Life insurance basics Flashcards
———————- are presentations or depictions of non guaranteed elements of a life insurance policy.
Illustrations
Selling of assess in order to raise capitol
Liquidation
Solvency is …
The ability to meet financial obligations.
In what ways does insurance present value to the insured?
Providing immediate cash to pay debt and financial security to survivors.
Can be used as collateral to secure a loan
May be paid for in manageable installments called premiums.
What are the three income periods?
Family dependency period.
Pre retirement period
Retirement period
During this income period should the insured die prematurely, the surviving spouse will have dependent children to support. A family’s income needs are the greatest during this time period.
Family Dependency period
During this income period the children are no longer dependent upon the surviving spouse for support but this is before the surviving spouse qualifies for social security benefits.
Preretirement period
At what age do social security benefits kick in?
60
During this period the surviving spouses working income ceases and his or her social security benefits begin.
Retirement period
What are the objectives to asses when determining a insurance plan?
Debt
Income
Mortgage
Expenses
Final medical expenses, funeral expenses, day to day expenses. Rent mortgage, car payments, utilities, groceries, day care, insurance premiums.
Type of information that needs to be gathered to develop and implement an insurance plan.
——————- is a way Insurance May be used to create a fund to pay off debts of the insured such as mortgage or auto loans.
Debt cancellation.
————————- can be used to assist in paying for sudden expense following the death of the insured, such as travel expenses or lodging for family members coming from a distance.
Emergency Reserve Funds
———————- are insurance funds that can be used to pay for children’s education expenses. So they can remain in school, or provide education or training for a spouse who need to re enter the job market.
Education funds
Insurance proceeds may be used as a source of retirement income with this—————-
Retirement Funds
And insured may wish to leave funds to the church school or other organizations at the time of her death with this.
Bequests
Under the ———-approach enough insurance is purchased so that when added other liquid assets there was enough to pay income benefits without invading the principal asset.
Retention of capital
How does a life insurance policy create an immediate estate?
It typically takes time to accumulate earnings savings and investments but all of these methods are immediately acquired after purchasing a life insurance policy. So it gives the insured a way to accumulate an estate of at least, the amount that’s needed in that moment at the time the first premium is paid there is no other way to accumulate an immediate estate as a small cost legally.
As a result of the cash accumulation feature some life insurance policies provide ————is available to the policy owner which means the policies cash values can be borrowed against at any time and used for immediate needs.
Liquidity
What are the two approaches used to determine life insurance amounts?
Human life value approach HLVA and needs approach
The—————-gives the insured an estimate of what would be lost to the family in the event of the premature death of the insured it calculates the individual’s life value by looking at the insured’s wages inflation the number of years to retirement and the time value of money.
Human life value approach
The blank approach is based on the predicted needs a family after the premature death of the insured some factors considered by the needs approach our income amount of debt investments and other ongoing expenses expenses.
Needs approach
