Life Insurance Basics Flashcards
Family dependency period
The period when, should the insured die prematurely, the surviving spouse will have dependent children to support. The family’s income need will be greatest during this period.
Pre-retirement period
The period after the children are no longer dependent upon the surviving spouse for support, but before the surviving spouse qualifies for Social Security survivor benefits. The income needs of the surviving spouse lesson during this period; however, until the surviving spouse reaches the age of 60, Social Security benefits are not available.
Retirement. Period
The surviving spouse is working income ceases and his or her Social Security benefits begin. Since the surviving spouse is standard of living does not listen, he or she will require an income comparable to the pre-retirement During this time
Types of information that needs to be gathered falls under four categories
Debt, income, mortgage, expenses.
Debt cancellation
Insurance maybe use to create a fund to pay off Debts of the insured such as home mortgage or auto loans
Emergency reserve funds
Insurance proceeds maybe used to assist in paying for sudden expenses allowing the death of the insured, such as travel expenses and lodging for family members coming from a distance.
Retirement funds
Insurance proceeds maybe use a source of retirement income
Bequests
And insured may wish to the funds to their church, school, or other organization at the time of their death.
Creates an immediate Estate
The purchase of life insurance creates an immediate estate.
Liquidity
The policies cash values can be borrowed against at any time and used for immediate needs.
Human life value approach
Gives insured in the estimate of what would be lost to the family in the events of the premature death of the insured. It calculates and then visuals life value by looking at the insured’s wages, inflation, the number of years to retirement, and the time value of money.
Needs approach
Based on the projected needs of a family after the premature death of the insured. Some of the factors considered by the needs approach our income, the amount of debt, investments, and other ongoing expenses.
Business uses of life insurance
Key person insurance, Buy sell agreements, other uses. It creates an immediate payment upon the death of the insured.
Key person insurance
The key employee is the insured and the business is the: applicant, policy owner, premium pay year, and beneficiary.
Buy sell insurance
Agreements is a legal contract that determines what will be done with a business in the event that an owner does or becomes disabled.