons, the old gentleman's future was not worth much anyway.<br />This scenario is the well-educated guess of an attorney deeply involved in the proceedings. It boils down to a legal standard that... “a man's worth is determined by how much he makes, how much he is likely to make, and whom he has to leave to." His worth as a human being has little, if anything, to do with it. A standard legal text says: "...had the decedent lived, the Court must consider what he earned, what he was likely to earn, what he spent on customary personal expenses, for instruction and moral training... his sobriety and thrift and occupation... and services before his death.“<br />"Of course, it's very unfair," said John J. Kennelly, the attorney who handles more of the Flight 191 cases than any other lawyer. "Of the complex laws governing the 34 plaintiffs within this charge... we are going under the 14th century (English) Common Law... it's a stage coach law. If you say the law is an ass, of course it is." He and Philip Corboy who handles the 26 of the 122 suits now before the US District Court of Northern Illinois, are more concerned over the dollars and cents difference between compensatory and punitive damages.<br />In the case of the greatest air disaster in the United States history, it all depends. At least $100 Million, quite likely $200 Million, and possibly $500 Million ride on lawsuits swarming about the crash of American Airlines Flight 191 on takeoff from Chicago's O'Hare Airport on May 25 of last year. (1979)<br />Two hundred and seventy-three died that afternoon, literally in a flash. Now at least 142 plaintiffs have filed suits against McDonnell-Douglas, manufacturer of the DC-10 death plane, and American Airlines, its operator. All of the plaintiffs will get a bundle. In fact, they only have to ask. But how much they will get will depend on such legal niceties as compensatory damages, the admissibility of punitive damages, the fine point of pre-judgment interest and the simplest matter of all: "...what price do you put on the life of a human being?"<br />Take a hypothetical case. On Flight 191 sits a minister, 35, with a wife and three children at home, his life dedicated to God, to his family, and fellowmen. He makes $20,000 a year if he is lucky. Across the aisle is a man of the same age, with a wife and three children, who through luck, brains, ambition and a willingness to walk over other people has achieved an annual income of $150,000. Both die in the O'Hare fireball. Both their wives filed suit for damages. The rich man's wife, who is <br />A standard legal text says: "...had the decedent lived, the Court must consider what he earned, what he was likely to earn, what he spent on customary personal expenses, for instruction and moral training... his sobriety and thrift and occupation... and services before his death.“<br />well-heeled already, stands to get $4.5 Million. The minister's widow, who is having trouble paying the mortgage and getting the kids to school, can expect about $600,000. If, back in the cabin, <br />Source: United Press International, Bulletin Today, May 30, 1980, Manila, Philippines<br />
  10. 10. WASHINGTON — Some families and victims of the Sept. 11 terrorist attacks would likely become millionaires under the terms of a tentative settlement package announced Thursday by a federal mediator. Under the plan unveiled Thursday, Washington attorney Kenneth Feinberg said that awards to families of the more than 3,200 people killed in the attacks on the Pentagon and the World Trade Center and the plane crash in the<br />Human Life Values & 9-11 Victims’ Families Compensation<br />Pennsylvania countryside would average $1.6 million. <br />About 2,000 badly injured would receive payments tailored to the severity of their injuries and effect of those injuries on their jobs.The money will be paid from an open-ended federal fund created by Congress as part of the airline bailout legislation. <br />Feinberg called the effort “an unprecedented expression of compassion” on the part of the American people to the victims and their families. The fund’s eventual size will be determined by the number of families that apply and the size of awards, but Feinberg<br />said initial estimates suggest the program could cost, about $6 billion. <br />“While there is no amount of compensation that can replace a human life,” our goal is to aid those who have so greatly suffered as a result of this horrendous act,” Feinberg said. <br />Also on Thursday, Feinberg announced an immediate $50,000 advance on their settlement would be sent to families of the dead if they request it and that a $25,000 advance would be paid to those severely injured.While the law enacting the fund would have permitted Feinberg to reduce families’ awards by the amount of charitable aid they have received so far, Feinberg said he opted to permit families to keep the aid and money from the victim compensation fund. <br />However, he warned, under the law, such income as life insurance, Social Security payments and death benefits must be deducted from the awards, which could reduce some families’ awards significantly.<br />The amount relatives receive would depend largely on the victim’s family size, age and earnings. For example, the widow and two children of a 35-year-old stock trader earning $225,000 or more a year could receive $3.6 million before deductions for life insurance and other cash received, while the survivors of a 25-year­old single worker who made $25,000 annually could receive $1.17 million before deductions.The widower of a 40-year-old childless Pentagon worker earning $60,000 a year would receive $640,000 before deductions. <br />The Victim Compensation Fund is part of a hastily enacted airline bailout law signed into law 12 days after the attacks that limited the airline industry’s liability in the Sept. 11 attacks and promised to pay “full and fair compensation” to every victim’s family if they waive their right to sue.<br />
  11. 11. Objective: $1,000,000<br />CAPITAL<br />INVESTING & LIFE INSURANCE (The Elevator Analogy)<br />10th Floor<br />10th Floor<br />10th Floor<br />$1,000,000<br />A person can reach this objective provided that he or she:<br /><ul><li>Had saved regularly and consistently over time
  12. 12. Investments were successful
  13. 13. Had sufficient time to complete the plan</li></ul>9th Floor<br />$900,000<br />8th Floor<br />$800,000<br />7th Floor<br />$700,000<br />6th Floor<br />$600,000<br />5th Floor<br />5th Floor<br />$500,000<br />Death<br />4th Floor<br />$400,000<br />3rd Floor<br />$300,000<br />Disability<br />2nd Floor<br />$200,000<br />1st Floor<br />$100,000<br />Stairs<br />Stairs<br />Elevator<br />Elevator<br />
  14. 14. SAVING/INVESTING & LIFE INSURANCE (The Elevator Analogy)<br />Let's suppose a man realizes that he needs $1,000,000 to provide adequate income for his family in the event of his early demise or for himself if he should live too long. <br />Being a loving, responsible father and husband, he is currently saving a part of his income with the hope of ultimately creating this capital for such eventualities. Furthermore, he hopes to have sufficient time in order to complete his plans.<br />Translating the scenario visually, let's compare his goal of saving $1,000,000 to that of reaching the 10th Floor of a building. Each floor representing $100,000. <br />He can reach the 10th Floor in two ways. He can either take the stairs or use the elevator.<br />Using the “Stairs”to reach the 10th Floor can be compared to the goal of saving systematically until the desired amount is reached. There is no doubt that the goal can be reached provided he can save successfully, will be able to invest successfully whatever had been saved and he has sufficient time to complete his plans. <br />Under this method, however, if he should die prematurely or should get disabled, his family will only receive whatever had been saved plus interest earnings... never that amount as he had originally intended to accumulate.<br />His other option is to use the “Elevator.” He only needs to press the 10th Floor button and no matter what happens along the way, that elevator will always bring him up to the desired floor. <br />In the business of living, loving and maintaining accustomed lifestyle, one such kind of a vehicle is LIFE INSURANCE. <br />
  15. 15. Home<br />$ ____________<br />Car(s)<br />$ ____________<br />Your Age Now:<br />Present Income:<br /> Years to Age 65:<br />Potential<br />Economic Value:<br />______<br />$ _____________<br />______<br />$ _____________<br />Savings<br />$ ____________<br />401(k)/<br />Pension Plan<br />$ ____________<br />Personal Effects<br />$ ____________<br />Stocks & Bonds<br />$ ____________<br />Total: $ ____________<br />Potential -vs- Acquired<br />YOUR POTENTIAL<br />WHAT YOU HAVE ACQUIRED<br />WHICH ONE IS GREATER, “WHAT YOU HAVE ACQUIRED” OR “YOUR POTENTIAL”?<br />PROTECT FIRST THAT WHICH YOU CANNOT AFFORD TO LOSE!<br />11<br />
  16. 16. When a Breadwinner Dies, a Family Suffers 3 Deaths:<br />The wife loses her “husband”<br />The children loses their “father”<br />The entire family loses his “income” … the income he would have earned if just lived.<br />Life Insurance cannot replace the father nor the husband but it can certainly replace his income to make tomorrow, the kind tomorrow he intended it to be.<br />
  17. 17. “To be “under-insured”is the greatest gambleany man can make,andit is particularly a tragic onebecause if he loses,his family pays for it.”<br />13<br />
  18. 18. DEATH…is like the Thief in the night.<br />can provide guarantees that no matter what happens, your "Economic Value"will never be stolen from your family.<br />
  19. 19. Don't Make Them Pay<br />for Your Life Insurance<br />It is a funny thing about life insurance. It has to be paid for, whether or not... it is bought. <br />If you buy the life insurance your family needs, then you pay for it out of current income. You spend less here and a little less there. You do a little better job of budgeting, of watching out for unnecessary expenditure.<br />But, if you don't pay for the life insurance out of the money in your pocket today, then your family may have to pay for it someday. <br />You say: “But how will they pay for it?"<br />The answer is that “they have to pay for it- out of the things they do without- the opportunities they do not enjoy; the school they are unable to attend; the home from which they are forced to leave; the sense of security they do not possess; a mother's attention which is not theirs because she must work to live and so that they may live.”<br />Ask yourself this question: “Who pays the biggest price for life insurance, I or my children?” Then, act in accordance with your answer.<br />
  20. 20. Is Your Life Insurance Enough?Here’s a Simple Way to Determine If It Is or Not<br />
  21. 21. Is Your Life Insurance Enough?Here’s a Simple Way to Determine If It Is or Not<br />
  22. 22. Is Your Life Insurance Enough?Here’s a Simple Way to Determine If It Is or Not<br />* Assuming 5%<br />Based on 5% rate of return, the present life insurance coverage of $1,000,000, can only provide $50,000 per year, spending only the interest with the capital remaining intact. <br />* NOTE: TAXES AND ADJUSTMENTS FOR INFLATION NOT CONSIDERED.<br />
  23. 23. “…a familyis as unprepared to liveas the breadwinner who isunprepared to die.”<br />19<br />
  24. 24. Do Wives Like Life Insurance?<br />Widows Certainly Do!<br />20<br />
  25. 25. THE DESIRE TO BE A BEING<br />WORTH REMEMBERING<br />“One of the things that stands out in the minds<br />of family heads and in the hearts of those who truly loves is the desire to be a being worth remembering.”<br />“In life, I can contribute constructively to the lives of my dear ones, but from the hereafter, my influence will ceaseunless I am remembered.”<br />“One thing is absolutely certain. We will be remembered.Will it be for what we did or for what we failed to do?”<br />“HOW WOULD YOU LIKE TO BE REMEMBERED?”<br />
  26. 26. Mistaken Kindness<br />To provide so well today<br />but leave no provisions for tomorrow!<br />
  27. 27. SynergiaBusiness Presentations<br />Joaquin “Duke” G. Wilwayco8301 Ephraim Road, Austin, TX 78717Phone: (512) 799-2999<br />Fax: (512) 671-6377Email:<br />