1. Life Insurance
Personal Finance

2. Why?
If someone (anyone) will suffer a financial burden if (when) you die
Last expenses
Unpaid bills
Mortgage
Lost income
Education of children
Business continuation
Estate taxes

3. How Much?
Look at the list on the prior slide and total what your needs would be
Many financial planners use 5x annual income as a reasonable approximation if you have a family
Needs change during your life

4. Premiums
If premiums are paid with after-tax dollars, the benefits are totally income-tax free (but may be subject to estate taxes)
Premiums are based on:
Age
Sex
Health
Occupation
Type of insurance
Amount of insurance
Tobacco habits

5. Things to Consider Beneficiary must have an insurable interest
Policy is usually incontestable after two years
Suicide during the first two years usually isn’t covered
Misstatements of age, health, smoking, etc. on the application can invalidate the policy during the first two years
Waiver of premium benefit is often automatic but can be removed
Accidental death insurance is usually not a good idea
Second-to-die helps with estate taxes
Guaranteed insurability option is good if you think you’ll need more coverage later

6. Things to Consider
Insurance is only a promise – and a long one at that
Make sure the company making the promise will be there
A knowledgeable and helpful agent is worth something
But remember how they get paid
There is always a 10-day free-look
Insurance is for insurance – not primarily for savings

7. Types of Life Insurance
Term Life Insurance
Whole Life Insurance
Universal Life Insurance

8. Term Life Insurance “Pure” insurance protection
Insures you for a “term” – a period of time
Inexpensive while young
Prohibitively expensive when old
Allows you to purchase maximum insurance for the least cost
It will “run out” at some point
The most typical type of term insurance has level premiums for 10 years

9. Whole Life Insurance Insurance with cash value buildup
The cash buildup is always tax-deferred, and often tax-free
Dividends may be paid, but are not guaranteed
Level premiums for a lifetime – guaranteed
Investment risk is with the insurance company
Moderately expensive while young
Comparatively inexpensive while old
Assures that you will always have some life insurance if you continue to pay the premium

10. Universal Life Insurance
Combination of Whole Life and Term
Less expensive than Whole Life, but fewer guarantees
More expensive than Term, but premiums will hopefully stay level
Investment risk is mostly with the insured
May allow for individual investment selection
Variable Insurance – you can have the premiums invested in stock, bonds, real estate, etc.